Trump Withdraws from Deal to Curb Corporate Tax Havens
NEWS & RESEARCH
On his first day back in office in 2025, President Trump signed an executive order withdrawing the US from the Biden-era international agreement known as Pillar 2, which aimed to establish a minimum 15% global corporate tax and curb corporate use of offshore tax havens. The fallout has been significant: companies have avoided at least $40 billion in income taxes since early 2025 by funneling profits into zero- or low-tax jurisdictions like Malta, Bermuda, Cyprus, and the Cayman Islands—often through subsidiaries with no employees, offices, or customers there. Major corporations across nearly every sector are among the beneficiaries, including American Express, PayPal, Walmart, Uber, Mastercard, Pepsi, and Crocs.
SOURCES: New York Times | International Consortium of Investigative Journalists
ANALYSIS & OPINION
Trump's withdrawal from Pillar 2 is not technically illegal—but critics argue it amounts to a deliberate policy choice to let corporations off the hook. The IRS has acknowledged that some companies have gone too far, and tax advisers warn that the administration's actions will make it easier for companies to pursue increasingly aggressive tax dodges. "Accommodating the U.S.'s refusal to participate in the global reforms opens up the door to abuse," said Philip Marcovici, former chair of the European tax practice at Baker McKenzie. The political contrast has been stark: as ordinary Americans face rising grocery costs, Sen. Adam Schiff (D-CA) criticized the offshore arrangements on social media, saying they’re "an insult to hardworking Americans” because “there’s no tax dodge for them.”
SOURCES: New York Times
HOW TO FIX IT
Federal action:
Pass the No Tax Breaks for Outsourcing Act, which would require corporations to pay the same tax rate on profits earned abroad as they do in the United States.
Pass legislation implementing Pillar 2, the international agreement joined by the Biden administration and 135 countries in 2021 to establish a 15% global minimum corporate tax—but never formally adopted into US law by Congress. Democrats hoped to include these provisions in the Inflation Reduction Act of 2022, but they were ultimately dropped from the final bill.
State action:
Pass legislation modeled on New Mexico's SB 151, which requires corporations to include profits reported by foreign subsidiaries in the state's tax base—making it harder to claim earnings were generated in tax havens to dodge state taxes. New Mexico is the first state to include 100% of this foreign income in its calculations; 22 other states have similar rules but only capture a portion, ranging from 5% to 60%. The Institute on Taxation and Economic Policy (ITEP) argues that other states should follow New Mexico's lead.
Pass legislation establishing worldwide combined reporting, as recommended by ITEP, which would treat a corporation and all its foreign subsidiaries as one entity for tax purposes, closing the loophole that allows companies to book profits in offshore tax havens. ITEP estimates that universal adoption could allow states to recover roughly $18.7 billion a year in lost tax revenue. Bills were advanced in Maryland and Minnesota but neither became law. Twenty-eight states already require combined reporting for domestic subsidiaries—this would extend that to foreign ones.
Legislation: H.R.995 - No Tax Breaks for Outsourcing Act | SB 151 - Corporate Income Tax Changes (New Mexico) | SB 859 - The Fair Share for Maryland Act of 2025 | HF 2883 - Corporate franchise tax provisions modified, and worldwide combined reporting required (Minnesota)
