Corporations are People…Except in the Tax World: Study Finds U.S. Corporations Stockpile $2.1 Trillion Overseas

Ever since Citizens United, the infamous notion that “corporations are people” has been a point of controversy and aversion among the American public. While the landmark case entreated corporations with the same rights as individuals in the context of political spending, such a mentality remains to be seen in the tax world, where a recent study found that $2.1 trillion in profits is being harbored in overseas tax havens by U.S. companies.

Citizens for Tax Justice, the non-profit group responsible for the study, reported that General Electric remains at the top of the list for the fifth year in a row with $119 billion overseas. Among others, technology companies such as Apple, Google, and Microsoft maintain more than one fifth of the $2.1 trillion overseas, a figure that is up 8% from 2014. These funds are generally held in low-tax countries such as Bermuda, Ireland, Luxembourg, and the Netherlands, and profits are stockpiled there in order to evade payment of the repatriation tax upon transfer to the U.S.

Unlike corporations, individual American taxpayers are constrained by FATCA (the Foreign Account Tax Compliance Act), where all worldwide income must be declared and taxed at rates up to 39.6%, including overseas income that is not distributed back home. When compared to Apple’s 2.3% offshore tax rate, many Americans have called for a more even playing field.

Such practices have led groups such as Citizens for Tax Justice to increase pressure on politicians for a change in legislation, where solutions include the complete closure of overseas tax loopholes and the removal of offshore job incentives. These groups argue that the removal of corporate tax havens will reduce the American budget deficit and stimulate the economy.

While the ramifications of offshore tax havens on the U.S. economy remains to be determined, the unpopularity of the Citizens United mantra that “corporations are people” takes on a contradictory nature. After all, maybe it is only when corporations actually start being treated like people (by paying similar taxes) that one of the major corporate contentions may finally be put to rest.

Corporations are People… Except in the Tax World (1) (PDF)