Let's fund infrastructure by giving tax breaks to large corporations.
Only in Washington would this make sense.
Currently, many large corporations avoid taxes by booking profits to sham shell companies in offshore tax havens like the Cayman Islands. This offshore tax dodging costs Americans a whopping $90 billion each year in tax revenue.
Now there's a new bill that would only exacerbate this problem. Introduced by Congressman Delaney (MD), it gives companies a temporary tax holiday, which rewards the worst offshore tax dodgers and encourages them to book even more profits offshore to avoid taxes in the future.
Rep. Delaney's Partnership to Build America Act purports to solve both our infrastructure problems and our tax dodging problems by requiring companies to invest, at most, $1 in infrastructure plans for every $6 they get in tax breaks. Unfortunately, the tax holiday that he proposes -- which would give corporations a window to bring the money they've been hiding offshore back into the U.S. without paying the usual taxes -- would encourage more tax dodging in the future, thereby contradicting his original goal and ultimately depriving America of long-term infrastructure funding.
What's more, the very companies that take greatest advantage of the holiday -- those who book the most cash to P.O. box shell companies in offshore tax havens -- actually get to appoint board members of the infrastructure bank created by the bill. Giving the biggest tax dodgers control over our infrastructure funds? That just doesn't seem right.
Besides, the last time corporations got a tax holiday back in 2004, it failed in its goals to create jobs or increase U.S. investments. Instead, the 15 companies that benefited most from the holiday shed 21,000 jobs while increasing executive pay by 60 percent in the following two years. The holiday ended up incentivizing companies to divert even more of their earnings overseas.
At least 82 of the 100 largest publicly traded U.S. companies use tax havens, according to a a U.S. PIRG report. Some glaring examples: Microsoft keeps about $60 billion offshore, on which it would owe nearly $20 billion in U.S. taxes; Pfizer uses accounting gimmicks to shift the location of taxable profits offshore, allowing them to report no federal taxable income in the U.S. in five years; and Google achieved an effective tax rate of just 2.4 percent on its overseas profits between 2008 and 2010.
Companies like these would get both the biggest tax breaks and the most influence over infrastructure funds in Rep. Delaney's bill. This legislation loses out on revenue in the long run, gives corporations tax breaks, and gets lost in contradictory logic.
As a recent college graduate who now works at a non-profit, I know firsthand the impact federal taxes put on my paycheck. But if hardworking Americans can pay the taxes that fund important public programs and infrastructure, so can big corporations. When corporations dodge taxes, every dollar they avoid paying must be covered by the public in the form of cuts to public programs, more debt, or higher taxes.
Let's leave destinations like the Cayman Islands for the tourists and the vacationers, not sham corporate headquarters. As Congress scrambles to cut the deficit, closing offshore tax loopholes for corporations should be the first step, and they should reject Rep. Delaney's harmful bill.