Earnings stripping is when a company, through its complex accounting practices, shifts it debt to US soil and its profits overseas to a locale where those profits are taxed at a lower rate.
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“The maneuvers powerful corporations are using to game the system and leave everyday taxpayers holding the bag are just offensive”, Clinton said at a town hall in Waterloo, Iowa.
He said caucus-goers strongly identify with Clinton’s agenda to “create jobs and get incomes rising again, to protect people’s right to vote, to keep our families safe from gun violence, and to make college more affordable”. Rather, lawmakers passed legislation saying US companies would have to merge with a foreign partner, even if the foreign partner is much smaller, to become a foreign-owned corporation. One of the “primary benefits” of that deal is earnings stripping, her campaign said. Sherrod Brown and Dick Durbin – both of whom have endorsed Clinton – proposed the exit tax concept for companies that decide to invert. Another Senate Democrat, Chuck Schumer, offered up a bill that same month targeting earnings stripping, and the Obama administration has made a similar legislative proposal in its recent budgets.
Hillary Clinton unveiled a plan Wednesday to crack down on a controversial practice that allows US companies to relocate overseas to avoid paying billions of dollars in federal taxes.
Clinton would also try to prevent inversions by requiring the acquiring company to control a 50% stake in the combined entity. For instance, by moving its corporate headquarters to Ireland, Pfizer will be lowering its tax rate from 25% in the U.S.to below 20% on the other side of the Atlantic.
After a rash of inversions, the Treasury Department has announced new rules restricting them twice since September 2014. She will on Wednesday discuss how she believes that she would have the executive authority as president to address earnings stripping, and encourage the U.S. Treasury Department to use its regulatory authority to “crack down on this loophole”.
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Clinton’s campaign estimates that closing the “earnings stripping loophole” would raise $60 billion over 10 years that could be used to provide incentives for manufacturing, research and small business.
