According to new research, the world’s super-rich are taking advantage of offshore tax havens to the tune of between $21 to $32 trillion dollars. Yes, trillion. To put that in perspective, that’s more money hidden abroad than in the entire American economy.
This is a double whammy to economic growth and recovery. Not only does this significantly lower tax bases of “source” countries — money that is supposed to pay for education, roads, water supplies, electrical grids, airports, and other infrastructure — but it also moves capital away from its source country into foreign tax havens, including places like the Cayman Islands and Switzerland (where Mitt Romney has stashed money). That capital is then not available in the source country to start or invest in businesses.
A similar problem is happening with corporate taxes. In July, a senior executive of Corning Inc. testified to the House Ways and Means Committee that America’s high corporate tax rate putting Corning at a disadvantage. She testified that Corning had an effective US tax rate of 36% in 2011, compared to an effective tax rate in foreign countries of 17%. Sounds terrible, doesn’t it!
There’s just one problem — it is a big lie. Between 2008 and 2011, Corning didn’t pay any US income taxes at all (even though they earned $3 billion during that time). In fact, they received $4 million dollars from the US government. Their effective US tax rate was actually negative 0.2 percent (compared to an 8.6% effective tax rate in foreign countries).
How did they do this? By offshoring their profits so they don’t have to pay US taxes on them. They supposedly would have to pay US taxes if they brought any of those profits back into the US, except that (as we’ve previously reported) the US already gave the corporations a tax holiday in 2004 that allowed them to repatriate their profits without paying any taxes, and will probably do it again.
That, my friends, is corporate welfare.
Interestingly, Mitt Romney thinks this is a good idea. At a campaign fundraiser a few weeks ago, Romney said:
Big business is doing fine in many places. They get the loans they need, they can deal with all the regulation. They know how to find ways to get through the tax code, save money by putting various things in the places where there are low tax havens around the world for their businesses.
I guess that we shouldn’t be surprised that Romney thinks avoiding taxes is good. Even if you don’t pay any US taxes at all.