Burning Our Bridges

Burning Our Bridges

By Sarah Anderson and Scott Klinger
Institute For Policy Studies
Thursday, April 16, 2015

To generate funds to shore up our nation’s crumbling
infrastructure, the U.S. Congress is considering giving
corporations large tax cuts on their offshore profits.

Under current law, corporations can defer U.S. tax payments on
overseas earnings until they bring the profits to the United States.

The proposed “tax holidays” would generate a relatively small, one-
time revenue bump while allowing large corporations to avoid much
larger amounts of tax owed over the longer term.

The last time we tried this, in 2004, it failed miserably.

Corporations that participated shaved nearly $100 billion
off their long-term IRS bills.

And instead of boosting investment, they used the windfalls to buy
back their stock and boost dividends while laying off more workers
than they hired.

Once the holiday was over, they began rebuilding their overseas
profit stashes.

This report identifies the 26 U.S. corporations with the largest
stockpiles of untaxed overseas profits and analyzes how much these
firms could help meet U.S. infrastructure needs if they actually
paid the taxes they owe — but can legally put off paying — on their
offshore profits.

The American Society of Civil Engineers estimates that $3.6 trillion
in infrastructure investment is needed by 2020 to bring our aging
infrastructure into the 21st century and keep our economy competitive.

Just 26 firms account for more than half of the $2.1 trillion in
untaxed profits U.S. corporations are currently holding offshore.

Each of these firms has accumulated more than $20 billion
in overseas earnings.

Together, they operate 1,086 subsidiaries in tax haven nations.

These 26 firms’ offshore profits have exploded more than
five-fold since the last tax holiday on overseas earnings.

Microsoft, Google, Apple, and Qualcomm each grew their
offshore stashes by more than twenty-fold between 2005
and 2014.

If these 26 mega-stockpilers were to pay what they owe on their
overseas profits, the federal government could gain a one-time
revenue boost of an estimated $364 billion.

That would be more than enough to cover the cost of repairing all
of the country’s wastewater and stormwater systems, with enough
left over to repair or replace all of the country’s dangerous and
deficient dams and restore all the nation’s local, state, and
national parks.

Apple is the largest offshore profit stockpiler.

If the highly profitable tech firm were to pay what it owes on
those earnings, it would be enough to cover 17 percent of the
cost of needed repairs on all public school buildings.

The second-largest offshore stockpiler is General Electric.

If GE paid the taxes it owes on the $119 billion it holds offshore,
that estimated revenue would be more than enough to pay for all
of the unmet maintenance needs in local, state, and national parks.

Seven pharmaceutical firms are among the 26 mega-stockpilers.

This sector has become adept at avoiding U.S. taxes by shifting
ownership of patents and trademarks to subsidiaries in tax havens.

If these seven drug companies were to pay the taxes they owe, it
would generate an estimated $82 billion, enough to replace all of
the deficient bridges in the United States.

If just two major oil companies — ExxonMobil and Chevron — were
to pay the taxes they owe on their offshore profits, it could cover
nearly a quarter of the cost of repairing all of the country’s levees.

This is infrastructure critical for responding to the more
volatile and extreme weather we are now experiencing.

Closing the offshore tax dodging loophole for all corporations
could raise at least $590 billion over the next decade, and
$90 billion more every year thereafter.

This would represent a significant down payment on the nation’s
overall infrastructure investment needs and could create an
additional 1.8 million jobs.



Sarah Anderson directs the Global Economy Project at the Institute
for Policy Studies and has co-authored 21 IPS annual reports
on executive compensation. She serves on the Investment
Subcommittee of the U.S. State Department’s Advisory Committee
on International Economic Policy.

Scott Klinger is Director of Revenue and Spending Policies at the
Center for Effective Government and an IPS associate fellow. He
crafted the first shareholder proposals on executive pay while
working as a social investment portfolio manager. Scott is a CFA
charterholder.

http://www.ips-dc.org/burning-our-bridges