Fix the Debt CEOs and Their Untaxed Offshore Profits
The Campaign to Fix the Debt sounds fairly innocuous. Don’t be fooled by it. Behind Fix the Debt are more than 80 of the nation’s most powerful chief executive officers. This group says it wants to lower the deficit by “reforming” Medicare and Medicaid, “strengthening” Social Security and passing “comprehensive and pro-growth tax reform” that “lowers rates.” [1] Translation: cut workers’ retirement security to pay for tax cuts for rich people and corporate America.
The Campaign to Fix the Debt CEO Steering Committee and Their Companies' Accumulated Offshore Profits
| CEO | Company | Accumulated Offshore Profits | 2012 Annual Increase |
|---|---|---|---|
| Jeffrey Immelt | General Electric Co. | $108 billion | 5.9% |
| Steve Ballmer | Microsoft Corp. | $60.8 billion | 35.7% |
| Kenneth Frazier | Merck & Co. | $53.4 billion | 20.5% |
| John Chambers | Cisco Systems | $41.3 billion | 12.5% |
| James Dimon | JP Morgan Chase & Co. | $25.1 billion | 15.1% |
| Dr. Paul Jacobs | Qualcomm | $16.4 billion | 21.5% |
| Douglas Oberhelman | Caterpillar Inc. | $15 billion | 15.4% |
| Andrew N. Liveris | Dow Chemical Co. | $14.5 billion | 13.8% |
| David Cote | Honeywell | $11.6 billion | 43.2% |
| Joseph Tucci | EMC Corp. | $8.1 billion | 26.6% |
| Alexander Cutler | Eaton | $8 billion | 25.0% |
| D. Scott Davis | United Parcel Service | $3.6 billion | 13.1% |
| Samuel R. Allen | Deere & Co. | $3.2 billion | 23.6% |
| Larry D. Fink | Blackrock | $2.1 billion | 40.2% |
| Gregg M. Sherrill | Tenneco | $728 million | 4.3% |
| Michael White | DIRECTV | $547 million | 79.3% |
| Robert Greifeld | Nasdaq OMX Group | $81 million | 35.0% |
Methodology: Accumulated offshore profits as reported in companies’ annual reports for 2012 (SEC Form 10-K). The following companies whose CEOs serve on the Fix the Debt Steering Committee did not disclose any offshore profits or are not publicly traded: ACE Limited, Aetna, Airlines for America, AT&T, CSX Corp., Deloitte, Delta Air Lines, Express Scripts, JetBlue Airways, NYSE Euronext, PricewaterhouseCoopers.
The Fix the Debt campaign maintains that the United States has “one of the highest corporate tax rates in the world,” and proposes instead a territorial tax system under which companies would not have to pay any U.S. taxes on foreign profits. [2] Under current law, U.S. companies are supposed to pay a corporate tax rate of 35% on their overseas profits, but, in reality, they end up paying an effective tax rate of less than 16.1%. [3]
Are corporations overtaxed in the United States? In reality, corporate taxes fell from 26.4% of total tax revenue in 1950 to just 7.4% of total tax revenue in 2010. [4] The Washington Post found that in the late 1960s and early 1970s, companies in the Dow Jones Industrial Average routinely paid up to 50% of their worldwide profits in federal taxes. Today, most of these companies pay less than half that rate. [5]
The CEOs behind Fix the Debt know a thing or two about sheltering offshore profits from taxes. The Institute for Policy Studies has estimated that 63 companies whose CEOs are members of Fix the Debt have accumulated $418 billion in overseas cash. Keeping this money overseas deprived the U.S. government of an estimated $134 billion in tax revenue, adding to—rather than cutting—the country’s deficit. [6]
Just how much cash have U.S. companies stockpiled overseas? The Wall Street Journal reports that 60 large U.S. companies sheltered more than $1.3 trillion overseas in 2012, a 15% increase from a year earlier. [7] A report by JP Morgan Chase & Co. estimates that as much as $1.7 trillion in untaxed offshore profits are being held by more than 1,000 U.S. companies. [8] Bloomberg News estimates that the offshore cash hoard of all U.S. companies had grown to $1.9 trillion in 2012. [9]
Tax avoidance is one of the reasons for the big buildup of cash by American companies in recent years, according to a recent report by the Federal Reserve Bank of St. Louis. [10] In keeping with this trend of parking profits offshore, U.S.-based multinational companies now employ some 11 million workers overseas through their foreign affiliates, compared with 23 million workers in the United States. [11]
Moving to a territorial tax system, as advocated by Fix the Debt, will permanently shelter these offshore profits from U.S. taxes. If the CEOs of the Fix the Debt group were serious about deficit reduction, they would support eliminating the tax loophole that allows corporations to pay a lower effective tax rate on their foreign income than on their domestic income. According to the Joint Committee on Taxation, closing this corporate tax loophole would raise $42 billion in new revenue in 2013 alone. [12]
[1]
www.fixthedebt.org/core-principles
.
[2]
The Debt Challenge
(Powerpoint presentation), Campaign to Fix the Debt.
[3] GAO, U.S. Multinational Corporations: Effective Tax Rates Are Correlated with Where Income Is Reported (August 2008), p. 17.
[4] Corporate Taxpayers & Tax Dodgers, 2008-2010, Citizens for Tax Justice and the Institute on Taxation and Economic Policy, Nov. 3, 2011.
[5] For Dow 30, Tax Burden Isn’t What It Used to Be, The Washington Post, March 27, 2013.
[6]
The CEO Campaign to ‘Fix’ the Debt
, Institute for Policy Studies, Nov. 13, 2012.
[7] More U.S. Profits Parked Abroad, Saving on Taxes, The Wall Street Journal, March 10, 2013.
[8] For Dow 30, Tax Burden Isn’t What It Used to Be, The Washington Post, March 27, 2013.
[9] Offshore Cash Hoard Expands by $183 Billion at Companies, Bloomberg News, March 8, 2013.
[10] Why Are Corporations Holding So Much Cash? The Regional Economist, the Federal Reserve Bank of St. Louis, Vol. 21, No. 1, January 2013.
[11]
Summary Estimates for Multinational Companies: Employment, Sales and Capital Expenditures for 2010
, Bureau of Economic Analysis, April 18, 2012.
[12] More U.S. Profits Parked Abroad, Saving on Taxes, The Wall Street Journal, March 20, 2013.
