The Coalition for a Prosperous America fights for tax reform that supports rebalancing trade, rebuilding domestic supply chains, and penalizing the offshoring of production or profits.

Strategy Summary

Pro-American Tax Policies

  • CPA advocates changing our current international corporate tax system to sales factor apportionment because domestic companies should not be undercut by foreign and multinational corporations who can shift profits overseas to gain a tax advantage.
  • CPA supports shifting towards a goods and services tax, offset by reducing domestic taxes on production. Value added taxes give companies in foreign countries an unearned trade advantage. A US goods and services tax would help domestic production and reduce the trade deficit.
  • CPA supports tax incentives to spur new productive investment and employment as part of a broader strategy to re-shore or build industrial supply chains in the US. These incentives should be combined with assuring a strong market for domestic production here and protection from foreign trade predation.

Chairman

David Morse

Committee Agenda

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How it Works

Foreign multinational corporations would be taxed the same way on U.S. income, leveling the playing field between domestic firms and foreign and domestic multinational corporations.

Where the company claims it earns its income would be irrelevant.

  • American Corporation sells $10 billion of its products to customers around the world. 
  • $6 billion of those sales (60% of total sales) are made to U.S. customers. 
  • American’s worldwide profit is $1 billion, therefore, $600 million of that profit would be taxed as U.S. profits.

U.S. taxable income would be determined solely by the percent of that company’s worldwide sales made to U.S. customers.

Why It’s Better 

The Tax Cut and Jobs Act improved the former international tax rules but created a complex patchwork system. It was particularly unsuccessful at balancing the effective tax rate scales between Domestic corporations and Multinationals, sometimes known as the Corporate Tax Differential.

Sales Factor Apportionment is the fundamental solution to the Corporate Tax Differential because it would:

  • Simplify the amount of corporate profit the U.S. taxes with a simple formula. 
  • Level the playing field between purely domestic businesses and multinational enterprises. 
  • Create an authentic and valid territorial system. 
  • Eliminates the tax incentives to locate jobs, factories, and corporate headquarters offshore.
  • Boosting employment, exports, and U.S. tax revenue. (Inversions are pointless.)
  • Estimated to increase revenue without raising rates because the revenue comes from multinational companies paying what their domestic competition does.

Sales Factor Apportionment is more straightforward and more effective than our new system which attempts — and fails — to tax all corporations fairly.

What People Are Saying About Sales Factor Apportionment:

“‘There are still large incentives and big possibilities for firms to shift profits to low-tax places,’ Mr. Zucman said in an interview.”…“Mr. Zucman said the research points toward a system that bases corporate income taxes on the location of sales.”

— Rubin, Richard. Corporations Push Profits Into Tax Havens as Countries Struggle in Pursuit, Study Says, WSJ, June 10, 2018


“The authors of the (Tax Cut and Jobs Act)… said their bill would discourage the shifting of profits earned in the United States. But the principal anti-tax avoidance measures introduced still allow companies to benefit strongly from profit shifting.” — Erman, Michael, Bergin, Tom, How U.S. tax reform rewards companies that shift profit to tax havens. Reuters, June 18, 2018


“(Sales Factor Apportionment) is a far simpler and more effective way to counter income stripping because it avoids a destructive race to the bottom and is the most competitive tax system at any reasonable rate.” — Parks, Bill. A Better Alternative For Corporate Tax Reform. Tax Notes Vol. 127, No. 11, Dec. 11, 2017


“… advanced countries are underestimating economic growth and undercollecting corporate tax revenues, because they are missing the profits that have been shifted on paper by multinational corporations.” — Tankersley, Jim. Tax Havens Blunt Impact of Corporate Tax Cut, Economists Say. NY Times, June 10, 2018


“Because the GILTI provision (of TCJA) was layered on top of older tax laws, it operates like ‘a truck built on a car chassis,’ said Michael Graetz, a Columbia Law School professor and former Treasury” — Rubin, Richard. Proposed rules meant to prevent corporate disadvantages while also avoiding the opening up of new tax-reduction strategies, WSJ June 4, 2018