Big business is gearing up for what may be an epic battle with the Obama administration over its efforts to reform the practice of offshore tax deferrals which allow companies to avoid paying U.S. taxes on profits made overseas as long as they remain there.
Huge multinational corporations such as General Electric, McDonald’s and Microsoft have joined forces with lobbying groups like the U.S. Chamber of Commerce, the National Foreign Trade Council and the National Association of Manufacturers to create the Joint Committee on Taxation. The group, made up of 200 multinational corporations and trade associations, was created for the sole purpose of opposing the Obama administration’s proposal.
The U.S. Chamber of Commerce has been aiding and abetting this race to the bottom that inevitably comes with “free trade” for years now. As the world’s largest non-profit business organization, the U.S. Chamber of Commerce has been a force to be reckoned with in the political world for some time. The deep-pocketed organization has the ability to sway votes in Congress and in the general public. In 2004, the organization spent $53 billion on lobbying and sent 3.7 million pieces of mail, placed 5.6 million phone calls and sent 30 million email messages on candidates behalf.
They have used this inordinate amount of influence to skew the debate on trade, painting it as a net positive for Americans even though all the evidence suggests otherwise. They are now claiming that ending the tax loophole would make American businesses less competitive abroad and hamper America’s economic recovery.
The Obama administration disagrees and is banking on the American public to share that sentiment as well.
"I think people generally feel like, let's encourage and motivate corporations to invest here at home, particularly at a time when there's been significant job loss," Obama said recently.
Jobs are the crux of the argument for those proponents of offshore tax deferral reform. As the current system is set up American multinational corporations are not required to pay taxes on the profits of foreign subsidiaries unless those profits are repatriated to the United States. This, critics of the tax policy claim, encourages overseas investment and the offshoring of American jobs.
“As many as 3 million American jobs have been moved offshore, and the U.S. Treasury loses tens of billions of dollars a year in offshore tax evasion,” James Kvaal, a senior fellow at the Center for American Progress Action Fund recently noted in a post on Politico. “The next president could greatly reduce these problems by taxing corporate profits earned in tax havens and other low-tax countries.”
Instead of bringing the cash back home and investing in technologies, factories and research that would create American jobs, those companies instead seek out tax havens or the cheap labor of Third World countries to improve their bottom line. In the end, the American taxpayers are the ones that lose out. Not only do jobs disappear to China, India or Brazil, but then the taxpayers are also forced to cover the loss of billions of dollars in tax revenues and in some cases foot the bill for a federal bailout of those same companies.
The Joint Committee on Taxation estimates that failure to close these current loopholes in tax laws will cost the government a total of $56.4 billion in revenues over the next four years.
"The administration is committed to reforming deferral to improve the overall efficiency and equity of the tax code by reducing incentives to divert investment from the United States in order to avoid taxation," a Treasury spokeswoman told The Wall Street Journal. "The administration has been consulting broadly as it designs the details of this proposal for release in the full budget later this spring.”
EconomyInCrisis. encourages you to contact the President and your Congressional representatives in Washington and ask that they not be persuaded by the powerful influence of corporate lobbyists on this issue. Ending these tax loopholes for American companies that engage in outsourcing would go a long way toward restoring America’s economy by bringing jobs back home.