WASHINGTON — Sen. Bernard Sanders, I-Vt., introduced legislation Thursday that would close the current tax loophole that allows U.S. corporations to avoid paying income taxes by keeping their profits overseas in countries with low corporate tax rates.
“The point has to be made that if we’re going to be serious about deficit reduction corporate America, which is now enjoying record-breaking profits, is going to have to step up to the plate,” said Sanders, a member of the Senate Budget Committee.
The Corporate Fairness Tax Act, which Sanders has introduced in the Senate and Rep. Jan Schakowsky, D-Ill., has introduced in the House, would alter current tax law that allows companies to defer paying income taxes on overseas profits until the money is brought back to this country.
With the introduction of this legislation, Sanders is weighing in on an area that has become the subject of increasing scrutiny in Congress at a time of large federal deficits. While no hearings or formal action has yet been slated on Sanders’ proposal, aides said he expects the bill to be considered during forthcoming discussions that the Senate Budget Committee plans on options for getting federal deficits under control.
Sanders observed Thursday that roughly one out of every four major corporations doesn’t pay any corporate taxes, while the national debt stands at about $16.5 trillion. Congress’ Joint Committee on Taxation has previously estimated that the provisions in his bill would raise more than $590 billion in revenue over 10 years, he added.
During a news conference announcing the legislation, Sanders described a five-story office building in the Cayman Islands that houses more than 18,000 corporations, which he displayed on a poster behind him.
“Offshore, every year corporations and the wealthy are avoiding more than $100 billion in U.S. taxes by sheltering their income in the Cayman Islands, Bermuda and other offshore tax havens,” Sanders said.
Beyond preventing the government from collecting tax revenue, Sanders said, current tax law is hindering domestic job creation and economic growth.
“Companies are also being rewarded by the tax code for shipping American jobs and factories abroad,” Sanders said. “These corporate tax rates have contributed to the loss of millions of decent-paying manufacturing jobs in this country and the closure of 56,000 factories since the year 2000.”
Current law also puts those companies that choose to keep their entire business within the United States at a disadvantage, said Dorigen Hoffman, policy director for Norwich-based Clean Yield Asset Management, who appeared with Sanders at the news conference.
“We are subject to federal and state taxes. However, our business competes against large nationwide investment firms that have found ways to dodge these important taxes by creative accounting and offshore subsidiaries,” Hoffman said. “This puts us at a financial disadvantage that can only be remedied by appropriate tax reform.”
Many large U.S. corporations with subsidiaries overseas say they reinvest profits abroad to avoid tax rates of up to 35 percent that apply to domestic profits. But a probe by the Senate Permanent Subcommittee on Investigations last year found that billions of dollars from these foreign subsidiaries is quietly finding its way back into the United States in the form of loans to U.S.-based entities, thereby avoiding taxation.
Edward Donga is affiliated with the Boston University Journalism Program.MORE IN Central VermontFallen firefighter to be honored
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