Morse: Don’t be fooled by Big Tech’s apparent support of higher corporate taxes – Gazettextra

Theres plenty of wrangling in Congress right now regarding potential changes to Americas corporate tax code. The corporate tax rate currently stands at 21%. However, Sen. Joe Manchin, D-W.Va., prefers a 25% rate, while President Joe Biden is aiming for 28%. Regardless of the rate, though, Congress must still address an overlooked problem: Plenty of larger U.S. multinational corporations are continuing to avoid paying their fair share of taxes.

Corporate tax reform is obviously a thorny issue. But several of Americas largest tech companies just came out in favor of Bidens suggested 28% rate. Through a partnership with the brand-new Chamber of Progress, Amazon, Google, and Facebook have jointly offered support for Bidens proposal. Its a nice gesture on their part, but rather hollowsince theyll hardly be affected by any tax increase.

Last year, the Coalition for a Prosperous America published a report showing U.S. multinational corporations paid an average of only 8.7% in corporate taxes in 2019far less than the current 21% rate. Large tech companies remain some of the prime beneficiaries of this tax avoidance since they repeatedly shift much of their profits to Bermuda and other tax haven nations.

Amazon is a perfect example. The e-commerce giant paid zero state or federal taxes in 2018 despite earning more than $11 billion in profits. While enjoying massive revenues, Amazon simply took advantage of current tax loopholesand assigned much of its profit to low-tax countries outside of the U.S.

When companies like Amazon shift profit abroad, they shrink the available U.S. tax base. And so its somewhat disingenuous for them to support the 28% Biden tax proposal because it will hardly affect their bottom line. Essentially, if Congress votes to raise Americas corporate tax rate by 7% but doesnt simultaneously address tax avoidance, multinational corporations would likely face only a small increase. However, domestic companies would have to carry the full amount.

Gaming the system like this offers a competitive advantage. Amazon paid a mere 4.3% average tax rate over the last three years while competing with thousands of brick-and-mortar retailers across the country. If the U.S. corporate tax rate climbs to 28%, these Main Street businesses will bear an outsized portion of the increasenot Amazon.

Concerns about such tax disparities arent new, though. The Coalition for a Prosperous America estimates that multinationals avoided paying $97.8 billion in corporate taxes in 2019. In response, the Biden administration has even offered some potential solutions through its Made in America tax plan. However, the complexity of these proposals could make them unwieldy and hard to sell in Congress.

Whats needed is simplicity and equity. Since Bidens Build Back Better plan aims to strengthen domestic U.S. manufacturing, its time to implement a system that fully taxes all multinational companies. The logical answer is to adopt a system of sales factor apportionment in order to impose taxes specifically on the location of a companys final sale. That means if a company generates $1 billion of profit on its U.S. sales, it should pay U.S. corporate taxes on that $1 billion. No more convoluted profit calculationsor claiming residence in an obscure, offshore locationin order to skirt U.S. tax obligations.

Americas large tech companies are among the multinationals that keep dodging a full tax load. Its somewhat meaningless, then, that they appear to be supportive of a tax hike. In reality, their main goal is to prevent anything that would include more of their profits in the U.S. tax base.

The American people already recognize that its unfair for multinational firms to sell products in the U.S. market but pay little or no federal taxes. That includes the tech firms that consistently generate massive profits from U.S. consumers. Its time to shift to an SFA system that closes loopholes and ensures that all companies pay their fair share of taxes.

David Morse is tax policy director at the Coalition for a Prosperous America Education Fund. Follow him on Twitter @CentristinIdaho. He wrote this for InsideSources.com.

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Morse: Don't be fooled by Big Tech's apparent support of higher corporate taxes - Gazettextra