Tax reform time
A bipartisan bill is to be sponsored by Democratic Sen. Kay Hagan of N.C. to lower U.S. corporate taxes for offshore profits from 35 percent to 8.75 percent. Currently, U.S. multinationals enjoy a tax loophole by paying no taxes on their overseas profits unless they transfer these earnings (called repatriated profits) back to the U.S. The bill’s rationale is that these corporations will invest the money saved in new jobs.
Recent history shows little job benefit and huge tax revenues lost by this kind of tax reduction. In 2005, the Bush administration passed a 5.25 percent tax rate on corporate repatriated profits. Studies show that it gave 843 of our largest corporations a $265 billion tax windfall; 92 percent of it went to investors and executives (dividends and stock buybacks) and 8 percent went to job creation.
Corporate tax reform is long overdue. Economists estimate that if overseas profits were fully taxed, they would create $100 billion a year in additional federal tax revenues. Our large corporations already pay one of the lowest effective tax rates in the industrial world. Consequently, their share of total federal tax revenue fell to 9 percent (a record low) in 2010.
John F. Bridgers, Fuquay-Varina