No wants to change the tax code and no one wants to allow U.S. currency offshore to be repatriated so…

U.S. Stands to Lose Billions From Corporate Tax Inversions

One Estimate Puts Lost Tax Revenue at Close to $20 Billion Over a Decade

How much revenue does the U.S. Treasury stand to lose from corporate tax inversions? It is difficult to say precisely, but one estimate puts the figure at close to $20 billion. Calculating how much the U.S. Treasury would lose is nearly impossible because of a dearth of reliable tax data from companies’ public filings and the variables in how companies can structure their businesses, tax experts say. One way companies seek to reduce their U.S. tax bills by reincorporating overseas is to transfer pretax income from their U.S. operations to their foreign parent companies through intercompany debt, says corporate tax consultant Robert Willens. But it is difficult to know how large of an impact that will have for a given company because of limits on how much interest companies can deduct from their taxable income. There is also a risk that companies act too aggressively attract scrutiny from the Internal Revenue Service. Another variable is the cash many companies keep overseas to avoid U.S. taxes. The cash only becomes taxable once it is brought back to the U.S. to pay dividends to shareholders or is used for other purposes. But companies don’t always disclose how much cash they bring back home or when.

Some companies say they were never going to repatriate the cash anyway, so they aren’t depriving the U.S. tax base of revenue by moving out of the country. Report: 1 million corporations closed, 60,000 a year; taxes blamed America has lost 1 million corporations since their height during the Reagan era, in part driven out of business by the industrialized world’s highest corporate tax rate, according to a new report from the nonpartisan Tax Foundation. The just-issued research revealed that the number of traditional “C” corporations has fall to a “historically low level” and wiped out the corporate tax base, resulting in the federal government relying much more on individual income taxes to fund its operation. “There is now more net business income taxed under the individual income tax system than the traditional corporate tax code, a trend that does not appear to be stopping any time soon,” said the report provided to Secrets. It said that corporate closings have recently picked up steam and now 60,000 a year are shut down. A driver in the loss of traditional corporations has been the ever-rising corporate tax rate, an issue Washington has been ducking for years. The Tax Foundation said that many corporate titans have taken matters into their own hands by restructuring as “pass through” operations which allows profits to be taxed at lower individual rates. “More than 60 percent of U.S. business profits are now taxed under the individual income tax code rather than the corporate tax code, which explains why the U.S. collects a relatively small amount of tax revenue from corporations despite having the developed world’s highest corporate tax rate,” said the foundation. “Although this kind of do-it-yourself tax reform is beneficial to the overall economy because it lowers the tax burden on business investment, something is nevertheless lost,” said Tax Foundation Chief Economist William McBride in a statement. “Pass-through businesses do not offer the same ability to invite investment from thousands of shareholders or easily transfer shares. That means the decline of the traditional corporate sector represents an economic distortion that is hobbling American industrial capacity and job growth. No other developed country has such a distorted business sector,” he added.

Report: 1 million corporations closed, 60,000 a year; taxes blamed

America has lost 1 million corporations since their height during the Reagan era, in part driven out of business by the industrialized world’s highest corporate tax rate, according to a new report from the nonpartisan Tax Foundation.

The just-issued research revealed that the number of traditional “C” corporations has fall to a “historically low level” and wiped out the corporate tax base, resulting in the federal government relying much more on individual income taxes to fund its operation.

“There is now more net business income taxed under the individual income tax system than the traditional corporate tax code, a trend that does not appear to be stopping any time soon,” said the report provided to Secrets.

It said that corporate closings have recently picked up steam and now 60,000 a year are shut down.

A driver in the loss of traditional corporations has been the ever-rising corporate tax rate, an issue Washington has been ducking for years.

The Tax Foundation said that many corporate titans have taken matters into their own hands by restructuring as “pass through” operations which allows profits to be taxed at lower individual rates.

“More than 60 percent of U.S. business profits are now taxed under the individual income tax code rather than the corporate tax code, which explains why the U.S. collects a relatively small amount of tax revenue from corporations despite having the developed world’s highest corporate tax rate,” said the foundation.

“Although this kind of do-it-yourself tax reform is beneficial to the overall economy because it lowers the tax burden on business investment, something is nevertheless lost,” said Tax Foundation Chief Economist William McBride in a statement.

“Pass-through businesses do not offer the same ability to invite investment from thousands of shareholders or easily transfer shares. That means the decline of the traditional corporate sector represents an economic distortion that is hobbling American industrial capacity and job growth. No other developed country has such a distorted business sector,” he added.

Then comes Congress with threats:

The Senate’s chief tax writer, Ron Wyden, wants U.S. companies looking to move abroad for a lower tax bill to understand one thing: “[T]hey won’t profit from abandoning the U.S.”

The Democrat’s comments, made in a Wall Street Journal op-ed last week, came amidst a spate of proposed mergers between major American companies and foreign rivals that would end up in their reducing their U.S. tax bill.

The proposed merger that’s gotten the most attention of late: The so far unsuccessful bid by Pfizer (PFE) for British pharmaceutical maker AstraZeneca (AZN).

Today, a U.S. company can move to a more tax-friendly country in a process known as “inversion” if the foreign partner owns more than 20% of the stock in the merged entity, among other requirements.

Wyden wants to raise that threshold to at least 50%, and he would like to make such a provision retroactive to May 8, 2014.