In a letter (pdf) to Congress on Monday, 100 advocacy groups denounced as "an incredibly bad idea" an under-discussed component of the Trump-GOP tax plan that would "allow U.S. multinational corporations to pay little to nothing on their offshore profits."
"It takes a lot of nerve to propose tax incentives for offshoring and then try to fool people into thinking you're doing the exact opposite."
--Richard Trumka, AFL-CIOPortrayed by Republican architects of the recently unveiled tax framework (pdf) as a move toward a "territorial" system that would eliminate incentives for corporations to move profits overseas, the plan would in effect do precisely the reverse, signatories of the letter to Congress argue.
"It takes a lot of nerve to propose tax incentives for offshoring and then try to fool people into thinking you're doing the exact opposite," Richard Trumka, president of the AFL-CIO, said in a statement. "What a con job."
Under the current tax system, profits of American companies' foreign subsidiaries are supposed to be subject to the U.S. corporate tax rate, but companies are able to avoid these taxes by deferring until the profits are repatriated. The Republican plan would almost entirely exempt these profits from taxation.
Far from incentivizing investment in the U.S., the groups' letter argues that such a policy would provide major corporations "even greater incentive to engage in accounting tricks and move their profits to countries with zero or single-digit corporate tax rates."
Gary Kalman, executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition, characterized the GOP's so-called "territorial" tax plan as "the largest offshore loophole in the history of our tax code."
The groups' letter explained:
Ending taxation of offshore profits would rig the rules in favor of multinational corporations, give them a competitive advantage over domestic businesses, and make our tax system more complicated. We cannot afford to give multinational corporations a giant loophole to avoid paying their fair share of taxes at a time when we need more revenue to create jobs rebuilding infrastructure, educating our children, expanding healthcare coverage, researching new medical cures, and ensuring a secure retirement.
The letter went on to argue that the American public is overwhelmingly opposed to any proposal that would ease the tax burden on offshore corporate profits.
"Three-quarters of Americans say they would oppose a tax system that does not tax offshore profits," the letter notes. "Only eight percent believe foreign profits should be taxed at a lower rate, and only four percent said they should not be taxed at all--which is what a territorial tax system would do."
Alan Essig, executive director of the Institute on Taxation and Economic Policy, concluded that the American tax system already treats offshore corporate profits with undue generosity. Trump's plan, Essig concluded, would make the system even better for businesses that send jobs overseas--and far worse for the American public.
"Corporate bosses would win while the rest of us would be left to pick up the tab," Essig said.
