In today’s bitter, poisonous political environment, there’s still one place where Democratic and Republican leaders find common ground: an abiding devotion to multinational corporations.
Sen. Chuck Schumer, D.-N.Y., and Sen. Rob Portman, R-Ohio, have just proposed a plan that would give those corporations something they’ve always wanted: a so-called “territorial” tax system in the U.S.
A territorial tax system would only tax U.S.-based multinationals on their profits earned within the United States — which sounds like it makes sense, except that it’s incredibly easy for big corporations to use financial trickery to sell to a big market like the U.S. but say their profits were earned in another country. Another country that always happens to have a much lower tax rate than here. For instance, in 2010 U.S.-based multinationals claimed that so much of their profits were earned in Bermuda that these profits were 1578 percent the size of Bermuda’s economy.
According to the current law, though, U.S.-based corporations are taxed on those profits at U.S. rates if they ever bring these profits back home. So they just leave them overseas — right now they have about $2.1 trillion stashed in other countries.
The Schumer-Portman plan would impose a tax on corporate profits purportedly earned in other countries whether they came back to the U.S. or not. But it would do so at a far lower rate than the current standard corporate tax rate of 35 percent — President Obama has proposed 14 percent, and while Schumer and Portman haven’t come up with a specific number, Portman says 14 percent is much too high.
The obvious consequence if the Schumer-Portman scheme becomes law is that businesses based solely within the U.S. would be at a permanent disadvantage. Multinationals could earn profits in the U.S., get their armies of lawyers and accountants to make these profits appear to have been “earned” in the Cayman Islands, and get taxed at the overseas profit rate. Meanwhile, purely domestic companies would either have to pay the higher domestic rate, or turn into multinationals themselves.
There is a much simpler, fairer, more efficient way to run the tax system for international corporations, called “formulary apportionment.” With formulary apportionment, it wouldn’t matter how many subsidiaries and departments corporations had scattered all over the globe, and which “earned” their profits where. Instead, a formula (based on a combination of a corporation’s sales, payroll and capital stock) would determine what proportion of the corporation “belonged” to each country. Then the corporation’s overall profits would be allocated according to that proportion, and the corporation would pay that country’s tax rate on that proportion.
This would be good for the U.S. overall, given that we’re a huge market that accounts for a large proportion of most multinationals’ sales. It would be good for domestic business, making it possible to raise the same amount of revenue at a lower corporate tax rate. And it would make companies compete based on who made the better product, not who has the better lawyers and accountants. But it would make it far more difficult for multinational corporations to play governments off each other and evade taxes, so don’t look for it anytime soon.
(This post is from our blog: Unofficial Sources.)
Photo: J. Scott Applewhite/AP
Tax these f*ckers 75% no matter where their money is!!!!
I am aware of one corporation in particular, which I will not name, that hired tens of thousands of IT (computer support) workers in India, China and other developing economies during the mid naughts, then off-shored huge portions of the work required to support the products of its US divisions (IT services, hardware and software). The foreign business divisions were allowed to charge the US divisions labor rates equivalent to what US workers would have made, even though prevailing rates were lower in the developing economies. On top of that, the foreign workers were often paid less than what they could make at competing firms. This sometimes resulted in quite high turnover rates and even wildcat strikes (sick-outs) by the foreign workers. Thus, US customers and internal units were paying contract rates comparable to what they would pay for domestic services, but the work was off-shored to a foreign unit to which the windfall profits were allocated. The management and workers at the US divisions were then constantly criticized because their profits fell short of targets. Athough most of the sales of IT services, hardware and software were made in the US and Europe and were based on intellectual property developed in the ’80s and ’90s within the US and (to a lesser extent) Canada and Western Europe, the company was able to allocate more and more of the profits to India, China, Eastern Europe and South America.
Most egregiously, I was told of a case where our Indian supplier had been caught billing the same hours to two different US divisions, and nobody was fired. This is a case of what William Black has described as “control fraud,” where official corporate policies are ignored and violations are given a wink and nod by executive management.
