Tax

Taxing Offshore Profits and Domestic Profits Equally Could Curb Corporate Tax Dodging

By Steve Wamhoff

In recent days, presidential candidates Sen. Kamala Harris and New York Mayor Bill DeBlasio have called for taxing corporate profits the same whether they are earned in the United States or abroad. These calls echo the position of Sen. Bernie Sanders, who has long had a proposal along these lines. As ITEP has explained, correcting this inequity is not a mere detail but rather a sweeping reform that could end incentives for companies to shift profits and jobs offshore.

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Tax Day Highlights Broken Promises and a Need for Transparency

By Gary Kalman

On Tax Day 2019, the first year of data on corporate taxes under the Tax Cuts and Jobs Act (TCJA) are coming in.  Those who championed the corporate reforms promised, among other benefits, that the changes would end the offshore shell games by multinationals, profits stashed in tax havens would return to the U.S., and the new competitive rate would attract a flood of foreign direct investment.

Opponents of the new law, like the FACT Coalition and our members, argued that the incentives would have the opposite effect: the offshoring of profits would continue and the incentives might well create new (unhelpful) distortions influencing corporate behavior.

It is now time to look at what actually happened.  To get a better sense of the impact, consider the following recent excerpts from various news reports and analysis by tax experts.

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Rep. Doggett and Sen. Whitehouse Reintroduce Bill to End Offshore Tax Avoidance

By Lorena Roque

Last Thursday, Representative Lloyd Doggett and Senator Sheldon Whitehouse announced that they are reintroducing the “No Tax Breaks for Outsourcing Act.” Our international corporate tax rules have been a mess for a long time, and the Tax Cuts and Jobs Act (TCJA) failed to resolve the problems. The old rules and the new rules under TCJA both tax offshore corporate profits more lightly than domestic corporate profits, but in different ways. The No Tax Breaks for Outsourcing Act would create rules that tax domestic profits and foreign profits in the same way.

The old rules allowed American corporations to defer paying taxes on their offshore profits until those profits were officially brought to the U.S., which in many cases was never going to happen. The new rules, under TCJA, are also problematic because they exempt certain offshore profits and tax other offshore profits at just half the rate imposed on domestic profits.

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New Bill Removes Tax Incentives to Shift Profits and Operations Offshore

“No Tax Breaks for Outsourcing Act” Endorsed by 57 National Organizations, Sponsored by 80 Members of Congress

WASHINGTON, D.C. – Eighty lawmakers introduced legislation Wednesday that would equalize the tax rates for domestic businesses and multinational corporations — reducing the tax incentive to shift profits and operations overseas that were enacted under the recent tax overhaul, according to the Financial Accountability and Corporate Transparency (FACT) Coalition.

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Netflix Posted Biggest-Ever Profit in 2018 and Paid $0 in Taxes

By Matthew Gardner

The popular video streaming service Netflix posted its largest-ever U.S. profit in 2018­­—$845 million—on which it didn’t pay a dime in federal or state income taxes. In fact, the company reported a $22 million federal tax rebate.

After a year of speculation and spin, the public is getting its first hard look at how corporate tax law changes under the Tax Cuts and Jobs Act affected the tax-paying habits of corporations. The law sharply reduced the federal corporate rate, expanded some tax breaks and curtailed others. The new tax law took effect at the beginning of 2018, which means that companies are just now closing the books on their first full year under the new rules.

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