Under current law, U.S. corporations are allowed to defer or delay U.S. income taxes on overseas profits until this money is brought back into the United States. U.S. corporations are also provided foreign tax credits to offset the amount of taxes paid to other countries.
This offshore tax scheme has provided two perverse incentives for American corporations. First, it motivates large companies to shift as much of their profits as possible overseas by setting up subsidiaries in the Cayman Islands and other tax haven countries. Second, it allows corporations to receive huge tax breaks for establishing manufacturing facilities in countries with very low or no corporate tax rates. Closing these tax loopholes would reduce the deficit and create jobs that millions of Americans need.
Sen. Sanders would end these loopholes by requiring U.S. companies to pay taxes on all of their income by ending the deferral of foreign source income.
Under Sanders’ plan, corporations would pay U.S. taxes on their offshore profits as they are earned. This legislation takes away the tax incentives for corporations to move jobs offshore or to shift profits offshore because the U.S. would tax their profits no matter where they are generated.