Corporations offshoring profits costs both the federal government and states billions of dollars per year. One of the more egregious giveaways is known as “deferral,” which allows U.S. corporations to avoid paying taxes on overseas profits until they bring that money back to the U.S., giving them every incentive to leave it overseas permanently.
According to the Congressional Budget Office, “The current tax system provides incentives for U.S. firms to locate their production facilities in countries with low taxes as a way to reduce their tax liability at home,” ultimately resulting in compensation for U.S. workers being lower. Sen. Bernie Sanders (I-VT) is introducing a bill today that would end this practice and close several other corporate tax loopholes:
Under this legislation, corporations would pay U.S. taxes on their offshore profits as they are earned. This legislation takes away the tax incentives for corporations to move jobs offshore or to shift profits offshore because the U.S. would tax their profits no matter where they are generated.
Under the Corporate Tax Fairness Act, U.S. corporations would continue to get a credit against their U.S. taxes for foreign taxes they pay. That means that when an American corporation has profits in a country with lower corporate taxes than the U.S., they would pay the federal government the difference between the foreign rate and the U.S. rate. When an American corporation has profits in a country with higher corporate taxes than the U.S., they would pay nothing to the U.S.
According to the Joint Committee on Taxation, “the provisions in this bill will raise more than $590 billion in revenue over the next decade.”
Due to the proliferation of loopholes, credits, and the use of tax havens, major corporations haven’t paid the full statutory tax rate in 45 years. In 2011, the 12.1 percent effective rate that corporations paid was the lowest in 40 years.