Democratic vice presidential candidate Joe Biden said Republican John McCain protected offshore tax shelters worth billions of dollars to U.S. insurance giants.
In a trip to the battleground state 0f Virginia this week, Biden said McCain promised to oppose any efforts to close a “Bermuda loophole” where American companies shielded $4 billion to $7 billion from U.S. taxes.
By claiming their headquarters as Bermuda, Biden said, firms actually based in the United States can keep profits out of the reach of the Internal Revenue Service.
“They’re skipping out on billions of dollars in taxes, and that money could be used to insure our children, … to make sure the (Veterans Administration) is not underfunded, to rebuild bridges that are crumbling around the nation,” Biden said.
Biden was referring to a provision of tax law that some insurance companies can use to wipe out much of their U.S. tax liability. The companies that issue fire, property and casualty insurance are allowed to establish a Bermuda office and transfer the premiums they collect there, treating them as business expenses. That creates a deduction that erases millions of dollars in taxable profits, costing the U.S. Treasury $4 billion or more a year.
McCain spent three days in Bermuda in August 2007 meeting business and political leaders, and while there was quoted by the island’s main newspaper, the Royal Gazette, as promising to defend tax breaks for insurance companies that locate there.
“The industry, the reinsurance that’s had such phenomenal success has been good for both nations,” McCain was quoted as saying in an Aug. 23, 2007 article. “I would oppose any measures that would upset that.”
Biden said despite McCain’s recent support for cracking down on corporate offshore tax breaks, McCain had once defended them.
“On the floor of the United States Senate, John spoke out against these offshore tax breaks not long ago. Then while he was in Bermuda, according to the Bermuda World Gazette … he started singing a very, very different tune,” Biden said
Paraphrasing the newspaper account, Biden said McCain promised a group of insurance industry executives and lobbyists he would block efforts to close the loophole. In appreciation, Biden said, the industry gave McCain’s campaign about $50,000.