How the GOP Tax Bill Would Close an Absurd Loophole

American Thinker: Since the Kennedy administration, a key reason why Americans acceded to free trade agreements is that playing on a level playing field appealed to our sense of fair play. Whoever can make the best product and service will prevail. Winners don’t win because they game the system — that’s not how the game is played here. That’s how the game is played in those sad, poor, third-world nations beset by corruption.

But there are cheaters in our reinsurance market due to an absurd loophole that foreign companies can use but that U.S.-based companies and U.S. individuals cannot. To dodge U.S. taxes, insurers effectively launder income generated in the United States to separate companies in their overseas tax havens. It’s a creative conspiracy which saves foreign owned insurance companies billions of dollars in taxes for sales they make in the United States, which has to be made up for by hardworking Americans. But it is all perfectly legal, and has been since tax reform in 1986.

By dodging the taxes that U.S. companies have to pay, foreign insurers have a built-in competitive edge and huge leg up on raising capital. Tragically, this brazen favoritism creates an enormous incentive for foreign corporations to buy U.S. insurance companies. Since this loophole opened thirty years ago, the share of U.S.-based insurers in the U.S. insurance market has declined from 85 to 27 percent. Close to 75% of Fortune 500 companies have money in offshore tax havens according to a report by the US PIRG Education Fund and the Institute on Taxation and Economic Policy. Without a level playing field for all businesses in the U.S. reinsurance market, Americans are losing tax revenues, businesses, and jobs to other jurisdictions.   more here