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A Tax Trick That Forces Companies to Close Factories

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This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

Yesterday was April 15, so I wrote about Tax Tricks. Here's a tax trick to talk about: Offshore Tax Havens for corporations.

Here's one way that offshore tax havens work. You make an item in one country, and sell it at cost to a subsidiary that is based (post office box) in a tax haven country with no or low taxes. So there is no profit to report in the country that it was made in. Then, your company or another subsidiary buys it for import in the US, for a price near to the amount the product will be sold for here. So when it sells, there is no profit to be taxed here. All the profit occurs in the low-or-no tax country. We, the People collect no taxes with which to pay for the schools and roads that make our economy competitive.

This tax trick encourages companies to move offshore, closing factories, laying off workers, killing the local suppliers and forcing costs onto the community. So not only are we losing the tax base and suffering the loss of the jobs and factory, we're picking up many of the costs. When a company like Whirlpool says they have to close a plant and destroy a community for competitive reasons, it's because they can do it, and if they don't their competitors will. If their competitors do and they don't respond they lose out, even to the possible point of going out of business (and closing factories and destroying communities.)

Don't blame the companies. Companies do what we let them do. If you don't take advantage of this your competitors will. If your competitors gain enough advantage and you don't you even face going out of business -- and closing factories, destroying communities, putting the costs on the public etc. So by allowing this, Congress forces companies to do this. The word you hear is "encourages" but really, in a competitive environment, allowing it at all forces not encourages.

It is OUR job to set up the playing field on which these companies compete and to define the rules they will use. Zach Carter writes in 10 Ways to Force the Stinking Rich to Share Their Wealth:

According to the Government Accountability Office, 83 of the 100 largest American corporations (pdf) engage in this kind of tax evasion. All of those companies have lobbyists.

These companies do it because we let them, which means we make them do it.

Congress: FIX IT!

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