Earlier this week, the Wall Street Journal reported that, “in one of the biggest battles between the business community and the White House, corporate lobbyists are intensifying efforts to block an Obama administration proposal to raise taxes on overseas profits.”
Groups including the Business Roundtable, the U.S. Chamber of Commerce, the National Association of Manufacturers and the National Foreign Trade Council “have helped form a lobbying coalition called Protect America’s Competitive Edge that is devoted specifically to the issue,” and according to a new report from researchers at the University of Kansas, a corporate dollar put towards lobbying for tax breaks can go an awfully long way.
Three Kansas professors found “that when Congress in 2004 granted firms a one-time pass to bring [overseas] income home at a reduced tax rate, the lobbying paid off — big time”:
Their study found that every dollar companies spent on lobbying for that tax break — which they tried to revive during the economic stimulus debate this year — saved them $220 in taxes. […] The three Kansas professors analyzed the financial reports and lobbying disclosure forms of 476 firms that repatriated about $298 billion. On average, the companies generated a 22,000 percent return from their lobbying efforts, with companies spending the most getting the biggest tax savings. For example, drugmaker Eli Lilly & Co. reported spending $8.52 million in lobbying but saved $2 billion in taxes.
“Perhaps it is time for a national conversation about the role of lobbyists in tax reform,” said Stephen Mazza, one of the three authors of the study. “We should be concerned when a corporation’s most lucrative investment is in lobbying the government for tax benefits.”
The United States does not tax foreign profits unless they are returned to the United States. Alongside low tax rates in some foreign countries, the result is a strong incentive to invest overseas. As many as 3 million American jobs have been moved offshore, and the U.S. Treasury loses tens of billions of dollars a year in offshore tax evasion. The next president could greatly reduce these problems by taxing corporate profits earned in tax havens and other low-tax countries.
According to The Joint Committee on Taxation, the failure to tax foreign income of U.S. controlled corporations will cost the government $56.4 billion in lost tax revenues between 2008 and 2012.