Trump/Congressional Tax Holiday Would Net $514 Billion Corporate Tax Break
Fortune 500 corporations stand to reap $514 billion in tax breaks under President-elect Trump’s proposal to allow companies to pay only a 10 percent tax rate on offshore profits. And the 10 firms that have most aggressively shifted their profits offshore would glean fully 25 percent of this massive corporate tax break, the Institute on Taxation and Economic Policy (ITEP) said today.
ITEP analysts annually examine the corporate filings of Fortune 500 firms to determine how much money corporations are holding offshore to avoid taxes. Based on this analysis, ITEP’s new corporate tax brief estimates how much these firms would save under Trump’s repatriation proposal. It also analyzes the 10 firms that have most aggressively used offshore tax avoidance schemes (Apple, Microsoft, Oracle, Citigroup, Amgen, Qualcomm, Gilead Sciences, JP Morgan Chase & Co., Goldman Sachs Group, and Bank of America Corp.) to estimate their tax benefits under Trump’s plan.
Collectively, Fortune 500 companies have $2.5 trillion stashed offshore on which they are likely avoiding $720 billion in taxes. The top 10 companies account for $182.8 billion of that and would receive a $130.6 billion tax break.
Under current law, corporations can indefinitely avoid taxes on their offshore profits as long as they remain offshore. Once these profits are “repatriated,” they are subject to the 35 percent statutory corporate tax rate less any taxes paid to foreign governments.
“Corporations shouldn’t be able to dodge all U.S. taxes by shipping their profits into offshore tax havens, so it’s important to end this scam now,” said Matthew Gardner, a senior fellow at ITEP. “Lawmakers shouldn’t give away the store to corporations by offering them vastly discounted tax rates on offshore earnings. Let’s not forget that these corporations aren’t exactly being good corporate citizens by stashing money offshore to avoid taxes in the first place.”
Lawmakers on both sides of the aisle for the last couple of years have floated legislative proposals on how to incentivize corporations to “repatriate” their offshore cash. These proposals have varied from 0 percent to 20 percent. Trump’s proposal falls in the middle of the spectrum.
The ITEP report notes many corporations don’t engage in offshore tax avoidance schemes and recommends lawmakers require companies to repatriate their offshore earnings and pay the statutory rate, “to restore fairness to the tax code.”