In a stunning depiction of how bad our tax code has become, the Wall Street Journal on March 10 found that 60 major U.S. companies parked a total of $166 billion abroad last year, enabling them to avoid almost $100 billion in taxes. Otherwise put, around 40 percent of these companies’ aggregate total earnings were shielded from taxes — and also made unavailable for paying dividends or making investments in the United States. Ten of the companies actually parked more money offshore than they made in profits, highlighting the desperate measures American companies are now willing to resort to in order to avoid the voracious maw of the American taxman.
With top combined state and federal corporate tax rates at about 40 percent, the United States — once the “land of opportunity” and of free-market enterprise — now has the highest corporate tax rate in the developed world, and a federal government frantically looking for further corporate tax “loopholes” to close that will raise rates higher still. In such a context, it is little wonder that so many of America’s top companies choose to move their business to lower-taxed jurisdictions overseas. In the case of many high-tech and health-care companies, this includes even moving patent rights and other types of intellectual properties to overseas subsidiaries.
It is estimated that the federal government lost $42 billion in tax revenue due to such tax avoidance practices last year alone; yet instead of seeking ways to lower rates to make the U.S. corporate tax code once again competitive with the rest of the world, and provide incentives for U.S. companies to return home, all the talk in Washington is about closing loopholes, raising rates, and, in general, finding ways to squeeze more money out of U.S. corporations.
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