Multinational corporations admit that nearly a trillion dollars of theirs has been shifted to offshore subsidiaries, using corporate accounting tricks, in order to avoid paying U.S. corporate taxes on it. If that trillion was effectively taxed at the 35% corporate tax rate, it would produce a tax revenue windfall of about $350 billion. The remaining $650 billion (remaining from the original trillion), repatriated back onshore, to the U.S., would then be reinvested here in the U.S., instead of offshore, thereby being allowed to create additional revenue, in the form of profits of perhaps $100 billion a year. And those additional profits could then raise an additional amount of government annual tax revenue of about $35 billion ever year for each of the next four years.
Even greater, however, is the amount that wealthy households, investors, and small companies have diverted to offshore tax havens. In 1985, it was estimated by the investment bank Morgan Stanley that $250 billion of their money was stashed away in offshore tax havens. In recent years, however, the estimates have risen to anywhere from $6 trillion to $11 trillion, worldwide.
The share of that global total that is held by U.S.-based investors, wealthy households, and corporations, is at least 40% (of the global total) -- somewhere between $2.4 and $4.4 trillion. Much of that is held offshore by institutional investors like hedge funds and other private banks, on behalf of wealthy individuals and the institutional investors they represent. It therefore follows that the wealthiest U.S. households probably have diverted between $1 and $2 trillion to these offshore havens as a means of avoiding U.S. taxes. Assuming that figure to be $1.5 trillion, and also assuming a 35% top marginal tax rate, that's about $500 billion in new tax revenue that could be generated immediately, just by ending the offshoring. Then, assuming the profits from the remaining trillion dollars amounts to an additional $150 billion for the year, the tax revenues thereby generated would be about $50 billion a year after that.
Based on these two tax changes alone, the total new tax revenue raised comes to around $850 billion in the first year and $85 billion a year, thereafter, for each of the next four years, or another $340 billion.
Still a third tax could be levied on excess corporate cash. From his first stimulus program introduced in early 2009, it has been clear there never really was any intent by the Republicans in Congress to directly create jobs. The strategy from the outset was to bail out the banks and big non-bank corporations facing bankruptcy. It was said by the Democrats that if the banks were bailed out, they would then lend to businesses, which in turn would invest, hire, and create jobs. Instead, however, the banks have insisted--for nearly two years now--on hoarding the $1 trillion in cash that the bailout helped them accumulate.
Meanwhile, non-bank big corporations are hoarding another $2 trillion.
The disappointing result of this hoarding is that private sector businesses in 2010 hired only about 1 million of the 25 million unemployed, and about two-thirds of those few who were hired received nothing more than part-time and/or temporary jobs!
Remarkably, despite the severity of the current recession, government at all levels has reduced the number of jobs (instead of hiring, to offset job losses in the private sector, as they could have). And now, starting up with 2011, the increasingly united political elite of both parties are in agreement that no more money will be spent on creating jobs! The budget deficit comes first, they say, people and families be damned.
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