Speaking of the U.S. Government screwing domestic businesses and regular Americans – and pretty much everyone else in the world, too…
Colorado wants to end the federal government forcing legitimate businesses following all state and local laws and paying all taxes, including federal, to operate at risk as if they’re a criminal enterprise. It’s due to an 80yo federal LIE eventually codified into insane law and a war on people by Richard Nixon. And President Nixon did so after ignoring the advice from his own hand picked advisory committee – recommending complete decriminalization of cannabis. Since then MILLIONS of lives here and around the world have been – and are still being – destroyed in a “company store war” to first eradicate one of Earth’s most beneficial plants, and now to globally monopolize any patented medicines derived from that plant (shades of Monsanto). It could ALL be ended by simple descheduling.
A Senate Bill introduced this week may help some:
http://america.aljazeera.com/articles/2015/7/10/bill-would-allow-banks-business-with-marijuana-cos.html
Rep. Ed Perlmutter (D-CO) also reintroduced a corresponding bill in the House on Tuesday, H.R. 2076 or “The Marijuana Business Access to Banking Act of 2015.”
and
http://www.tokeofthetown.com/2011/06/worth_repeating_govt_holds_patent_for_cannabinoids.php
also
http://globenewswire.com/news-release/2015/05/18/736743/10134883/en/Brazilian-Government-Approves-Medical-Marijuana-Inc-s-New-Partnership-HempMeds-Brasil-TM-and-Their-Products-as-a-Prescription-Medication-for-Import.html
Somewhat related story of a more local interest…
http://www.alternet.org/drugs/planned-bong-thon-marijuana-smoke-out-causes-local-panic
Can’t yet attend myself but, as always, tourists in Colorado are welcome.
http://www.bong-a-thon.com/Home.html
Austerity, my arse! lol $2.1 trillion parked; i.e. doing squat! The lack of it, though, has manufactured a faux deficit. This fake “run-up of debt” in turn, has fueled the current lies and distortions coming out of bankster-financed, D.C. politics, turning Democracy on its head.
Phony austerity measures are causing an unnecessary ruinous descent into poverty by working people everywhere and worldwide. Who knows, though, what the weasel banksters would do with those bucks, if they got their larcenous hands on that immense stack, all at once? Perhaps, leave a “sleeping dog” lie? Anybody’s guess. My bet is, well, too righteous for today’s world. TAKE IT! – lol – And give it back to those of us who were ……. ‘robbed’ would be too noble of a word for these pigs!.
Please, don’t insult pigs.
If that $2 trillion were taxes at 100% it would not resolve the US deficit. That is without counting unfunded SS liabilities and unfunded pension debt from the states, which causes total US debt to balloon to several orders of magnitude beyond the total global economy.
I have to say, I enjoyed the title. It’s not something you come across often.
Nice work. Schumer… ugghh.
This just strikes me as angling for post political employment.
You know what would be a good story is to to go back and look at the post political careers of the top retiring representatives and senators of each election cycle and cross referenced that with legislation introduced and committee positions held by each of them. Sprinkle a little statistical analysis of the areas of each politicians worked in to were they ended up working on retirement. It would be interesting to know if government service was just a stepping stone on the career path of some politicians and if analysis showed it was a major or minor occurrence.
You could start with Eric Holder, who has just moved back to the law firm he worked at before being AG and which held a corner office for him the entire time. Or check out Billy Tauzin: https://en.wikipedia.org/wiki/Billy_Tauzin#Career_as_a_lobbyist. Most of them do it. Of course, this is the whole point of Obama’s political career protecting criminal banks and corporations (FISA Amendments Act: https://en.wikipedia.org/wiki/Foreign_Intelligence_Surveillance_Act_of_1978_Amendments_Act_of_2008) and helping create, in secret, the so-called trade agreements that will give national sovereignty to corporations through investor-state dispute settlement: https://en.wikipedia.org/wiki/Investor-state_dispute_settlement.
