Tax reform

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As a prime example, Apple is a major beneficiary of a tax loophole that, since 1960, has enabled U.S. companies to avoid paying taxes on earnings made and held abroad. At the end of June 2016, Apple had about 93% of its $231.5 billion in cash, near-cash, and marketable securities stowed offshore, thereby protecting the profits that had generated that from U.S. taxation.

In May 2009, President Obama vowed to get rid of this foreign-profits tax dodge, declaring that “it’s a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York.” In his State of the Union address on January 27, 2010, Obama insisted that “it is time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs right here in the United States of America.”

But blowback from prominent U.S. high-tech executives, combined with the Republican capture of the House of Representatives in November 2010, scotched that attempt at essential tax reform.

European Ruling Highlights Apple's Corrupted Business Model

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The commission's ruling was a "fair warning" that he supported, Stiglitz told CNBC. "The fundamental point here is Apple unambiguously was trying to avoid taxes and it was doing it in a dishonest way, with complicity from the Irish government, pretending that the money, the profits, the billions of profits it was making, were really being originated in some Irish company that was registered in cyberspace and therefore did not have to pay any taxes. And anybody looking at that says that is a ruse, that is an attempt at tax avoidance, tax evasion, whatever you want to call it," the 73-year-old U.S. economist said.

Stiglitz slams 'dishonest' Apple and ‘totally irresponsible’ Tim Cook

And this all in the name of shareholder value, who get rich while the rest of the population has to make up for the loss in tax revenue. This is hurting the population twice.

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For years, Democratic elected officials in Washington have been wary of going after Wall Street excesses too hard, lest the deep-pocketed financial industry throw all its resources to Republicans. This has been especially true of one of the most notorious targets for financial reform: the favorable tax treatment of the outsized compensation earned by partners in private equity firms.

Democrats have long spoken out against this so-called “carried-interest loophole,” yet have often not pushed as hard as they could to change the law, which saves some of the very wealthiest people in finance billions of dollars in taxes each year. All of this explains why the scenario presented by the 2016 election is so surreal.

The Democratic presidential nominee, Hillary Clinton, has vowed to close the loophole, saying it’s unfair that the highly compensated money managers who benefit from it “pay lower tax rates than nurses or … truckers.” Clinton recently went even further than President Obama on the issue, saying she would close the loophole through executive action if Congress continued to resist a legislative fix, a step that Obama has shied away from taking.

The Surreal Politics of a Billionaire’s Tax Loophole - ProPublica

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A recent study by the General Accounting Office reported that for the tax years from 2008 to 2012, the largest U. S. corporations had an effective tax rate of only 14% of their profits, compared to the nominal tax rate of 35%.  This represents a huge amount of money.  For example, a 2013 report by the Senate Subcommittee on Investigations charged that from 2009 to 2012, Apple used international cost-shifting strategies to avoid paying taxes on $74 billion in income.  And Microsoft avoided paying an estimated $19.4 billion in taxes through such (perfectly legal) fictions as pretending that 47% of its U. S. sales are attributable to Puerto Rico.

Articles: Corporate Tax Evaders for Hillary: Why Big Business Supports the Tax-Hiking Candidate

Some basic facts of the state of corporate taxation in the US, from the American Thinker, an alt-right website. This goes on arguing these companies donate big time to Clinton because she wants to keep these loopholes?

Does she? In the previous entry in this thread, we saw that she wants to close the carried interest loophole, if necessary by executive action bypassing Congress. This would upset Wall Street, one of its biggest supporters.

The basic problem is money in politics, which the Democrats want to curtail, but not the Republicans.

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A must read report from the EPI

In recent years, corporate profits have reached record highs, and so too has the amount of untaxed profits U.S. corporations have stashed offshore: $2.4 trillion. And it is estimated corporations could owe as much as $700 billion on those profits. In short, corporations are dodging more and more of their tax responsibilities.

While the statutory tax rate on corporate income is 35 percent, estimates of the rate corporations actually pay put the effective rate at about half the statutory rate. Driving this divergence between what corporations are supposed to pay and what they actually pay is a combination of offshore profit shifting and tax avoidance. Multinational corporations pay taxes on between just 3.0 and 6.6 percent of the profits they book in tax havens.

And corporations have become increasingly adept at making their profits appear to be earned in these tax havens; the share of offshore profits booked in tax havens rose to 55 percent in 2013. Almost half of offshore profits are held by health care companies (mostly pharmaceutical companies) and information technology firms. Because of the inherent difficulty in assigning a precise price to intellectual property rights, it is relatively easy for these companies to manipulate the rules so that U.S. profits show up in tax havens.

The use of offshore profit-shifting hinges on a single corporate tax loophole: deferral. Multinational companies are allowed to defer paying taxes on profits from an offshore subsidiary until they pay them back to the U.S. parent as a dividend. Proponents of cutting the corporate tax rate refer to profits held offshore as “trapped.” This characterization is patently false. Nothing prevents corporations from returning these profits to the United States except a desire to pay lower taxes.

In fact, corporations overall return about two-thirds of the profits they make offshore, and pay the taxes they owe on them. Further, there are numerous U.S. investments that these companies can undertake without triggering the tax. In short, deferral provides a mammoth incentive for multinational corporations to disguise their U.S. profits as profits earned in tax havens. And they have responded to this incentive: 82 percent of the U.S. tax revenue loss from income shifting is due to profit shifting to just seven tax-haven countries.

Firms have also become increasingly adept at manipulating the rules here in the United States to avoid taxation. Lower tax rates on “pass-through” business entities and poor regulatory responses have given firms the chance to reorganize as “S-corporations” or opaque partnerships in order to avoid paying any corporate income tax at all.

This intentional erosion of the U.S. corporate income tax base has real consequences. Rich multinational corporations avoiding their fair share of U.S. taxes means that domestic firms and American workers have to foot the bill. It also means that corporations are not paying their fair share for our infrastructure, schools, public safety, and legal systems, despite depending on all of these services for their profitability.

Corporate profits are way up, and corporate taxes are way down. In 1952, corporate profits were 5.5 percent of the economy, and corporate taxes were 5.9 percent. Today, corporate profits are 8.5 percent of the economy, and corporate taxes are just 1.9 percent of GDP.

Corporations used to contribute $1 out of every $3 in federal revenue. Today, despite very high corporate profitability, it is $1 out of every $9.

Corporate tax chartbook: How corporations rig the rules to dodge the taxes they owe | Economic Policy Institute