MARCH 11, 2021
RE: No Tax Breaks for Outsourcing Act (H.R. 1785 / S. 714)
Dear Member of Congress,
We write to express our support for the No Tax Breaks for Outsourcing Act (H.R. 1785 / S. 714), which would eliminate harmful incentives to move the corporate tax base as well as real operations – American jobs and investment – offshore. The bill would ensure that U.S. multinational corporations pay at least the U.S. statutory rate (currently 21 percent) on their income in every country where they operate. We ask you to become a co-sponsor of this critical legislation.
The ongoing COVID-19 pandemic has laid bare the ramifications of the global race to the bottom on taxes, which has drained government coffers, hollowed out our public health and social services, and given rise to levels of economic inequality not seen since the Gilded Age. Certain companies profiting the most during the pandemic – like Microsoft, Google, or Facebook, which saw their profits surge since the start of the crisis[1] – have a history of avoiding federal income tax. They are not outliers. “Building back better” requires more than a health care response to the pandemic: it requires reimagining a fairer tax system that works for all.
Current U.S. tax law results in losses of revenue that should be funding critical public investments in healthcare, education, infrastructure, and other priorities. Moreover, the current law offers incentives for multinational corporations like General Electric to move their real operations offshore.[2], [3] The current law guarantees that U.S. multinational corporations will pay at most one-half the domestic rate in federal taxes on their offshore earnings, with many companies paying little or nothing in federal taxes on these earnings. This means that a U.S. multinational company will pay a much lower tax rate if it invests in Ireland than if it invests in Indiana.
The No Tax Breaks for Outsourcing Act would provide a simple, straightforward fix to one of the costliest problems created by the Tax Cuts and Jobs Act and bolster President Biden’s corporate tax agenda. It would level the playing field for small and wholly domestic businesses by eliminating the deep discount that multinational companies get for shifting profits offshore and outsourcing jobs. It is counterproductive to the goals of a fair and growing economy to allow U.S. companies to pay a lower tax rate abroad than they pay in the United States.
The legislation would also close the corporate inversion loophole, which allows companies to avoid paying U.S. taxes by pretending to be a foreign company on paper. The bill would prevent an American corporation from using a merger with a foreign company to claim that it is foreign for tax purposes if it continues to be managed and controlled in the United States, or if a majority of the U.S. company’s shareholders own the resulting company after the merger. Additionally, the legislation would curb the biggest incentive for companies to invert by limiting the practice of earnings stripping, in which intercompany loans are used to shift profits out of the United States into low-tax subsidiaries.
Economists have calculated that the No Tax Breaks for Outsourcing Act would raise an estimated $771 billion over the 10-year budget window.[4] Preventing U.S. domiciled multinational companies from avoiding their fair share of taxes would strengthen our emergence from the pandemic-caused recession by supporting much-needed public investment in a Build Back Better recovery bill. Corporate taxes are levied on profitable, not unprofitable, businesses. And the investments new revenues could underwrite – from infrastructure to healthcare to working-family tax credits – would have a stimulative effect on the economy. Returning a measure of fairness to our nation’s tax code in this fashion would support a strong and equitable recovery for all.
We strongly encourage you to co-sponsor the No Tax Breaks for Outsourcing Act in order to make our tax system fairer, raise critically needed revenue, and encourage job creation here in America.
Thank you for taking our views into account. If you have questions, please contact Erica Hanichak at ehanichak@thefactcoalition.org.
Sincerely,
AfricaFocus Bulletin
Alliance for Retired Americans
American Family Voices
American Federation of Government Employees (AFGE)
American Federation of Labor & Congress of Industrial Organizations (AFL-CIO)
American Federation of State, County and Municipal Employees (AFSCME)
American Federation of Teachers
Americans for Democratic Action (ADA)
Americans for Tax Fairness
American Sustainable Business Council
Association of Concerned Africa Scholars – USA
Campaign for America’s Future
Center for International Policy
Center for Popular Democracy
Coalition on Human Needs
Color of Change
Communication Workers of America (CWA)
Community Change Action
Congregation of Our Lady of Charity of the Good Shepherd, U.S. Provinces
Corporate Accountability Lab
Crude Accountability
DailyKos
Democrats.com
Economic Policy Institute
Fair Share
Faith Action Network
Financial Accountability and Corporate Transparency (FACT) Coalition
Franciscan Action Network
Friends of the Earth U.S.
Fund for Constitutional Government
Global Alliance for Tax Justice
Global Financial Integrity
Greenpeace US
Grey Nuns of the Sacred Heart
Health Care for America Now
Indivisible
Institute for Policy Studies – Inequality Program
Institute on Taxation and Economic Policy (ITEP)
Interfaith Center on Corporate Responsibility (ICCR)
International Association of Machinists & Aerospace Workers (IAMAW)
International Brotherhood of Teamsters
International Federation of Professional and Technical Engineers (IFPTE)
International Rights Advocates
International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW)
IUE-CWA
Jobs With Justice
Jubilee USA
Liberty Shared
Main Street Alliance
Maryknoll Fathers and Brothers
Missionary Oblates
MomsRising
National Advocacy Center of the Sisters of the Good Shepherd
National Education Association (NEA)
National Employment Law Project
National Organization for Women
NETWORK Lobby for Catholic Social Justice
Our Maryland
Our Revolution
Oxfam America
Patriotic Millionaires
Peace Education Center
Progressive Change Institute
Project Blueprint
Public Citizen
Publish What You Pay – United States
Responsible Wealth
RESULTS
Rights CoLab
RootsAction.org
Service Employees International Union (SEIU)
Sisters of St. Francis of Philadelphia
Small Business Majority
South Carolina Small Business Chamber of Commerce
Strong Economy For All Coalition
Take on Wall Street
Tax Justice Network
Tax Justice Network USA
Tax March
Union Veterans Council, AFL-CIO
United for a Fair Economy
United Church of Christ, Justice and Witness Ministries
United Methodist Church – General Board of Church and Society
United Steelworkers (USW)
UNITE HERE
US-Africa Bridge Building Project
Voices for Progress
Washington Fair Trade Coalition
Working America, AFL-CIO
Working Partnerships US
[1] Oxfam, “Power, Profits and the Pandemic: From corporate extraction for the few to an economy that works for all,” Oxfam, September 2020, https://www.oxfamamerica.org/explore/research-publications/power-profits-and-pandemic-corporate-extraction-few-economy-works-all.
[2] Natalie Kitroeff, “Tax Law May Send Factories and Jobs Abroad, Critics Say”, The New York Times, January 8, 2018, https://www.nytimes.com/2018/01/08/business/economy/gop-says-tax-bill-will-add-jobs-in-us-it-may-yield-more-hiring-abroad.html.
[3] Public Citizen, “Promises Made, Workers Betrayed: Trump’s Bigly Broken Promise to Stop Job Offshoring,” Public Citizen, October 2020, (p. 2), http://www.citizen.org/wp-content/uploads/Govt-Contracts-w-Offshorers-Report-10052020FINAL.pdf. See also Americans for Tax Fairness, “Corporate Lobbying on Tax Extenders and the ‘GE Loophole’”, March 2014, https://americansfortaxfairness.org/reports/report-on-lobbying-on-tax-extenders.
[4] Kimberly Clausing, “Five Lessons on Profit Shifting from the U.S. Country by Country Data,” Tax Notes Federal, January 13, 2021, p. 936, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3736287.