You’re welcome. ;-)
Once upon a time, I remember hearing something about “no taxation without representation.” Well, American workers are no longer being represented at the federal level and, in many cases, at the state and local levels either. So, it follows that a boycott on payment of federal and state taxes is in order until the interests of working people are represented in ways analogous to the way current policies benefit corporations.
Do ‘governments’ have a god-given right to take money from their subjects in exchange for some (mostly imaginary) level of ‘protection’? I thought it was a high crime if, let’s say ‘the Mafia’ was doing it. Probably because the Mafia charges so much less and offers so much more.
Nothing prevents the US gov’t from becoming a tax heaven and attract all of them multi-nationals. All they need is to extort a lesser percentage of income than other governments do. So, US government, don’t be greedy, don’t waste your loot on stupid wars, don’t overpay the parasites on your payroll and you’ll be competitive and afford to ‘take’ a lesser portion of your productive citizens’ income.
Oh, and let’s not forget why certain ‘corporations’ (such a scary word, isn’t it?) make ‘profits’. Most of them (yes, there are those who sell to the gov’t or work for the government so those are not legitimate) make money because they have products or services that people (also known as ‘the consumers’) like to buy and use.
It’s more than just certain ‘corporations’ that sell or work for the government. Defense contractors, health insurers & medical devices, the education and prison industry, police equipment suppliers, IT, finance, agricultural subsidies, I could go on. A lot of corporations have simply raided the government and wouldn’t have anywhere near the market share in a true free market. For every Apple selling consumer devices directly to consumers, there’s probably 3 Booz Allen Hamiltons working almost exclusively for the government. Public liability, private profits.
Governments have every right to tax those who benefit from its services. We are not a nation of freeloaders and tax cheats.
Spare us the Ayn Rand nonsense.
Hey, question: who is the ‘us’ in the ‘spare us…”? You and your house pets? Some imaginary friends thrown in?
As for government’s ‘every right to tax’, my memory is not so good because I forgot when I asked for a service such as a trillion-dollar military. I even forgot how I benefit from such a service. But you and your house pets seem to hold that statist view that the state owns its subjects (and their pets) and it has ‘every right’ to take whatever it pleases and the only issue worth discussing is how to take as much as possible from the productive citizens without actually killing them or severely diminishing their productivity.
You get a vote. If you don’t like the way Washington is spending your money, Use it!
Ahhhh… the scam aka ‘the 2-party system’. It’s an interesting topic but I’m not sure it can be discussed or dismissed in 1-sentence posts or even well thought-out tweets.
Question: why most of the beneficiaries of Mafia protection never call the cops? Think about it, then come back with another 1-sentence pearl of wisdom. But make it short.
The top 20% of income taxpayers fund the federal government…so yeah, we are a nation of freeloaders.
Actually, a very large portion of the federal government has for the last 30 years been funded by T-bills bought by the Social Security Trust Fund, collected from the bottom 80% through FICA. Now that it’s time to redeem those bonds to pay the benefits of people who have earned them and paid for them for the past 30 years, the 20% (that benefits most from government spending) doesn’t like the idea and is ranting and raving that the funds are “gone” and replaced by nothing but “useless IOUs.” They borrowed the money, now they don’t want to pay it back.
A truly territorial system of corporate income taxation would be a huge incentive to ship American jobs overseas. Any CFO worth his salt would recognize this. Only the deluded, the ignorant, or shills for multinationals would deny it.
You want to produce something to sell. If you produce it offshore, your foreign profits are exempt from tax. If you produce here in the US, your profits will be subject to tax. The most incompetent CFO can see this.
The best solution is true current worldwide taxation of foreign profits. That must include profits earned by foreign subsidiaries of US corporations. That would be a simple to do.
Schumer, although nominally a Dem, is a w*o*re for Wall St. They and tech would benefit the most. Banks will move all their operations to tax havens, and pretty much eliminate their US tax liability.
Again, if you want to ship American jobs overseas, vote for territorial taxation!
“You want to produce something to sell. If you produce it offshore, your foreign profits are exempt from tax.”
