WASHINGTON, D.C. — The U.S. House Ways and Means Committee unveiled legislation Thursday that would overhaul the U.S. tax system. According to the FACT Coalition, the bill would reward corporations that have shifted profits to tax havens.
Our tax system is fundamental to our democracy, delineating who pays the costs of a functioning civilization. But the system is broken, leaving an undeniable imbalance between the working and middle-classes and the wealthy and multinational companies. It would seem to follow then that the focus of tax reform should be around correcting this imbalance by targeting those that have gamed the system and flagrantly avoided taxation. Yet, the priority for Congress and the administration seems to be to exacerbate tax avoidance with greater incentives for shifting profits offshore.
There is currently $2.6 trillion booked offshore — untaxed — by multinational companies. This is the result of a gaping loophole for multinationals known as deferral, where a company can delay paying taxes until the profits are “repatriated” to the U.S. The administration has frequently cited this number as a reason our tax code needs “reform,” and, on that point, there is broad agreement. Our tax system undoubtedly needs reform, though, their solution—to simply not tax offshore profits—misses the point.
