Tax tweak could level playing field

Multinational corporations like Google, Amazon, and Pfizer hide their profits in offshore tax havens and pay a low tax rate in the U. S. They sell billions of dollars worth of products to American consumers and businesses but have a surprisingly low tax bill.

However, Ohio corporations that lack clever accountants are left holding the bag and paying a much-higher rate. Congress has a chance to fix this discrimination against U. S. companies, but the current tax bill continues to favor multinationals.

Most states have already solved this problem with an innovative tax system called Sales Factor Apportionment (SFA). An SFA taxes profits in proportion to companies’ sales in their state. Studies show that if the United States adopted an SFA, Congress’ tax plan would raise another $1 trillion dollars over 10 years at the lower 20 percent corporate rate being proposed.

Under an SFA, a Columbus company selling half of its product in the U. S. and half overseas would be taxed on only half of its profits. If a Chinese company sold half of its product in the U. S., it would also be taxed on half of its profits. Helpfully for domestic companies, profits on exports would be tax-free. Because profits on imports would be taxed, foreign companies would not get access to the U. S. market without paying for it.

U. S. firms should not be penalized for playing by the rules. Both small and large corporations should be equally taxed for the privilege of profiting from the lucrative U. S. consumer market.

Michael Stumo

Coalition for a Prosperous America Washington, DC.