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Kai Ryssdal: President Obama made some tax news earlier this week. He said he wants to close loopholes that let companies and individuals keep a lot of their profits offshore. Even though the president does have a lot on his plate already commentator Robert Reich says there is good reason to take on this fight right now.
ROBERT REICH: Why is President Obama taking aim at corporations that use foreign tax shelters when some think he should keep his powder dry for the much bigger fight coming up over universal health care?
Because the two are related. Originally the White House planned to pay for health care by limiting tax deductions for wealthier Americans. That would have brought in $318 billion over 10 years, half of the president’s proposed “health care reserve fund.” But the Democratic leadership nixed that revenue source. So now the White House is scrounging for money elsewhere.
Foreign tax shelters are an obvious place to look. According to government reports, 83 of the 100 largest publicly-held companies are evading U.S. taxes by sheltering their earnings in low-tax zones like Bermuda and the British Virgin Islands. To give you some idea of how much is out there, a tax amnesty five years ago brought $300 billion back to the United States.
But the administration is not proposing to force companies to bring sheltered money home and pay taxes on it. Its proposal is merely to stop them from deducting the expenses of the shelters from the U.S. income they already declare.
This alone would bring in more than $100 billion over 10 years. Another $95 billion would come from making it harder for individuals to hide their income in offshore accounts, and for companies to shift their income from one foreign subsidiary to another in search of the lowest-tax jurisdiction.
The total, some $200 billion, is still way short of what’s needed for health care. So the White House should go after sheltered corporate income more directly. Regardless of whether you think corporate income taxes are too high, there’s no justification for allowing some big companies to use clever tax dodges to avoid paying taxes that other corporations have to pay.
Especially when the pressure is on to come up with some credible ways to pay for universal health care. If money isn’t found, that measure could be vulnerable to deficit hawks who continue to circle ominously.
RYSSDAL: Robert Reich is a professor of public policy at the University of California, Berkeley.
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