| Special to The News-Press
As the COVID-19 pandemic continues to push the U.S. economy into recession, polls show that healthcare remains a top concern for millions of voters. Clearly, Americans are concerned about paying for medical bills. However, the overall national healthcare debate continues to bog down on one simple question: How to pay for it?
What if there were a way to find an extra $90 billion annually to help struggling families with healthcare expenses? And what if taxpayers didn’t have to pay for any of it?
It sounds too good to be true. But the reality is that the U.S. Treasury is continually getting short-changed by roughly $90 billion each year. By merely closing certain loopholes in America’s corporate tax code, the U.S. government could generate tens of billions of dollars in much-needed additional revenues.
Here’s the issue. Right now, a large number of global, multinational corporations earn vast profits from sales in America’s large consumer market. And yet, thanks to the current U.S. tax code, they’re able to simply shift profits into overseas tax havens.
It’s a very self-serving arrangement. Amazon, for example, paid zero state or federal taxes in 2018 despite earning more than $11 billion in profits. And nearly 100 Fortune 500 companies paid essentially no federal taxes in 2018.
This kind of profit shifting is stunning. The pharmaceutical company AbbVie reported worldwide sales in 2017 of over $28 billion -— including 65 percent of that in the United States alone. However, by taking advantage of the corporate tax code, AbbVie actually reported a U.S. “loss” of more than $2.6 billion.
Recently, the Coalition for a Prosperous America (CPA) scrutinized the Securities and Exchange Commission (SEC) filings of America’s 500 largest public companies. They found that these companies paid a combined total of $137 billion in corporate taxes for 2019, at an average federal tax rate of only 8.7 percent on pre-tax profits. That’s extremely low when compared to the current 21 percent corporate tax rate established by the 2017 Tax Cuts and Jobs Act (TCJA).
According to CPA’s study, a system that fully taxed these global companies’ U.S. profits would have yielded an additional $97.8 billion for the U.S. Treasury in 2019. That’s a 59 percent increase in federal corporate tax revenues.
How then to get these companies to pay their fair share of taxes? What’s needed is a system of sales factor apportionment (SFA). Adopting SFA would establish a very simple approach to U.S. tax law: Whatever profits a company earns in the United States should be taxed in the United States. Doing so would eliminate the utility of tax havens in Bermuda, the Cayman Islands, and elsewhere.
It’s time to revamp America’s tax code in favor of domestic U.S. companies and workers. Shifting to an SFA system would not only simplify the corporate tax code but also improve the competitiveness of domestic U.S. companies already paying a full tax load.
Tax obligations should be borne equitably. There’s simply no excuse for multinational corporations — faceless global enterprises with no loyalty to the welfare of the United States — to game the system for their own profit. Closing the loopholes that allow them to earn record profits in the U.S. could generate more than $90 billion each year for the U.S. Treasury. And that could help to pay for the healthcare of millions of struggling Americans. It’s an effort Washington should start considering right now.
Steven Capozzola has served as media director at both the U.S. Business and Industry Council and the Alliance for American Manufacturing.