If Fortune 500 companies paid a mere 6 percent on their offshore profits — about as much as they pay, on average, outside the U.S. — they'd owe $620 billion in additional federal taxes, says a report published this week by Citizens for Tax Justice. That would be enough to finance the entire U.S. federal education expenditure for more than five years. Yet this is a political nonstarter in the U.S. and other jurisdictions where these companies operate. So here's a modest proposal: Why not cut out all the hypocritical noise about tax freeloaders and just declare big corporations' profits tax-free? The argument would run like this.
Here are the U.S. companies with the most money held offshore; they account for about two-thirds of the $2.1 trillion stashed outside the U.S. by the Fortune 500:
These companies are all household names, darlings of the U.S. corporate sector, producers of things we couldn't do without. Our lives wouldn't be the same without Apple, Google or Cisco, but also without Procter & Gamble, Coca-Cola or Wal-Mart. We wouldn't have the most potent drugs without the seven pharmaceutical companies on the list, and global finance would arguably be different without Goldman Sachs and Citigroup. The giants project American soft power — which, as Andrew Rose of the University of California, Berkeley, showed in a recent paper, produces a quantifiable effect on the nation's exports. It could also be argued that they provide valuable public services, even though doing so is highly profitable.
This elite group employs millions of people in the U.S. and beyond. It provides training and invaluable experience to many of those workers, allowing them to set up new businesses and scale up smaller companies. They also bolster the service sector wherever they go. San Francisco residents may complain about the gentrification companies such as Google bring, but no town or national government would ever object to one of these companies setting up a presence.
The cash these industry leaders generate is often spent on life-changing innovations such as self-driving cars or medicines to treat formerly incurable diseases. Intel, Microsoft, Johnson & Johnson, Google and Merck are on the list of offshore cash hoarders, but also among the top 10 research and development spenders worldwide.
They might be spending even more to pay employees and finance research if they didn't have to maintain expensive tax optimization arrangements — Pfizer, for example, has 151 tax haven subsidiaries, and PepsiCo has 132 — and spend millions of dollars on lobbying to prevent a harsher tax climate from being imposed. Of the companies on the top cash hoarders list, four — Google, United Technologies, General Electric and Dow Chemical, plus the Pharmaceutical Research and Manufacturers of America, which includes another seven — are among the 20 top lobbying spenders in the U.S.
