PNS Daily Newscast - September 20, 2019 

A whistleblower complaint against President Trump sets off tug-of-war between Congress and the White House; and students around the world strike today to demand action on climate change.

2020Talks - September 20, 2019. (3 min.)  

Climate change is a big issue this election season, and global climate strikes kick off, while UAW labor strikes continue.

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Will New Tax Law Reduce Corporate Offshoring?

There are said to be 3,000 subsidiaries of U.S. corporations headquartered in one small Cayman Islands building. (U.S. Public Interest Research Group)
There are said to be 3,000 subsidiaries of U.S. corporations headquartered in one small Cayman Islands building. (U.S. Public Interest Research Group)
January 18, 2018

CHARLESTON, W.Va. — One reason for the big tax law signed last month was to reduce the tax advantage to corporations for keeping jobs and profits in foreign affiliates. But will it work?

President Donald Trump said he wanted tax reform because, under the old system, multinational corporations could dodge U.S. taxes by keeping the profits of overseas subsidiaries on foreign affiliates' books. But will the new law change that common practice?

According to Steven Rosenthal, a senior fellow at the Tax Policy Center:

"No one really knows."

Rosenthal said, along with cutting the corporate tax rate by more than a third - from 35 to 21 percent - the new law intends to put a minimum 10.5 percent tax on foreign subsidiaries of U.S. corporations.

He said the effect of that is not yet clear.

"At best, the profits earned abroad will be taxed at a rate that's half the rate,” Rosenthal said. “That still leaves a sizable incentive to shift profits and operations abroad."

Estimates are that companies incorporated in the U.S. may be holding as much as $3 trillion under the names of their foreign subsidiaries.

Rosenthal described the offshore nature of these profits as, at times, total fiction. The foreign subsidiary may be little more than a P.O. box, and the money may even be invested in American stocks and bonds, or in a U.S. bank.

He said to discourage this, the new tax law puts the minimum tax on the future profits of the overseas subsidiaries of the U.S. corporations, along with other steps:

"The minimum tax, and then tax certain transactions between U.S. multinationals and their foreign affiliates,” he said.

The $3 trillion in past profits held overseas would be taxed at a low rate to encourage companies to bring that money home. The one-time influx of revenue is to be used to reduce the deficit impact of the cuts in the new tax law.

For the future, Rosenthal said the question is what companies will do, based on the incentive of the low rate for foreign profits.

"What we have now is exemption of profits abroad, with some exceptions,” he said. “That perverse incentive might yet create the ability to shift operations and factories abroad."

More information from the Tax Policy Center is available at

Dan Heyman, Public News Service - WV