Ever wonder why big corporations who seem quite rich end up paying less tax than you? Senator Bernie Sanders has listed six loopholes that allow them to get away with it–loopholes that, if closed, could mean $100 billion more in our federal coffers. Here they are (quoted from the website shown at the end):
The “check-the-box” loophole. Simply by checking one box, companies can claim that an entity it owns should be ignored by the IRS for tax purposes. By giving different stories to different governments, they can transfer profits between subsidiaries tax free. Closing this loophole would raise up to $78 billion over the next decade.2
The “Hewlett-Packard” loophole. Companies are supposed to pay taxes when they bring offshore profits back to America. But if their offshore subsidiaries only provide a short-term “loan” to the onshore parent company, they can dodge the law. At one point, Hewlett-Packard was found to be “borrowing” billions, tax-free.3
The “Real Estate Investment Trust” loophole. Real estate investment trusts are like mutual funds for real estate, and they don’t pay corporate income tax. But all sorts of companies, from private prisons to casinos, now claim to be real estate investment trusts in order to dodge taxes.4
The “carried interest” loophole. Wealthy investors pay hedge fund managers billions to manage their money. But this loophole allows those fund managers to pretend that their income is actually a capital gain from selling investments – and capital gains are taxed at a far lower rate. Closing this loophole would raise up to $18 billion.5
The “earnings stripping” loophole. CREDO members have fiercely fought corporate inversions, where big U.S. companies merge with a smaller foreign company to avoid paying taxes. The Treasury Department has already cracked down on one tax dodge related to inversions, and closing the other, the “earnings stripping” loophole, could raise up to $13 billion over the next decade.6
The “valuation discount” loophole. If wealthy parents put a restriction on selling a company before transferring it to their children, it is considered less valuable and so they pay less in taxes – even if that restriction is then removed or ignored. The IRS could overlook these meaningless restrictions and raise up to $18 billion over the next decade.7
To see the references the footnotes go to and to sign a petition asking President Obama to close these loopholes (he can do it without Congress’ permission), go to https://mail.google.com/mail/ca/u/3/#inbox/14ca3a01d7d1cc5d.