While the headlines on the fiscal cliff negotiations are about wrangling over the top individual tax rates, multinational corporations are quietly lobbying for an agreement to move the U.S. international tax rules to a territorial system.
Members of the so-called Fix the Debt Campaign have called for massive cuts to social programs while seeking additional tax breaks for their own companies. A move to a territorial system could give the 63 publicly-held companies in the Fix the Debt campaign an immediate windfall of up to $134 billion and would massively increase their incentives to move even more profits offshore, where they would then be permanently exempted from U.S. taxes. Terrible-torial.
Meanwhile, defense contractors that exhort Congress to find a “reasonable approach” are also lobbying for permanent tax breaks on their offshore earnings. And major corporations complain (perennially) about having to pay U.S. taxes on any foreign cash they decide to bring home.
Moving to a territorial tax system would be a disaster for the U.S. Treasury and an open invitation for multinational companies to intensify their offshore shenanigans. Our fact sheet explains why. For an illustration of why it’s such a bad idea, you only need to look at headlines from the U.K. Because of their territorial tax system, they are unable to collect corporate income tax from U.S. corporate giants Starbucks, Amazon, and Google who are profiting wildly from sales and business in the U.K. Recently, these multinational giants were hauled before Parliament to explain their “immoral” tax-dodging behavior.
The U.S. already collects only a fraction of the taxes corporations owe on their profits; why would we move to a system that makes the problem even worse?