GILTI: Foreign Tax, Local Impact

  1. To best serve their customers and compete in today’s modern economy, many U.S. businesses must employ workers in countries across the globe. In fact, the connectedness of our global economy has come with significant advances in technology and medicine that have been critical during the pandemic.
  2. When U.S. companies succeed abroad, it means more investment and jobs at home. In 2018, two-thirds of employees for U.S. multinational companies were based in the U.S., representing 22 percent of the U.S. workforce.
  3. To help finance his infrastructure proposal, President Biden has proposed doubling the tax rate on “GILTI” or Global Intangible Low Tax Income, a little-known policy passed as part of the Tax Cuts and Jobs Act of 2017.
  4. GILTI was crafted by Republicans to be a 10-13 percent minimum tax on businesses with high earnings from intellectual property (IP) and was designed to discourage U.S. businesses from shifting profits overseas.
  5. GILTI is broken. It doesn’t just tax IP, and it doesn’t just tax businesses that are looking to shift their profits into low-tax countries. GILTI unintentionally places a surtax on many U.S. companies that want to reach customers overseas.
  6. GILTI is a foreign tax with a local impact. When U.S. businesses are prevented from growing their operations overseas, that means new jobs at home are never created, existing jobs may be eliminated, and entire operations could be sold to foreign competitors.
  7. Since only U.S. businesses pay the GILTI tax, not foreign businesses, it makes U.S.-based brands less competitive abroad.
  8. Whatever its intentions, GILTI is a flawed policy, and doubling down on it will hurt us abroad, and at home.

This leading US company employs thousands of Americans in industries from research to manufacturing, to marketing and shipping.

Thanks to international demand for its products, and because they’re costly to ship, it has recently opened facilities abroad.

This overseas growth brings the benefit of job creation at home, from new marketing specialists who know foreign markets, to experienced supply chain managers who make sure everything runs smoothly.

Jobs like these are essential to local communities around the country.

Now this is GILTI.

GILTI is supposed to be a 10-13 percent minimum tax on businesses with high earnings from intellectual property.

The tax was adopted by Republicans in 2017 to discourage U.S. businesses from shifting profits overseas.

Unfortunately, because GILTI was poorly designed, it doesn’t just tax IP, but unintentionally places a large surtax on every US company that wants to reach customers overseas.

This makes it hard to compete with brands from other countries who don’t pay GILTI.

Today, the current administration wants to double the GILTI tax, making an already bad policy worse.

These changes will make it highly difficult for US businesses to grow overseas.

And fewer sales means new jobs at home that are never created. Unsustainable taxes mean existing jobs may be eliminated, and entire operations could be sold to foreign competitors.

Whatever its intentions, GILTI is a flawed policy, and doubling down on it will hurt us abroad, and at home.

Global Intangible Low Tax Income (GILTI)

March 12, 2021

Foreign Derived Intangible Income (FDII)

March 12, 2021

Base Erosion and Anti-Abuse Tax (BEAT)

March 12, 2021

Qualified Business Asset Investment (QBAI) Exemption

September 10, 2021

Corporate Income Tax

July 27, 2020

Tax Cuts and Jobs Act (TCJA)

July 27, 2020

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