Statement by FACT Coalition on White House’s Tax Reform Outline
The Administration released an outline today of its plan to reform the corporate tax code. The signature reform is a reduction of the corporate tax rate from 35% to 15%. The plan further states that profits already booked offshore would get a special, one-time rate — likely much lower than the statutory rate. The U.S. would move from a system in which companies pay taxes on all their profits to a system in which they pay only on profits they book to domestic subsidiaries.
Gary Kalman, the executive director of the FACT Coalition, released the following statement:
“As I understand the plan, the pizza shop in Iowa would still pay a higher tax rate than GE or Google.
“This is a reversal from the President’s original proposal during the campaign which included provisions to close loopholes that facilitate offshoring profits.
“The Administration’s plan does not end deferral. The plan provides a one-time giveaway rate for companies that previously shifted profits offshore and then proposes a ‘territorial system’ to create an even greater incentive to move additional money offshore in the future.
“While maintaining all the benefits of U.S. residency, multinationals would be able to book profits to subsidiaries in tax havens and immediately use those profits for any purpose — dividends, stock buybacks, executive bonuses and more – without paying any U.S. income tax.
“GE has already experienced years in which it had a negative tax rate. Apple paid no taxes on billions in profits it deemed to be ‘stateless income.’ If this plan passed, these stories would be less the outliers and more the norm for multinational companies.
“During the campaign, it seemed the one area of agreement between the two major party candidates was over the perverse incentives to offshore profits. But this plan would double down on those incentives by opening a huge new loophole to ease corporate tax dodging.
“If passed, it is reasonable to expect capital flight to increase. Proponents will point to a dramatically lower rate to counter corporate tax dodging, but it’s important to keep in mind that the rate in the Cayman Islands is zero percent. And the plan appears to do nothing to address abusive transfer pricing, earnings stripping, and other tax dodging schemes abused by many of the largest, most profitable companies in the country.
“The plan also means the U.S. would become a driving force in the global tax race to the bottom, a race that has undermined other economies, led to bailouts and left nations without the resources to pay for basic services. How does one look at those experiences and willingly join the race?
“This plan would take us in the wrong direction. We should not make offshore tax dodging easier.”
Clark Gascoigne, Deputy Director
+1 202 810-1334