As Trump was quick to point out prior to taking office, United States corporations faced the 3rd highest tax burden of any country in the entire world, leading many business owners and investors to outsource jobs and store vast amounts of money overseas. To this effect, according to a new research paper released by Zucman & Wright earlier this year, almost 50% of the profits from US multinationals are currently generated in tax havens outside of US borders. For some perspective on this figure, this number was less than 10% in the 1970’s. Moreover, research found that US tax corporations effectively pay tax rates at 27% on profits generated in non-tax havens inside the USA, but only 7% in tax havens located outside the country – effectively earning 20% more revenue simply by stashing money internationally.
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Shinning light on just how much US businesses owners and citizens have become incentived to store money overseas, the research also explains how, since the early 90’s, the tax rate paid by US non-oil multinationals on foreign profits has fallen from 35% in 1990 to 20% in 2018. Similarly, the tax rate paid by US oil companies to foreign governments fell from 70% percent prior to the Gulf War to 45% percent today.
For those of you whom may be unaware, the United States Government currently holds close to 20 trillion dollars in “National Debt,” more debt than every other country on Earth combined. The United States Government has also operated under an annual budget deficit every year running since 2002. On top of this, as Zuman & Wright adds, the US’ accumulated foreign debt exceeds that of any other country, standing at around $8 trillion – 40% percent more than the US’ gross domestic product (GDP). Explaining that this “$8 trillion is the difference between $35 trillion in foreign investments in US assets and $27 trillion in US investments in foreign assets.“Therefore, Zucman & Wright estimate that almost 50% of the difference between US returns and foreign returns can be attributed to abnormally low tax rates for American multinationals overseas.
Whats The Cost To US Citizens?
The research concludes that the USA loses out on about $180 billion dollars annually thanks to these very tax havens – about 1% of the US’ GDP.
Full Research Paper from Zucman-Wright:WrightZucman2018