News Release

Problems with “One-Time” Tax on Overseas Corporate Profits

AP reports on the budget the Obama administration sends to Congress today: “Obama’s six-year $478 billion public works program would provide upgrades for the nation’s highways, bridges and transit systems, in an effort to tap into bipartisan support for spending on badly needed repairs.

“Half of that money would come from a one-time mandatory tax on profits that U.S. companies have amassed overseas, according to White House officials who spoke on condition of anonymity before the budget was released.”

JAMES HENRY, jhenry at sagharbor.com, @submergingmkt
Henry is former chief economist at the international consultancy firm McKinsey & Co. He is now senior fellow at the Columbia University Center for Sustainable International Investment and senior adviser with the Tax Justice Network, which last year in their report “The Price of Offshore Revisited” estimated that total wealth in tax havens was between $21 trillion and $32 trillion.

Now an investigative journalist, Henry is featured in the film “We’re Not Broke,” which tells the story of U.S. corporations dodging billions of dollars in income tax and is available on Netflix.

He said today: “The proposal is not as bad as what Bush did in 2004, but if you keep doing this, you in effect repeal the corporate income tax.

“Contrary to claims back then, in 2004, it didn’t create any jobs. Citibank brought back money and used it to buy back shares, so it benefited management.

“And corporations don’t actually just keep money overseas, they end up borrowing against it. What we’ve had is an erosion of the tax rate for corporations since the late 70s. What’s needed is a meaningful progressive income tax. Instead, we have a system of ‘tax competition’ — one country after another lowering tax rates. This year, with Burger King and Chrysler, has been a big year for inversions and the administration did very little to stop that.

“What we should be doing is working with other countries to strengthen corporate tax collection. Instead, we keep lowering ours — and it hurts us, but it really hurts poorer countries.

“And all this is being driven by the fact that both establishment parties have been on the take and that’s why you have so little leadership on this issue.”