Ten Percent of S&P 500 Companies Avoid Paying U.S. Taxes

Bloomberg reports:

Fueled by a wave of inversions, a record 54 companies in the Standard & Poor’s 500 Index of leading U.S. firms are now at least partially exempt from the corporate income tax. That’s more than twice the number four years ago.

The biggest factor is the recent wave of companies, such as Medtronic Plc and Mylan NV, that have completed what’s known as an inversion, in which they move their tax address overseas. Other companies have declared themselves to be real estate investment trusts, or REITs, which the Internal Revenue Service doesn’t treat as corporations. Just this year, Equinix Inc., a California company that operates data centers, became a REIT to lower its effective tax rate to as little as 10 percent. At 35 percent, the U.S. corporate rate is the highest in the developed world.

The Congressional Budget Office predicted in January that these techniques, by eroding the tax base, would contribute to a drop in U.S. corporate receipts, from 2.3 percent of gross domestic product in 2016 to 1.8 percent in 2025. By then, receipts will be about 5 percent, or $27 billion a year, lower than they would be without the anticipated erosion, the CBO estimates.

“As capital gets increasingly mobile, it’s harder to stop people from pursuing tax advantages around the world,” said William Gale, an economist at the Brookings Institution in Washington.

The demand for lower tax rates!