End Offshore Tax Havens
While many conservative politicians complain that corporate tax rates are too high, large businesses rarely pay the full 35 percent rate. Many conglomerates stash their profits overseas to evade taxes by establishing subsidiaries incorporated in foreign countries with laxer corporate tax policies. These companies exploit America’s infrastructure and government resources while avoiding their tax liability to maximize profits. The U.S. created the climate that allowed these corporations to prosper — and should be repaid for its role in their success.
Bernie has said:
“Instead of sheltering profits in the Cayman Islands and other offshore tax havens, the largest corporations in this country must pay their fair share of taxes so that our country has the revenue we need to rebuild America and reduce the deficit. At a time when corporations are making record-breaking profits, while the middle class is disappearing and senior poverty is on the rise, the last thing we should be doing is giving huge tax breaks to profitable corporations that don’t need it.”
I’m no economist. How do companies avoid paying taxes?
The short version is that companies claim that their profits are generated not by their U.S. headquarters or facilities but instead by a subsidiary in a locale with low corporate tax rates. (Bermuda and the Cayman Islands aren’t just vacation spots.) This often takes the form of a “corporate inversion,” which has become a common method of tax evasion. These are just a few examples of large American companies that have moved their nominal headquarters for this purpose:
Florida-based Burger King acquired and merged with Tim Horton’s, under the umbrella company Restaurant Brands International. Now based in Canada, it could avoid $117 million in U.S. taxes by never having to pay corporate income tax on foreign profits it holds offshore.
Ingersoll Rand reincorporated in Bermuda in 2002 and then relocated again to Ireland in 2009, all while keeping the bulk of its management and workforce in North Carolina.
Minnesota-based Medtronic, one of the world’s largest medical technology companies, acquired Ireland-based Covidien in 2014.
Another particularly egregious example of this strategy is known as a “double Irish” or a “Dutch Sandwich,” which cheats not only America out of tax revenue but also Ireland. This is done by shuffling profits and product origins between Ireland, the Netherlands, and the Cayman Islands or Bermuda. The Irish government has attempted to crack down on the scheme, but whether they will be successful remains to be seen.
I love companies like Amazon and Google. Why should I care?
For one thing, it costs you, as an American taxpayer! There’s an estimated $2.1 trillion in profits held in tax havens, which studies estimate amounted to $90 billion of lost tax revenue in 2014. In 2008 a U.S. Senate investigation put the figure at $100 billion. That’s roughly what our federal government spends on transportation each year. To put that in perspective, the Congressional Budget Office estimates that the cost of repairing all of the nation’s 604,493 bridges would be $76 billion.
This is also tremendously unfair, especially to American small businesses. These multinational corporations have built themselves up on the infrastructure and education system provided by the U.S. government and paid for by American citizens, but are now stashing their profits overseas to avoid repaying what they owe. Several of these corporations have taken advantage of not only our infrastructure, but also our bailout funds and tax breaks — all while keeping their profits overseas.
So where does Bernie fit into the equation?
Bernie has publicly called out some of the worst tax-dodgers for their hypocrisy. In 2012, 80 corporate CEOs published a letter in the Wall Street Journal calling for cuts in Medicare and Medicaid in order to reduce the federal deficit. Bernie responded by publishing this aptly titled report: Top Corporate Tax Dodgers: Meet a few of the job destroyers and tax evaders that want to cut Social Security, Medicare, and Medicaid while lowering the tax rate for the top 2%. You should read it.
That was great. Anything else like that?
As ranking member of the Senate Budget Committee, Bernie issued an official report that outlines some of the worst corporate offenders:
Citigroup received $2.5 trillion of taxpayer bailout funds, stashed $43.8 billion of profits overseas, and would owe $11.7 billion if and when this money is repatriated.
Bank of America received $1.3 trillion in bailout funds but holds $17 billion of profits offshore (in 143 tax haven subsidiaries in the Cayman Islands alone). That amounts to an outstanding tax bill of $4.3 billion.
IBM has $52.3 billion in profits held offshore but gets $13.2 billion in tax breaks for a 5.8 percent effective tax rate. Again, the full corporate rate is 35 percent.
Boeing got $9.6 billion in tax breaks for a total tax refund of $401 million between 2008 and 2013, despite claiming $26.4 billion in profits over this period.
