Examining 400 Billion Corporate Tax Forgiveness

The Pros and Cons of Corporate Tax Forgiveness

Updated July 2023

We will utilize a historical illustration to underscore the perilous nature of corporate tax forgiveness initiatives, which essentially amount to stripping diligent citizens of their earnings. Essentially, these programs see the government extracting from Peter and Paul to rescue these corporate entities.

Prior to delving into the potential rally-triggering aspects of the Corporate Tax Forgiveness program, let’s examine the dire implications of this scheme and how it vividly highlights the dominance of thieves within Congress.

While ordinary individuals working abroad find themselves subject to taxation on their earnings in various forms, a stark contrast exists for U.S. multinationals. These corporate giants are not obligated to pay taxes on profits earned overseas until such earnings are repatriated. If they opt to keep these profits offshore indefinitely, they remain untaxed. Remarkably, these colossal corporations collectively hold over $2.1 trillion in untaxed profits, conveniently stashed away in offshore tax havens. The potential tax obligation associated with these profits hovers around $400 billion.

The corporate figures, including individuals like Carl Icahn, are not merely requesting; they are unequivocally demanding the following:

They insist on withholding repatriation of profits until Congress substantially reduces the taxes owed, effectively asking to escape significant financial obligations for minor penalties.

Additionally, they seek a permanent reduction in tax rates for all their future earnings, adding insult to injury. Some Republican leaders, likely influenced by corporate interests, are proposing the permanent elimination of taxation on foreign corporate income while retaining such taxation for U.S. citizens.

It’s intriguing to ponder if average citizens could employ a similar approach—negotiating a lower tax rate or threatening non-payment. However, reality dictates that such actions would swiftly be met with IRS intervention.

Senator Warren aptly termed this program a “giant wet kiss for the tax dodgers.”

As is often the case, the general populace remains blissfully unaware of these occurrences due to the media’s focus on inconsequential matters instead of pressing issues.

Corporations escalate their tactics by asserting that they will relocate from the United States without being granted virtual impunity. In practice, they merely shift their headquarters, continuing operations in the U.S. This results in business as usual, but with the added advantage of retaining profits earned here and paying significantly reduced taxes. This overtly unethical behaviour must be curbed, yet Congress appears unwilling or lacking the resolve to enact such measures. Instead, it is probable that they will pass legislation exempting these corporations from tax obligations altogether.

Corporate Tax Forgiveness Program Could trigger Massive Rally

There exists a method to capitalize on this corporate deceit. As these tax-exempt funds return to the U.S., a pertinent question arises: where will they find their destination? It’s highly probable that these substantial funds will find purpose in financing further stock buyback initiatives. In essence, the potential influx of $2.1 trillion has the capacity to inundate the markets. Share buyback programs contribute to perpetuating this deception.

They allow company executives to enhance the Earnings Per Share (EPS) without engaging in genuine efforts to enhance efficiency or innovate with new products. This is achieved simply by reducing the number of outstanding shares through repurchases. The outcome is a notable surge in earnings per share, which, in turn, suggests that the stock market has significant potential to experience substantial growth – a concept even the most optimistic of market enthusiasts can readily envision.