Target: Michigan Representative Sandy Levin
Goal: Prohibit big business from avoiding corporate taxes
It is currently legal for American companies to reincorporate with a foreign business in order to avoid paying U.S. taxes. In the last decade alone, at least 47 companies have used the process called “corporate inversion” to save big money when it comes time to pay taxes. This process means that big business is able to skip out on its fair share of taxes and pass the burden onto working class citizens. Such companies as Herbalife and Apple have done it, and other big companies like Pfizer and Walgreens have plans in the works.
Corporate inversion is when a U.S. company restructures its business in order to appear as a foreign firm by partnering with a company based in another country. This is allowed if the U.S. company has 25% of its business operations in the foreign company, which is a minimal amount of sales when looking at a company as big as Apple. In fact, Apple’s reincorporation in Ireland with Apple Operations Inc., accounting for 30% of Apple’s total net profits, saved Apple $7.7 billion in U.S. taxes in 2011 alone. The merger between Pfizer and British company AstraZeneca, which fell through, would have saved the company $1.4 billion per year. The corporate tax inversion loophole allows big business to keep an absurdly large sum of money from entering into the U.S. tax system.
Looking at the change in federal revenue earned from corporate tax and payroll tax between 1952 and today, there has been a substantial increase in the percent of revenue from payroll tax, which was directly influenced by the drastic decline in the precent of revenue from the corporate tax. In 1952 corporate tax revenue accounted for 32% of federal revenue. Today, that percentage has dropped to a staggering 8.9%. Payroll tax, on the other hand, went from comprising 9.7% of federal revenue to accounting for 40% of federal revenue. Working class Americans are now shouldering the burden of U.S. companies that have reincorporated overseas.
The corporate tax inversion loophole needs to be closed. Companies that are looking to reincorporate in order to dodge paying their share of taxes must be stopped. We need to tell Congress that allowing U.S. companies to restructure themselves in order to cut tax payments is unacceptable and detrimental to the sustainability of the U.S. economy. Let’s close the loophole on corporate inversion.
Dear Rep. Levin,
Big businesses that avoid paying corporate taxes in the U.S. by reincorporating as international companies must be stopped. Too much money has been kept from entering the federal tax system and the burden has fallen on working class Americans. You have sponsored H.R.4679 — Stop Corporate Inversion Act of 2014 in order to close the loopholes allowed to companies through corporate inversion. I urge you to continue your work in this area to make sure that companies pay their dues to the same government and economy that helped them to flourish.
By changing the required current share of foreign business operations from 25% to 50%, you are ensuring that companies that truly seek a foreign and equal partnership have that ability while prohibiting the majority of companies from reincorporating solely for the sake of avoiding U.S. taxes. I implore you to pursue this bill and help reduce the burden on working class Americans.
[Your Name Here]
Photo Credit: Phillip Ingham