General Electric would have paid $14.8 billion more in federal income taxes than it did between 2008 and 2013 if it had paid the full 35 percent federal income tax rate — to say nothing of the $16 billion bailout it received during the financial crisis.
Verizon got $15.6 billion of tax breaks on its $42.5 billion of profits from 2008 to 2013 to net a total refund of $732 million over this period, all while cutting 62,000 jobs in the U.S.
Yikes. What else has Bernie said about this?
A lot. Take this 2011 editorial as an example:
“Today, the U.S. government is actually rewarding companies that move U.S. manufacturing jobs overseas through loopholes in the tax code known as deferral and foreign source income.
This is unacceptable. During the Bush years, the U.S. lost nearly 30 percent of its manufacturing jobs and since 2001, 50,000 manufacturing plants have been shut down. Today, corporations in this country are outsourcing jobs to China and other low wage countries where workers are paid pennies an hour. The last thing we should be doing is providing a tax break to companies that move jobs overseas.
Ending these tax loopholes could raise more than $400 billion over a 10-year period.”
What does Bernie suggest we do about it?
Bernie has sponsored the Corporate Tax Dodging Prevention Act, which would prevent corporations from sheltering profits in tax havens like Bermuda and the Cayman Islands and would stop rewarding companies that ship jobs and factories overseas with tax breaks. He sponsored the Corporate Tax Fairness Act, which would require U.S. companies to pay taxes on all of their income by ending the deferral of foreign source income. And he co-sponsored the Stop Corporate Inversions Act of 2015, which would stop corporations from buying a smaller foreign business and moving their tax “domicile” (address for tax purposes) overseas.
End Subsidies to Big Business
Bernie finds it outrageous that the most profitable corporations continue to receive billions of dollars in taxpayer subsidies each year. He has fought for years to limit these unfair benefits and has consistently refused to accept money from corporations, calling it “legalized bribery.”
Are we really giving billions of dollars in taxpayer money to the most profitable corporations?
Yes. Study after study after study after study reveals the astonishing extent to which we subsidize big business. While the details differ each year, a recent study concludes: “Over the past 15 years, the federal government has provided $68 billion in grants and special tax credits to business, with two-thirds of the total going to large corporations.”
I don’t understand. Why?
In theory, these incentives encourage corporations to keep their businesses in the U.S. and provide jobs to American workers. “Economic development incentives” is a more neutral term for this policy.
But does it work?
It’s a very complex topic, but according to a study in the Harvard Business Review, large corporations are not using the extra money to invest in American jobs. As the author details, after WWII businesses largely followed a retain-and-reinvest approach in that they would use extra income to invest in their workers through “higher incomes and greater job security.” But, the author continues:
“This pattern began to break down in the late 1970s, giving way to a downsize-and-distribute regime of reducing costs and then distributing the freed-up cash to financial interests, particularly shareholders. By favoring value extraction over value creation, this approach has contributed to employment instability and income inequality.”
Which is to say, businesses are increasingly using the extra money to pay CEOs million-dollar salaries and to pump up their own stock prices instead of creating jobs or giving their employees raises.
But I keep hearing that we have the “highest corporate tax rates” in the world?
Our official corporate tax rate of 35 percent is the highest in the world. But it’s very rare that corporations actually pay the full rate, for the reasons outlined above. There’s something called the “effective tax rate,” which is the net rate a taxpayer pays if all forms of taxes are included and divided by taxable income. In other words, it’s a more accurate reflection of a company’s tax liabilities. The nonpartisan Government Accountability Office found that the most profitable corporations paid only an average 13% in federal income taxes in 2010. That puts the U.S. well below most developed countries:
U.S. well below most developed countries
Check out this study from the Cato Institute, a libertarian think-tank founded by Charles Koch, co-owner of Koch Industries. In it, the researchers conclude that “corporate welfare in the federal budget costs taxpayers almost $100 billion a year.”
Are there any other ways that government policies help big business?
Sadly, too many to count.
Any specific examples that Bernie is focused on?
Bernie speaks out against all types for corporate welfare, but he finds the government subsidies given to the fossil fuel industry to be particularly egregious. Oil Change International finds that over $21 billion in production and exploration subsidies are given to oil, coal and gas companies each year. Bernie introduced legislation to end this which would save taxpayers over $135 billion over ten years. You can read more about Bernie’s energy policy at our Climate Change and Energy Policy issue pages.
Any other specific issues that Bernie is focused on?
