Sen. Levin: 'Those foreign earnings are not trapped or locked offshore at all'
A select group of U.S. multinational corporations have been furiously lobbying for a tax holiday, they say, to bring more than a trillion dollars in so-called “trapped” foreign earnings back home and invest it in the American economy.
But a Senate report released Thursday shows the money is anything but trapped. Some of the richest firms have already brought hundreds of billions of dollars back to America, without paying U.S. taxes, and invested it in US banks, bonds, stocks and other assets.
The Senate Permanent Subcommittee on Investigations surveyed some of the best known U.S. multinationals and found that 27 of the cash-flush firms, including Apple, Google and Microsoft, had invested almost $250 billion in the United States.
Microsoft chairman Bill Gates during a keynote address.Paul Sakuma/AP file
“Those foreign earnings are not trapped or locked offshore at all,” said Sen. Carl Levin, the Democrat from Michigan who chairs the subcommittee. “About half of the so-called offshore funds were actually onshore.”
Some of the firms leading the lobbying for a tax holiday, Levin noted, have brought home almost all their “trapped” funds. Apple, Google and Microsoft, for example, have brought back from 76 to 100 percent of their offshore earnings, the subcommittee found.
As the Center for Public Integrity has reported, the multinational firms are lobbying for a tax holiday because the US has a higher corporate income tax than many foreign countries. Under current law, when a foreign subsidiary returns its earnings to the American parent company, it must pay the difference between the tax of the country in which it conducts operations, and that charged in the United States.
Rather than pay the U.S. corporate income tax, as domestic companies must do, many multinational firms leave the money on the books of their foreign subsidiaries. If they could return their earnings to their parent corporation without paying the U.S. tax, they contend, more money would be invested in new research and development and jobs here at home.
“The fact that foreign subsidiaries of U.S. companies have deposits in U.S. banks or in U.S. bonds does not mean that their American parent companies are able to deploy those funds in the US economy, said Abigail Gardner, a spokeswoman for WIN America, a coalition of firms pushing for the tax break.
Wall Street and government analysts estimate that US corporations carry some $1.4 trillion on the books of their foreign subsidiaries — and some $2 trillion on their books at home.
“They have gobs of cash,” Levin said. With bulging corporate coffers and low interest rates, said the senator, there is no rationale for giving a small segment of American firms a tax break that could cost the US Treasury from $40 billion to $80 billion.Reprinted by Permission © 2013, The Center for Public Integrity®. All Rights Reserved.