Curbing foreign tax havens would strengthen federal budget
Blog contribution provided by Tazra Mitchell, Public Policy Analyst with the NC Budget and Tax Center
The federal budget process would become a bit more stable and predictable if the recently introduced Stop Tax Haven Abuse Act is enacted. This bill, which has been introduced by Senator Carl Levin, would raise at least $200 billion over the next 10 years by closing corporate tax loopholes that allows multinationals to shield their offshore profits from taxation. The bill’s passage would deliver a more balanced approach to addressing the federal deficit and help prevent a second round of across-the-board cuts that will only further harm the nation’s most vulnerable citizens at a time when hardship remains high.
One of the major reforms within the bill is to eliminate tax incentives for US companies to move jobs and operations offshore, saving an estimated $60 billion. Currently, businesses can move production to another country and never pay taxes on their profits as long as they park such profits overseas indefinitely. Yet to their advantage, businesses can immediately deduct the expenses incurred building and operating new plants, including expenses related to shipping materials abroad and severance packages for laid-off employees. The bill would end such practice by forcing corporations to pay taxes on their offshore profits before they are able to deduct any associated offshore expenses from their tax bill.
Businesses benefit from public investments and rely on an educated workforce and a solid transportation system that helps them get their goods to market. As such, it is in the best interest of all taxpayers, especially small businesses, for multinational corporations to pay their fair share.