© Josh Sager – March 2016
Since 2010, Washington has been virtually paralyzed. The Republican majority in the House and, more recently, in the Senate, has engaged in a campaign of massive resistance against almost everything that the White House has supported. In spite of this paralysis, a bipartisan group of Washington politicians is currently working quickly and quietly to hammer out a corporate tax forgiveness deal which would, in effect, steal hundreds of billions of tax dollars from the American people. This is an incredibly corrupt plan that has been ignored by the media, thus is virtually unknown in the American public.
Currently, American corporations have offshored approximately $2.1 trillion in revenue so that they can avoid having to pay corporate income taxes—according to a loophole, corporations only have to pay American income taxes when they bring their profits back into the country, not when they actually make the profit.
Under a tax forgiveness deal, corporations which have stashed large amounts of money overseas will agree to return their money home and pay taxes, but only if the tax rates are temporarily lowered so that they don’t have to pay everything that they owe. In effect, corporations that offshore are given a reward for their tax dodging and allowed to avoid paying their fair share to the tune of billions
Given the obvious unfairness of this situation, one may wonder why politicians would ever contemplate supporting such theft. The answer is quite simple—these giant multinational corporations have poured billions, of dollars into lobbying firms and political campaigns to buy our politicians out from under us. A recent report by the Sunlight foundation found that the return on investment when a corporation spends on lobbying (through tax cuts and contracts) is approximately 76,000% (for every $1 spent, the corporation gets $760) and this is just one more manifestation of a much larger trend.
On this deal alone, a literal army of approximately 1,500 corporate lobbyists has been working behind the scenes to make it happen. They have been lobbying both parties and leveraging these corporate interests’ long histories of donating large amounts of money to both sides of the political divide. This is one issue that transcends partisanship, and is an area of agreement between the Clintons, Trump, and both parties’ leadership (but not Bernie Sanders—probably nothing to do with his refusal to take corporate money).
Democrats, led by President Obama, have proposed a tax holiday that would drop corporate taxes from 35% (normal), to 14% (a 60% reduction)—when applied to the $2.1 trillion in offshore revenue, this translates to a $441 billion tax break. Some reports from individuals familiar with the negotiations have also claimed that the Obama Administration has proposed a permanent decrease in corporate taxes as part of this tax holiday which would bring the corporate tax rate from 35% to 28%.
Not to be outdone in helping corporations rob the taxpayers, the Republicans support a larger tax holiday which would set the rate at just under 10% (a 71% reduction). Some Republicans have also supported making this the permanent corporate tax rate.
Regardless of what the eventual deal is, every dollar to be “saved” in tax breaks to these corporations is a dollar that was stolen from the American people. These are taxes that are owed, but not paid, and letting corporations bring their money back to the USA at a decreased rate is like letting a thief avoid jail by paying back 40% of what they stole. Of course, this is a service that is only available to big corporations who buy politicians, and any individual who tried this would be rightly arrested and jailed (ask Wesley Snipes).
In the long term, these deals set a terrible precedent, where corporations are able to simply stash their profits overseas, secure in the knowledge that they will be able to return the money home in a couple years during a tax holiday. This incentivizes more offshoring and makes it possible for large multinationals to raid the treasury. Here is a graph of what happened after the last tax holiday of this sort (2004):
Notice how the offshoring spikes after the 2004 holiday—that is corporations realizing how much they can make with this scam.
When establishment politicians say that our country is broke and cannot possibly afford to pay for universal higher education or healthcare, keep this story in mind. $440 billion could pay for universal higher education for 6 years and help create a generation of better educated, less in debt, adults. That said, this wouldn’t help the corporations or their bought political cronies.
The media has completely fallen down on the job in reporting this kind of tax holiday. They have essentially ignored it in 2016, and failed to cover it significantly when Bush passed a similar measure in 2004 (it failed then too). The reasons behind this failure are very simple.
First, there is no real political controversy here to create sensationalism, as both parties are willing to work quietly and behind the spotlight on this issue. Just as few politicians want to have their names publically attached to such an obviously corrupt policy, few politicians want to stick their neck out in opposing this kind of robbery (fighting this could cripple your ability to raise corporate money in the future).
Second, the media knows that this issue is unlikely to hold the interest of the public without fiery political fighting—most Americans simply don’t understand this issue. Because of this, the media has an incentive to cover more bombastic stories, which draw more eyes, even if they are absolutely irrelevant from a substantive perspective (e.g. Trump’s next offensive screed).
Third, the giant media corporations which control most of our mainstream news are either owned by corporations that stand to benefit from this robbery (e.g. MSNBC is owned by General Electric), or controlled by very wealthy individuals who are invested in such corporations. They are biased in favor of this type of tax holiday and have an incentive to make sure that their media networks don’t make the American public aware of how badly they are being robbed.