Sen. Bernie Sanders (I-VT) drops a bomb on corporations who are dodging taxes by hiding money overseas by introducing new legislation that will force tax dodgers to pay their fair share.
Here is part of what The Corporate Tax Dodging Prevention Act of 2015 would do:
1. Ending the rule allowing American corporations to defer paying federal income taxes on profits of their offshore subsidiaries. (Section 2 of the bill.)
Current law allows American corporations to defer paying U.S. income taxes on profits of their offshore subsidiaries until those profits are “repatriated” (officially brought to the U.S.) which may not happen for years, if ever. As a result, American corporations would rather report foreign profits than domestic profits to the I.R.S. Deferral therefore creates an incentive to either move operations and jobs to a lower-tax country, or to use accounting gimmicks to make U.S. profits appear to be earned in a lower-tax country.
The Congressional Research Service has indicated that the cost of this tax avoidance to the U.S. Treasury approaches or exceeds $100 billion annually. The Corporate Tax Dodging Prevention Act would end this tax avoidance by ending the rule allowing deferral of U.S. income taxes on offshore profits.
Under this legislation, American corporations would still be allowed a credit that reduces their federal income tax liability by an amount equal to income taxes paid to foreign governments on these profits. This foreign tax credit exists under current law and already prevents double-taxation of profits.
2. Closing loopholes allowing American corporations to artificially inflate or accelerate their foreign tax credits. (Section 4 of the bill.)
When U.S. corporations earn profits overseas, taxes paid to the foreign country are credited against U.S. tax liabilities, in order to avoid double-taxation. Under current rules and tax planning strategies, corporations are allowed to claim foreign tax credits for taxes paid on foreign income that is not subject to current U.S. tax (meaning foreign tax credits in excess of what is needed to avoid double-taxation). As a result, companies are able to use such credits to pay less tax on their U.S. taxable income than they would if it was all from U.S. sources – providing them with a competitive advantage over companies that invest in the United States. Under the Corporate Tax Dodging Prevention Act, foreign tax credits generated by profits earned in one country could not be used against U.S. income taxes on profits earned in another country.
3. Preventing American corporations from claiming to be foreign by using a tax haven post office box as their address. (Section 5 of the bill.)
At a news conference to unveil the legislation, Sen. Sanders said, “”At a time when we have a $18.2 trillion national debt and an unsustainable federal deficit; at a time when many of the largest corporations in America are paying no federal income taxes; and at a time when corporate profits are at an all-time high, it is past time for corporate America to pay their fair share in taxes so that we can create the millions of jobs this country needs.”
The House companion measure to The Corporate Tax Dodging Prevention Act of 2015 is being introduced by Rep. Jan Schakowsky (D-IL), who said, “Over the past 30-40 years, virtually every time Americans have been asked to make ‘tough choices,’ it has resulted in disproportionate harm to low- and middle-income individuals and families. Cuts to programs that help Americans get ahead and stay ahead have been significant, while tax breaks have been handed out like candy to captains of industry and the behemoth corporations they run. Most perversely, these tax breaks have incentivized moving revenue and jobs overseas. It’s time that we end that skewed system, and the Stop Corporate Tax Dodging Act would help us do that.”
There is a mounting wave of outrage building against corporations who are dodging their taxes by hiding profits overseas. There is a consensus on the left and right that this money needs to be brought back home. The problem is that many Republicans don’t believe that corporations should have to pay their fair share. In fact, the Republican budgets passed by both the House and Senate include big tax breaks for the wealthy and corporations.
As millions of hard working Americans and small businesses file their tax returns, it is important to remember all of the big and extremely profitable corporations who are forcing you to pay more while they pay nothing, or even get a rebate.
The issue is one of fairness. Those who make their money off of American consumers should be paying their share of taxes. The era of the free ride must come to an end for greedy corporate deadbeats, and Bernie Sanders is proposing the legislation that will accomplish this goal.