One of Bernie’s biggest issues is the Export-Import Bank. He’s been fighting against it for years. Here he is back in 2002:
What is the Export-Import Bank?
It provides subsidized financing to American businesses doing business overseas. Head over to Vox to read a thorough explanation.
Done. So what’s wrong with supporting American businesses?
Bernie believes in supporting the business community, particularly American small businesses. What he objects to is taxpayers subsidizing large multinational corporations while they ship American jobs overseas. As Bernie argues in the above video, the Export-Import Bank’s track record isn’t great. Year after year, the vast majority of benefits have gone to a few large corporations. For example, in 2013, nearly one-third of all its financing went to Boeing.
Then why do President Obama and other Democrats support it?
Because there are still many small businesses that rely on the Export-Import Bank for much needed financing. So it is both a form of corporate welfare and a tool for supporting small business. Many Democrats used to side with Bernie on this, including President Obama. Before he was elected president, Obama referred to it as a “fund for corporate welfare.”
Sounds complicated. So what does Bernie propose we do about it?
In 2001, then Representative Sanders introduced an amendment for the reauthorization of the Export-Import Bank to discontinue subsidizing business that shipped American jobs overseas. This would have ensured it remained in place for small businesses but did not continue to subsidize multinational corporations that relocate jobs to other countries. Nearly 15 years later in June 2015, Bernie said:
“Instead of providing low-interest loans to multinational companies that are shipping jobs to China and other low-wage countries, we should be investing in small businesses and worker-owned enterprises that want to create jobs in the United States of America. If the Export-Import Bank cannot be reformed to become a vehicle for real job creation in the United States, it should be eliminated.”
So how do tax reform advocacy groups feel about Bernie?
This is from Citizens for Tax Justice:
“Senator and now presidential candidate Bernie Sanders has one of the strongest records of any elected official when it comes to standing up for tax fairness. In many cases, Sen. Sanders has been the lone voice in the Senate fighting for legislation that would ensure that corporations and the wealthy pay their fair share.”
What else?
Well, have you ever heard of “corporate welfare?” That’s when businesses fail to pay their workers a living wage — exploiting the super-low federal minimum wage of $7.25 per hour — forcing their workers to depend on social services paid for by middle-class taxpayers. Bernie has called this “Welfare for Walmart.”
What does “Welfare for Walmart” refer to?
It’s a reference to the fact that the retail behemoth Walmart costs taxpayers $6.2 billion each year in food stamps, health care costs, and other government programs because it pays the vast majority of its employees so little that they require public assistance to survive. Important to note is the Walton family, Walmart’s largest shareholders, is the wealthiest family in America, estimated to be worth $148.8 billion or more than 49 million American families’ net worths combined.
Watch Bernie question a representative from the Manhattan Institute of Policy Research, a conservative American think-tank, on Walmart and the minimum wage in this 2014 hearing:
Appalled? Right. Now go read the Minimum Wage issue page to learn about Bernie’s proposal to more-than-double the federal minimum wage to $15.
Overturning Citizens United
Bernie wants to implement comprehensive campaign finance reform by passing a constitutional amendment to overturn Citizens United — a Supreme Court decision that allows corporations and the super-rich to spend unlimited money on election campaigns — and move toward public funding of elections.
Why does Bernie want comprehensive campaign finance reform?
Right now, wealthy corporations have enormous power to influence campaigns and elections. This gives them an outsized voice in lawmaking and policy — and stifles the voice of ordinary Americans.
Haven’t the wealthiest people always had more influence on our government?
Yes. That’s why Bernie has called for campaign finance reform for years. Here he is in 2002:
So, how will he overturn Citizens United and what does public funding of elections mean?
Glad you asked. Check out all the details at the Political Reform page.
Support Entrepreneurship and Small Businesses
Bernie has emphasized the importance of supporting America’s small businesses. He believes that our government favors multinational corporations and huge conglomerates in their quest for limitless profits — over innovation and domestic economic stability.
Specifically, how has Bernie supported small businesses?
In general, all policies that Bernie supports have the indirect purpose of helping small businesses to compete with large or international corporations. To name a few, in addition to policies mentioned above such as reforming the Export-Import Bank, Bernie supports efforts to raise the minimum wage, legalize and protect immigrant workers, and reform disastrous trade deals which only benefit multinational corporations.
Check out the Small Business issue page for specific policies geared towards boosting small businesses.
