NATIONAL — Twenty-eight American corporations acknowledged paying less than a 10 percent foreign tax rate on the collectively $409 billion they hold offshore.
The 28 corporations that made disclosures in their most recent annual financial reports included these New Jersey-based firms: Merck, Johnson & Johnson, Honeywell International, Celgene, Cognizant Technology Solutions, Becton Dickinson, Prudential Financial, Actavis, Automatic Data Processing, Campbell Soup, Avis Budget Group, Hertz Global Holdings, and Toys “R” Us.
That was among the facts in a new report from Citizens for Tax Justice, which revealed 301 of the Fortune 500 companies hold a combined $2 trillion offshore, collectively avoiding $550 billion in U.S. corporate income tax.
American corporations that bring offshore profits back to the United States are subject to a federal tax rate of 35 percent minus a credit equal to whatever taxes were paid to foreign governments.
Thus, if an American corporation says it would pay a U.S. tax rate of 25 percent or more on its offshore profits, that means it has paid foreign governments a tax rate of 10 percent or less.
Almost all profits corporations report as earned in tax havens actually originated in the United States or an advanced country with a similar tax system.
Few countries that have no or very low corporate income taxes — such as Bermuda, the Cayman Islands, and the Bahamas — provide real business opportunities for American corporations like U.S. Steel, Safeway, and Microsoft.
“These large corporations use accounting gimmicks allowed under American law to make profits appear to be earned in tax haven countries because they engage in legalized bribery under our system of political campaign finance,” said James J. Devine, a Rahway Democrat seeking nomination as mayor in the June 3 primary election.
New Jersey’s most aggressive tax-dodger was headquartered in Rahway for a century and it maintains a 200-acra research facilty there.
Merck, has 12 subsidiaries in Bermuda alone, but it is unclear how much of the drug giant’s $57 billion in offshore profits are being stashed for tax avoidance on the tiny island.
Merck has been a topic of controversy in Rahway’s mayoral election because city officials granted a one-third property tax reduction that cost the typical homeowner $400 a year at a time when home values are plummeting, joblessness is widespread and more than 230 local families have lost their homes in forclosure.
Devine, a progressive Rahway Democrat who has called on Merck to stop avoiding its fair share of the tax burden, has been under a heavy Tea Party-style character attack since he raised the issue of Merck’s property tax reduction, but the super PAC responsible for supporting his opponent has not disclosed if the drug company is funding the smear campaign.
One of the vicious mailers called the progressive pro-choice Democrat “anti woman” despite the fact that Devine had been endorsed by the National Organization for Women, NARAL and other feminist organizations in previous campaigns for public office.
Devine says “voters are too smart” to be persuaded by a character assassination campaign and he is sticking to his issues of combating gun violence and restoring justice to the tax system.
“A sensible solution would be to repeal offshore profit exemptions so that profits of corporations would be taxed by the United States in the year they are earned,” said Devine. “Corporations would continue to receive a foreign tax credit to ensure they are not double-taxed, but the $550 billion in revenue would reduce our federal deficit and make America stronger and more financially secure.”
“In Rahway, I would erase Merck’s massive tax reduction by revising the inflated values assessed on homes, so everyone is measured with the same standard,” Devine said. “Since 2007, home values plummeted but their assessments remain the same while hundreds of commercial and industrial land owners sought and won unfair appeals.”
“People should not have to fight City Hall,” said Devine. “City Hall should be fighting for us, but under the current regime, City Hall does not care about you.”
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