More and more U.S.-based corporations are growing wings and flying away from their U.S. tax obligations.
Bloomberg puts it as simply as possible: “U.S. companies looking for lower tax bills are heading for the exits, and Congress is doing nothing to stop them.”
The immediate impetus for the story was Pfizer’s proposed purchase of AstraZeneca, which would result in Pfizer reincorporating in Britain while tapping literally billions of dollars it has been holding outside the U.S., as The New York Times reported.
What’s the solution? Congress could grow a set and change the tax laws so that there is a crackdown on companies that use tax havens to keep profits outside of the U.S. system, as Steven Rattner suggests. Rattner also suggests in essence giving up on taxing corporations and instead increasing taxes on profits at the shareholder level, which would effectively increase the taxes paid by the wealthiest Americans.
I don’t know what the solution is, but when you consider that the effective federal tax rate paid by corporations has dropped from more than 40% in the 1950s to about 15% today, it seems clear that something has to change.