If you’re outraged by Donald Trump’s reported avoidance of federal taxes for 18 years, then make sure you’re sitting down.
America’s biggest companies—including some whose products you’re probably using right now, such as Apple, Microsoft and Nike—hold nearly $2.5 trillion of accumulated profits in offshore accounts to avoid paying US taxes, according to a report by the advocacy group US PIRG.
US PIRG estimates that the US government is missing out on $100 billion a year in federal taxes from at least 367 Fortune 500 companies because of these tax havens. While many of these companies do not disclose what they would expect to pay in US taxes if they did not hold those profits offshore, US PIRG extrapolates from existing information to estimate that they would have to pay $717.8 billion in federal taxes if all that money were repatriated all at once.
Some stats to give you an idea of just how much that $717.8 billion would mean to the United States:
- It’s over six times the annual cost of Obamacare (estimated at $110 billion in 2016)
- It’s around 30 percent more than the total annual cost of all US elementary and secondary schools
- It’s around 20 percent over the US defense budget ($595bn in 2016)
- If that pool of unpaid federal taxes were a country’s GDP, it would be the 19th largest in the world (above Switzerland, Saudi Arabia and Nigeria)
The money is held in over 10,000 subsidiaries, in tax havens including the Cayman Islands, Bermuda, Luxembourg, Ireland, and the Netherlands.
Update: Nike said in a statement: “We fully comply with tax regulations, and we rigorously ensure our tax filings are fully aligned with the economic substance of how we run our business.”
Apple, Microsoft, Citigroup and Oracle all either declined to comment or didn’t reply to emailed requests for comment this afternoon.
Apple was hit with a $14.5 billion tax bill by the European Commission this year for funneling its profits into a stateless shell company and paying absurdly low taxes on them. Apple has said it will appeal the decision. CEO Tim Cook has also said it will only repatriate money to the US and make it subject to federal taxes once the country undertakes tax reforms.
In a report published today, Standard & Poor’s Global suggests incentivizing companies to repatriate their offshore money by offering a one-off relief on taxation but requiring them to invest 15 percent of repatriated funds in bonds to upgrade ailing US infrastructure. The issue has also come up in the presidential campaign, with Democratic candidate Hillary Clinton advocating an “exit tax” on corporations, and Republican Donald Trump suggesting cutting the corporate tax rate to encourage companies to keep their money in the US, and incentivizing them to repatriate money that’s overseas.
As Trump has asserted regarding his own tax situation, these companies haven’t done anything illegal–so why does this matter? Well, apart from the fact that it forces ordinary people and smaller companies to pay more taxes to keep up the roads, schools, and military, it also makes a mockery of trickle-down economics.
Former British opposition leader Ed Miliband adroitly explained this after reams of information about how wealthy people and companies use tax havens were exposed in the Panama Papers leak: If the top echelons of society and business stockpile their cash offshore and don’t pay taxes on it, there’s very little to “trickle down” and enable social mobility of the rest of us. “For 30 years, since Reagan and Thatcher, the basic view has been, ‘Be nice to the super-rich and their wealth will trickle down,’” Miliband told the Guardian. “That is the big lesson of Panama for me. It doesn’t trickle down; it gets stashed.”
This story was updated with a comment from Nike.