Evidence of excessive corporate tax avoidance keeps piling up. And so do Congress’s excuses, mainly from Republicans, for not doing anything to curb it.
Shortly before Congress recessed last week for a monthlong break, the Senate Permanent Subcommittee on Investigations issued a report and held hearings on “basket options,” financial products created by Barclays and Deutsche Bank and used by prominent hedge funds to dodge billions of dollars in taxes, according to the subcommittee. The inquiry follows earlier subcommittee investigations into rampant tax-avoidance tactics at Microsoft, Hewlett-Packard, Apple and Caterpillar. The hit to the U.S. Treasury is severe: According to a study cited at an Apple hearing last year by the subcommittee chairman, Sen. Carl Levin, D-Mich., 30 of the largest American multinationals, with more than $160 billion in profits, “paid nothing in federal income taxes over a recent three-year period. Zero.”
The congressional summer recess also came before lawmakers took action on either of two Democratic bills to stop a rising wave of “inversions.” That’s the process whereby an American corporation acquires a company in Britain, Ireland, the Netherlands or elsewhere in order to reincorporate abroad and cut its American taxes — even as its headquarters, officers, most of its shareholders and much of its business remain in the United States.
An ideal solution would be for American and European leaders to forswear competition based on relative tax advantages as bad for everyone. Unfortunately, that would require a level of cooperation and leadership that is nowhere to be found.