And why shouldn’t they? Please help me understand why should the US gpv’t attempt to tax profits from goods and services created abroad? I believe that there are such things called ‘import duties’ where goods are taxed when brought in to be consumed by the docile US subjects but if something produced in Bulgaria is consumed by Bulgarians I can’t see how the US gov’t is entitled to tax that activity.
How clueless on economics. Every other modern nation has a territorial tax system. They taxed income that is earned in their Under your idea, you’ll just drive these companies to domicile and headquarter themselves in these nations. Also, how does leaving cash overseas that can’t be brought back, and invested here, help spur job creation here? Your logic isn’t grounded in economic reality.
Why should cash earned overseas be brought back here. Seriously, the guys overseas are people too. No? Besides, why should the guys in Vietnam or India subsidize OUR military industrial complex? I am sure we have a few fans in India or in Mexico but I bet most locals would rather wish that our overseas subsidiaries do not use the fruits of their labor to pay the US government so that it can supply the Israeli military with better cluster bombs they could use to kill the locals in Gaza.
I am curious. Down’t ‘we’ tax Honda when they assemble cars in the USA? Does Japan tax Honda USA? I really don’t know but I doubt it. Is Honda USA sending bags of money back to Japan?
It is a bit disappointing that the writer begins the article with the assumption that there is a real difference between the Republicans and Democrats. No such difference exists; they are both part of the Corporate/Fascist organization bought by and serving the richest few. We, as Americans, need to see the problem before we’ll be motivated to work on it. The MSM is part of the organization and is of no use to those seeking the truth in this matter.
The differences are in social issues: LGBT rights and civil rights in general. Unfortunately, the Dems devotion to corporations undermines anything that doesn’t produce profits. Marriage equality works for them because corporations make money off marriages (also why Roberts voted for them). Civil rights, OTOH, get in the way of for-profit prisons, for instance.
Ah yes, the all-powerful Marriage Industrial Comples.
We the People must stop electing lawmakers who bend Americans over to be fisted by Big Business.
When Corporate Tyranny knocked on America’s front door, it was wrapped in the U.S. flag and carrying a briefcase. After a century of living in the Edw. Bernays haze, gullible and docile Americans opened the door and said, “Welcome! Come in!”
No need for brown shirted troopers to put their boots on our necks for compliance. Heck, plenty of Americans would offer to drive themselves to the FEMA reeducation camps instead of taking a free ride on a govt. transport train while boasting of their self-reliance, freedom of choice, blah blah.
I really like this website, but find this article sloppy, slanted, and not to Intercept standards.
I’m pretty sure the U.S. Is the only major country that has a double tax setup where foreign earnings are also taxed when brought back to the U.S. This is why corporations leave all that cash overseas. If my company makes a product in Malaysia by Malaysians sold to Malaysians for a profit, why should the U.S. Tax on top of it? Wouldn’t it make more sense to encourage U.S. companies to bring cash back home and invest in the U.S.? If we double tax, it just causes companies to not bring the foreign earnings home, or worse….they decide to move their headquarters overseas.
I’d like to see facts on the Cayman Island references too, because that seems outdated. Most of those loopholes are shut down. Their are transfer pricing and arms length rules that prevent companies from inflating phantom profits in low tax jurisdictions.
They’ve let them bring the money back here before. It usually leads to dividend payouts with little investment. In reality, it’s still within the U.S. financial system, on paper it shows it belongs to another country. Look up double Irish Dutch sandwich or tax inversion. Companies like GE have access their physical operations in the U.S. with access to its infrastructure and can effectively beat the hell out of our roads transporting heavy equipment while having their earnings show up on another country’s books, hence not paying for their proportional use of the roads. And for foreign earnings, IIRC iTunes purchases are considered profits in Ireland, even though I’m betting the majority of purchases are made by consumers in the U.S and Western Europe. As for tax laws, multinationals play a big part in writing and gaining preferential treatment from the tax system.
