According to a new study by the Economic Policy Institute and Americans for Tax Fairness, corporate tax dodging is at record levels while corporate profits have reached record highs. U.S. corporations have stashed $2.4 trillion offshore. It is estimated corporations could owe as much as $700 billion on those profits, much of which are earned in the United States. Some of the findings are below. I should like to point out that a recent report in the Guardian stated that US corporations were the best at avoiding taxes.
1. Corporate profits are way up, and corporate taxes are way down. In 1952, corporate profits were 5.5 percent of the economy, and corporate taxes were 5.9 percent. Today, corporate profits are 8.5 percent of the economy, and corporate taxes are just 1.9 percent of GDP.
2, Corporations used to contribute $1 out of every $3 in federal revenue. Today, despite very high corporate profitability, it is $1 out of every $9.
3. Many corporations pay an effective tax rate that is one-half (or less) of the official 35 percent tax rate.
4. One thing not mentioned by the study is that many US corporations pay no taxes and sometimes receive tax rebates on taxes they never paid, Verizon, for instance, paid no Federal taxes in 2009, 2010 and 2013, and received tax rebates in each of those years.
5. As of 2015, U.S. corporations had $2.4 trillion in untaxed profits offshore. This is roughly a five-fold increase from $434 billion in 2005. It stems largely from anticipation of a tax holiday.
Just two industries—high-tech and pharmaceutical/health care—hold half the untaxed offshore profits.
6. Just 50 companies hold over 75 percent of untaxed offshore profits. Ten companies hold 39 percent of these profits. Just four companies—Apple, Pfizer, Microsoft, and General Electric—hold one-quarter of all untaxed offshore profits.
7. About 55 percent of U.S. corporate offshore profits are in tax-haven countries. Corporations pay an average tax rate of between just 3.0 percent and 6.6 percent on profits in tax havens.
8. U.S. corporations pay very low tax rates—6 percent to 10 percent, mainly to foreign governments—on all their offshore profits. A tax break known as “deferral” allows them to delay paying U.S. taxes until the profits are repatriated to the parent corporation in the United States.
9. The U.S. Treasury will lose $1.3 trillion over 10 years—about $126 billion a year—due to the deferral of taxes on offshore profits.
10. Income shifting—which are making profits earned in the United States look as if they were earned offshore—erodes our corporate tax base by over $100 billion a year. U.S. corporations increasingly manipulate transfer pricing and bilateral tax agreements to make their U.S. profits appear to be earned in tax havens. Think Panama Free Trade Agreement and the looming Trans-Pacific Partnership.