Vermont’s Bernie Sanders, the progressive firebrand and longest-serving independent member of Congress in American history, introduced legislation on Thursday to prevent U.S. corporations from sheltering income in the Cayman Islands and other offshore tax havens.
Every year, said Sanders, corporations and wealthy Americans are “avoiding more than $100 billion in U.S. taxes by sheltering their income in the Cayman Islands, Bermuda and other offshore tax havens.”
Under existing law, U.S. corporations are allowed to defer or delay U.S. income taxes on overseas profits until that money is brought back into the United States. U.S. corporations are also provided foreign tax credits to offset the amount of income taxes paid to foreign jurisdictions. In other words, any foreign taxes are deducted from the nominal 35 percent tax rate on corporate profits if and when that money is taxed in the United States.
According to a 2008 report by the Government Accountability Office (GAO), eighty-three of the Fortune 100 companies in the United States have used offshore tax havens to lower their tax liability. U.S. companies and corporations currently have an estimated $1.7 trillion of unrepatriated foreign profits sitting offshore, said Sanders, a member of the Senate Budget Committee.
The unrepatriated profits of Fortune 500 companies was estimated at $1.584 trillion in 2011, according to a study by Citizens for Tax Justice.
Sanders’ bold and desperately needed legislation would require U.S. companies to pay taxes on all of their income by ending the deferral of foreign source income, requiring corporations to pay U.S. taxes on their offshore profits as they are earned. His legislation would also eliminate the tax incentives for corporations to shift profits offshore because the United States would tax their profits regardless of where those profits were generated.
Importantly, it would also close existing tax loopholes that allow large oil companies to disguise royalty payments to foreign governments as foreign taxes.
The Corporate Tax and Fairness Act, which will be introduced in the U.S. House by Rep. Jan Schakowsky (D-IL), would also eliminate tax incentives for companies that ship American jobs and factories overseas.
If enacted, Sanders’ legislation would yield more than $590 billion in revenue to the U.S. Treasury over the next decade, according to the nonpartisan Joint Committee on Taxation.
“At a time when we have a $16.5 trillion national debt and an unsustainable federal deficit; at a time when roughly one-quarter 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 contribute significantly to deficit reduction,” declared Sanders, one of only two independents in the U.S. Senate.
“The point has to be made that if we’re going to be serious about deficit reductions, corporate America, which is now enjoying record-breaking profits, is going to have to step up to the plate,” said the white-haired Sanders, adding that “we are not going to balance the budget on the backs of the elderly, the children, the sick and the poor.”
In addition to one in every four major corporations paying nothing in taxes, the feisty Vermonter also pointed out that the current tax rate on profits at 12 percent is “the lowest that it has been since 1972” and that corporate revenue as a percentage of GDP “is now the lowest of any major country of the OECD.”
Noting that corporate profits have grown to record levels in recent years while their share of tax revenues have dropped sharply, Rep. Schakowsky said that the Corporate Tax Fairness Act was a “comprehensive and commonsense solution” designed to eliminate the perverse practice of rewarding companies and corporations that ship American jobs and profits overseas through tax subsidies.
An eight-term member of the House, Schakowsky is regarded by many as one of the most progressive members of the current Congress.
During yesterday’s press conference, Sanders released a report showing how 31 banks and corporations represented by the Business Roundtable have avoided $128 billion in federal income taxes by setting up more than 500 subsidiaries in tax haven countries. The Business Roundtable, an association of CEO’s from the nation’s leading U.S. companies, recently released a report calling on Congress to cut entitlement spending, including cutting veterans benefits and slashing Social Security and Medicare while raising the eligibility age for those programs — a draconian recommendation the Vermont lawmaker called utterly “shameless.”
Several of those firms received more than $2.5 trillion in the form of a taxpayer bailout from the Federal Reserve and the U.S. Treasury following the financial meltdown of 2008.
The tax dodgers include Bank of America, which paid no federal income taxes in 2010 yet received a $1.9 billion tax refund while boasting of no fewer than 371 offshore tax havens. The “too big to fail” banking behemoth received over $1.3 trillion in virtually interest-free loans from the Fed and $45 billion in TARP funds during the economic crisis, which, in no small measure, it helped to create in the first place, nearly collapsing the U.S. and global economies.
Other major financial institutions and corporations on the infamous list of 31 tax avoiders include J.P. Morgan Chase, Goldman Sachs and General Electric, the latter of which shipped at least 25,000 U.S. jobs overseas since 2001.