“If my company makes a product in Malaysia by Malaysians sold to Malaysians for a profit …”
If you think corporations making clothes in Pakistan, for instance, are getting their profits in Pakistan, or factories in Malaysia are selling primarily to Malaysians, you’re as delusional as your handle indicates.
Not to mention that slave labor finds it hard to buy any products: Obama Administration Makes Malaysia Slavery Problem For TPP Disappear [http://ourfuture.org/20150710/obama-administration-fixes-malaysia-slavery-problem-for-tpp]
I’ll bet this new scheme will be deceptively billed as “cracking down on corporations” and “making corporations pay taxes on money earned overseas” instead of “letting corporations pay just a little bit on money routed to appear as if it is earned overseas”. When an unsavory practice gets too much exposure, politicians have to pretend they are doing something about it. And the corporations would be able to bring that money back to the U.S. because, hey, they’ve paid taxes on it, albeit at a much lower rate than anybody else pays. I guess there is only so much a corporation can buy elsewhere before it wants to have the use of its money at home.
“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.”
Benito Mussolini
Time to start removing the corporate Congress from office & defunding the NSA & the Police Surveillance state, to pre 9-11 levels & force them to comply with the law & impose jail time for non compliance under USC Title 18 Sec. 241 & 242 (Google it) .
Disclaimer: Be advised it is possible, that this communication is being monitored by the National Security Agency or GCHQ. I neither condone or support any such policy, by any Government authority that does not comply, as stipulated by the 4th Amendment of the U.S. Constitution.
Why not just make multi or trans national companies illegal. Break ’em up. Nowhere to hide. While we’re at it, no more so-called off shore tax havens. Sometimes simplistic, ludicrous suggestions are needed to cleanse the soul.
This would be the worst economic idea ever…
This article is So 1970 in its acceptance of the appearance of political discord (a sham pretense) and
in the belief that democrats and republicans (and probably libertarians) have a “devotion” to
multinational corporations when,
in fact,
these parties are working for and through the greed of multinational corporations.
The Congresses, the administrations, and the Supreme Court are all now corporate agents.
They do not see people as any more than human resources to be used for monetary gain.
You know, this was the EXACT OPPOSITE of what President John F. Kennedy proposed in his final budget just before his assassination: he wanted to tax foreign profits and monies kept overseas by American-based corporations, a major step in restructuring the American tax system.
Of course, JFK was a real democrat, and any rational person today knows that Schumer, or Cantwell or Murray or Feinstein or any number of faux crats out there have absolutely nothing to do with the Democratic Party which once existed — they are simply rightwingers posing as something slightly different!
At least two other easy solutions: a) vote Chuck “Wall Street and Israel’s Pony Boy” Schumer out of office and vote in somebody with a soul, or b) do a) and then pass a law that says the only tax deduction a transnational corporation gets is directly tied to number of Americans it employs in America and abolish every other tax deduction corporations are entitled to because why in the F*ck should any American citizen subsidize some transnational entity in any way. And then you follow all that up by putting massive tarrifs on whatever shit goods they try to sell in the American marketplace made in some slave labor hell-hole.
Either that or you could try and convince the American people that making purchases on the basis of the “lowest price” goods actually has costs for all working people all over the globe. And buying things on basis of “lowest price” is ultimately the biggest contributor to a giant global race to the bottom in wages, environmental practices, regulation and taxation for the entire planet of living breathing working human beings as opposed to legal fictions who don’t give a flying f*ck about human beings except to the extent they can profit off their labors and purchases.
But I don’t see any of that happening anytime soon in America because Americans aren’t the brightest bulbs in the pack so to speak. And not only that they really don’t give a hoot about anybody or anything that doesn’t directly impact them, so the thought of international worker solidarity is completely beyond even their wildest imaginings.
Schumer is practically impossible to get rid of. The Democrats of NY won’t primary anyone with a chance against him and the Republicans usually put up someone who has the same positions towards Wall Street and Israel, and is usually a bit more of a religious authoritarian to add. Maybe throw in some differing rhetoric on abortion and gun control for good measure and to create an illusion of choice.
Great story. I learned something.