Corporations add big bundle to overseas hoard. Expect to hear more cries for lowering their tax rate

Richard Rubin at Bloomberg reports:

The largest U.S.-based companies expanded their untaxed offshore stockpiles by $183 billion in the past year, increasing such holdings by 14.4 percent, according to data compiled by Bloomberg. [...]

The build-up of offshore profits'totaling $1.46 trillion for the 83 companies examined'is increasing because of incentives in the U.S. tax code for booking profits offshore and leaving them there. The stockpiles complicate attempts to overhaul the tax system as lawmakers look for ways to bring the money home and discourage profit shifting. [...]

A report last year by analysts at JPMorgan Chase & Co. (JPM) estimated that all U.S.-based companies had $1.7 trillion in accumulated offshore profits. In the data compiled by Bloomberg, 83 companies had about 75 percent of last year's total, which suggests that the total for all companies now exceeds $1.9 trillion.

The reason for this, corporations and their apologists explain, is the supposedly excessive U.S. corporate tax rate compared with other developed nations. If they bring their overseas profits home, they say, they have to pay more than they think they should in taxes. More than what foreign rivals pay. But what they think they should pay and what is reasonable for them to pay are two different matters.

Groups like the Business Roundtable claim the U.S. corporate rate is the highest among those developed nations. But that's not so. While the statutory rate of 35 percent is high, the effective rate, what actually gets collected, is quite low comparatively speaking. In fact, the effective rate slipped to a four-decade low in fiscal 2011, just 12.1 percent. And, as the charts above show, the United States not only taxes corporations less than other nations, it also raises less revenue from corporate taxes.

Ignoring the fact of the actual tax situation, or rather twisting the truth about it, the corporations accumulating the vast overseas hoard say they have a "solution." It's called "territorial" taxation. Simply put, in its purest form, such a system would put profits earned overseas permanently out of the reach of the U.S. Treasury. The corporations would then be incentivized to bring their profits home to invest in America instead of stashing them in the Caymans.

Malarkey, as Vice President Joe Biden would say. What really would happen is that corporations would do all in their accountants' power to juggle and jiggle their earnings reports to claim that profits generated in the United States have actually been generated overseas. A cynic might call that "laundering." Pure territorial taxation would also encourage corporations to ship more jobs offshore so they could actually make more profits overseas. Please continue reading below the fold to read about corporate hoarding and taxation.