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Trump Tax Reform Ignores Worst Problem in Tax Code

Today, the White House announced the much anticipated tax reform plan, though still very much in outline form. Fair Share’s National Campaign Director, Nathan Proctor, issued the following statement:

Already, our loophole-ridden corporate tax code is rigged for big companies and their armies of tax lawyers.

Not only does this plan do nothing about the worst part of our tax code -- that it rewards hiding profits offshore -- it make it worse.

We hope Congress will reject this proposal, which would not only reward companies for offshoring to the tune of $500 billion plus, but also increases the incentive to offshore more going forward.

There is an estimated $2.5 trillion in profits from U.S. companies stashed offshore, which, thanks to loopholes in the law, allows companies to indefinitely defer the taxes they own on that profit. Most of that money, 66 percent, is held by just 30 companies.

The current plan would offer deep discounts on those deferred taxes, and would stop taxing offshore profits going forward. Because countries like the Cayman Islands corporate tax rate is 0 percent, there will always be an advantage to booking profits offshore.

Why should a store on Main Street pay a higher tax rate than a corporate giant like Pfizer or Apple?

Other issues flagged by Fair Share’s analysis:

  • Lacks sufficient details to gauge just how much it will reduce revenues, and how the benefits and costs are for different categories of businesses and individuals.
  • Without full details, appears to create a large tax shelter issue by no longer treating “pass-through” entities with same rates as individual tax code. By taxing these corporate structures at 15 percent, it allows high-earning individuals to shelter their income from the standard rates for top earners. President Trump owns 500 such entities.
  • The deficit could grow sharply. The administration claims that growth in the economy will offset the cost of these tax reductions, but even the models with the most favorable views of tax cut-fueled growth show this to be untrue, as has recent history. Such sharp increases in debt will endanger public spending on other important programs.