Co-founders of the "Fix the Debt" campaign, Alan Simpson and Erskine Bowles, want the U.S. to move toward a territorial tax system that could save 59 companies involved with the campaign up to $173 billion in taxes, according to a report released Wednesday by the Institute for Policy Studies, a progressive think tank.
Scott Klinger, one of the co-authors of the report, told The Huffington Post that Fix the Debt’s push for cuts to safety net programs combined with its co-founders’ advocacy for a territorial tax system represents a kind of “hypocrisy” on the organization’s part.
A territorial tax system would benefit companies by allowing them to leave their offshore profits untaxed, while cutting social programs would hurt ordinary Americans, Klinger said. Multinational companies currently have to pay U.S. taxes on the offshore profits they bring back home, but that money would not be subject to taxes under a territorial tax system.
“These companies continue to advocate for a territorial tax at the same time that they’re shoveling more amounts of money offshore,” Klinger said. “They’re saying tax cuts for our businesses and Social Security and Medicare cuts for the public.”
For its part, the non-partisan Fix the Debt campaign, sponsored by deficit hawk Pete Peterson, says it doesn’t take a position on how corporate foreign income should be taxed.
Maya MacGuineas, a spokeswoman for the initiative and a budget expert who has worked with both Democratic and Republican lawmakers, called the IPS report “nothing more than lies and mudslinging” in an email statement to HuffPost. Wednesday’s report was the latest in a series from IPS accusing Fix the Debt of pushing for reforms that benefit its members.
“In reality, the Fix the Debt campaign takes no position on how foreign income should be taxed and has repeatedly called for reducing, not expanding, corporate and individual tax breaks in the context of a broader deficit reduction deal,” she wrote. “We will continue to work together with our partners to find a comprehensive, bipartisan solution to the debt that includes responsible reform of a tax code that is overly complicated and riddled with loopholes.”
Lawmakers and organizations like Fix the Debt have been focused in recent months on finding a way to curb the budget deficit out of concern that it's hurting economic growth. Proposals like the one from Simpson and Bowles, which includes austerity measures, have been controversial because the cuts often result in high unemployment.
Critics of a territorial tax system say it would actually cheat Uncle Sam out of much-needed money during a time of budget constraints. But businesses have argued that simplifying the corporate tax code would encourage companies to do more of their business in the U.S. because they'd be inclined to bring offshore money home.
IPS’ estimate of savings for companies is based on the assumption that the U.S. would move completely to a territorial tax system. But the proposal put forward by Simpson and Bowles suggests moving toward a partial territorial system in combination with closing tax loopholes that they say would make the move “revenue-neutral” for the U.S. Still, some organizations, including the non-partisan Center for Budget and Policy Priorities, argue that it’s difficult to move toward a more territorial tax system without losing money.
“I don’t think there's a way to move to a territorial tax system without having it be revenue negative,” Klinger said. “The question is, are corporations paying their fair share currently? I think our answer is no.”
Companies have come under fire in recent months for avoiding paying taxes on offshore profits. Eighteen of America’s biggest companies have used tax havens to skirt taxes on $92 billion in offshore profits, according to a recent report from the Citizens for Tax Justice. In addition, Lawmakers grilled Apple CEO Tim Cook and other Apple executives last month over claims the company paid just 2 percent in taxes globally on $74 billion in profits.
Klinger noted that U.K. Prime Minister David Cameron has discussed the pitfalls of his country's territorial tax system, vowing to crack down on international firms like Starbucks accused of avoiding taxes in his country even though they make money there.
“It’s not like it's even you have to be a high-tech company to create loopholes to take advantage of a territorial tax system,” Klinger said. “People say they can craft safeguards, our experience is that every time we try to put up safeguards, companies find ways around it.”
Original Article
Source: huffingtonpost.com
Author: Jillian Berman
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