Leona Helmsley famously said that "Only the little people pay taxes." In a recent presidential debate, Donald Trump bragged that not paying taxes makes him "smart."
It’s not just millionaires such as Helmsley and Trump who have mastered the art of avoiding taxes. A new study shows that the largest American corporations shelter trillions of dollars in profits from U.S. taxes each year by keeping the money offshore.
In 2015, the Fortune 500 companies avoided paying taxes on $2.5 trillion in accumulated profits held offshore, according to the study by the Citizens for Tax Justice, U.S. PIRG Education Fund, and the Institute on Taxation and Economic Policy. Thirty of these companies accounted for $1.65 trillion (66%) of these offshore profits.
U.S. tax laws permit companies to avoid paying taxes on foreign profits until they return the money stateside. Many of the Fortune 500 companies defer taxes indefinitely by keeping profits in overseas tax havens. Some large companies have even moved their headquarters overseas to avoid paying U.S. taxes.
Only 58 of the Fortune 500 companies actually disclose the additional taxes they would owe if they didn’t book their profits offshore. These 58 companies would owe a total of $212 billion in additional federal taxes if they didn’t shelter their profits offshore. That’s “equal to the entire state budgets of California, Virginia and Indiana combined.”
The Treasury could receive a windfall of $717.8 billion, nearly double the federal budget deficit of $438 billion last year, if all 298 Fortune 500 companies that shelter profits overseas agreed to pay their full tax bills.
The worst culprits include Apple, which has stashed $214.9 billion offshore, and would owe $65.4 billion in U.S. taxes; Citigroup which kept $45.2 billion offshore and would owe $12.7 in taxes and Nike, which holds $10.7 billion offshore and would owe $3.6 billion in taxes.
The authors of the report urge Congress to change tax laws to prevent companies from deferring paying taxes on foreign profits indefinitely. The report also urges companies to be required to publicly disclose key financial data, such as profits by country, in their annual financial statements.