“Partnership to Build America Act” and the “Infrastructure 2.0 Act” Would Exacerbate Offshore Tax Haven Abuse
The FACT Coalition sent two letters up to House lawmakers this week opposing a couple of egregious tax giveaways that are expected to be re-introduced by Rep. John Delaney (D-MD) in the near future.
Titled the “Partnership to Build America Act” and the “Infrastructure 2.0 Act”, both measures seek to offer multinational tax avoiders a reward under the premise that the measures might raise some revenue for infrastructure funding. The question is: at what cost?
Specifically, FACT’s Gary Kalman and I note in a February 7th letter that the “Partnership to Build America Act”:
…offers a costly and unwarranted tax amnesty to some of the most profitable corporations in America. It would permit a small number of multinational corporations — who have used tax loopholes unavailable to working Americans and small businesses — to escape their obligations to society, thereby requiring domestic corporations, small businesses, and average taxpayers to pick up the tab…
While an infrastructure bank capitalized through traditional government expenditures could help finance needed infrastructure investment, an infrastructure bank capitalized in the manner set out in the bill would, over time, undermine our ability to make public investments by further incentivizing aggressive offshore tax avoidance. Worse, if the bill mirrors the last proposal and permits seven of the 11 members of the infrastructure bank’s board of directors to come from the companies repatriating the most money, the bill may hand over control of the investment bank to those who have already shown their willingness to put their own self-interest ahead of the vast majority of taxpayers. This bill would not solve a problem; it would make current problems worse.
Rep. Delaney’s second proposal, the “Infrastructure 2.0 Act”, is similarly unwarranted. The Infrastructure 2.0 Act would reward companies, which have skirted their obligation to taxpayers by booking their profits offshore, with a 75% tax cut on their offshore holdings. This means an 8.75% tax rate — even lower than the 10% repatriation tax rate proposed by President Donald Trump!
Under Rep. Delaney’s Infrastructure 2.0 proposal, multinational corporations would still:
- have extraordinary tax advantages over wholly domestic and small businesses;
- have significant incentives to offshore profits in tax havens; and
- enjoy an outrageous tax holiday after assurances were made in 2004 that such an extraordinary corporate tax break would be a one-time only benefit.
As Gary and I wrote in our February 6th letter to House lawmakers, the Infrastructure 2.0 Act:
…would establish permanent benefits for offshoring profits, undercutting tax revenue for infrastructure and other needs into the future.
Offshore tax dodging is a major problem. A recent report from U.S. PIRG Education Fund, a FACT Coalition member, found that:
[Taxpayers lose] approximately $147 billion in federal and state revenue each year due to corporations using tax havens to dodge taxes … Every small business would need to pay an additional $4,481 in federal taxes to account for the revenue lost … [and] pay on average an additional $647 to make up for the lost state taxes … Because state corporate tax rates vary considerably, small businesses in some states would have to pay as much as $2,520 to make up for state tax revenue lost to tax haven abuse.
Both of Mr. Delaney’s bills will exacerbate this mess. Instead of the “Partnership to Build American Act” and the “Infrastructure 2.0 Act”, we should seek solutions which actually address the problem, like ending deferral, stopping inversions, and boosting transparency.
Clark Gascoigne is the deputy executive director of the FACT Coalition.