In a couple of previous posts, I outlined some clear problems with Paul Ryan’s recent tax plan. The final major pieces of Speaker Ryan’s House GOP tax reform are the changes to the corporate income tax. The headline here is bad enough, cutting the top corporate income tax rate from 35 to 20 percent. But it gets worse, and as with the rest of this tax plan, it does so in a way that clouds how much of a giveaway Paul Ryan and the House GOP actually intend.

The corporate income tax is steeply progressive, making it an important tool for curbing inequality. This is because the vast majority of the incidence of the corporate income tax falls on the owners of capital, with capital income heavily concentrated at the very top of the income distribution. For instance, the Congressional Budget Office’s reading of the economic evidence assigns 75 percent of the incidence of the corporate income tax to capital owners. And taxes on capital income are eroding. Foreigners and retirement plans now hold 63 percent of U.S. stock and are nontaxable. So that erosion at the shareholder level has made the corporate income tax the main way through which shareholders are taxed, either explicitly or implicitly. Far from worries about so-called double taxation, Steve Rosenthal and Lydia Austin have shown that the percentage of corporate stock that is taxable has fallen from 83.6 percent in 1965 to 24.2 percent as of 2015. This makes pairing a reduction of the corporate income tax to 20 percent, along with the 50 percent tax exemption for capital gains, dividends, and interest that I touched on previously, a spectacular giveaway to the rich.

Despite its progressivity, and despite the erosion of other taxes on capital income, the corporate income tax base has also eroded substantially in recent decades. Since 2010 after-tax corporate profits have averaged 9.1 percent of GDP, while corporate income tax revenues have averaged 1.6 percent of GDP. Driving this erosion are business reclassification and income shifting, points we will make more detailed and visual in an upcoming joint Americans for Tax Fairness/EPI chart book. But for now, let’s focus on how Ryan’s House GOP tax plan would lock in current income shifting and worsen future income shifting considerably.

The most damaging part of Ryan’s corporate tax reform isn’t the stark cut in the headline rate—it’s the much less obvious change towards a territorial system of taxation. Territorial taxation gives multinational firms a quick and easy way to avoid all the taxes they owe on their U.S. profits, further eroding the corporate tax base.

First, some background is necessary. Current U.S. corporate tax law ostensibly taxes corporations based on their worldwide income. However, through a loophole known as deferral, multinational corporations can avoid U.S. taxes by declaring their profits as being permanently reinvested offshore. Taxes are only due once the offshore subsidiary has repatriated the profits back to the U.S. parent company in the form of dividends. Deferral opens the door for income shifting. Rather than pay taxes on their U.S. profits, a multinational corporation can simply use a variety of accounting gimmicks to book their profits in an overseas tax haven. A simple example of such accounting is transfer pricing rules, the prices of goods and services sold between a parent and subsidiary company. The inherent difficulty of pricing intellectual property rights makes this a particularly easy way for information technology and pharmaceutical firms to avoid paying taxes on U.S. profits. All such a firm needs to do is assign the intellectual property assets, patents for instance, to a subsidiary that is located in a tax haven and then have the U.S. parent company pay royalty payments to the offshore subsidiary. Provided the accountants don’t charge too much, the chance to avoid taxes on their U.S. profits is too good for a multinational to pass up. If repatriations were guaranteed to happen in the future at the 35 percent statutory tax rate, such shifting wouldn’t make much sense. But there are a few reasons multinational firms know they won’t be paying the 35 percent statutory rate, probably ever:

First, once these profits are booked as offshore, they’re hardly offshore in reality. Recent examples of creative accounting include Apple using their offshore profits to finance stock buybacks, benefiting their shareholders, and Microsoft financing their purchase of LinkedIn with offshore profits. Apple and Microsoft pay respectively 3 and 5 percent on their offshore profits.

More importantly, income shifting has accelerated since an ill-advised repatriation tax holiday in 2004. In 2004, Congress allowed multinational firms to repatriate their foreign income at a rate of 5.25 percent for a single year rather than the full 35 percent rate owed. Proponents of this policy claimed that firms would use the money they “brought home” to invest in plant and equipment and hence boost the recovery from the 2001 recession, but in reality the profits were used to repurchase stock and pay larger dividends to shareholders. Clearly, anticipation of a future tax holiday is providing further incentive for firms to book even more of their U.S. profits overseas. And the size and scope of this income shifting are staggering. Kimberly Clausing provides evidence that income shifting costs the United States over $100 billion a year in tax revenue.

And finally, as Ryan’s tax reform shows, multinational corporations know that they’ve convinced Republicans to push for a territorial tax system. What are the motives for doing so? A territorial tax system means that instead of the complexity of worldwide taxation with a deferral loophole, the profits of offshore subsidiaries are no longer subject to U.S. taxation at all, repatriated or not. Without base erosion protections, which the House GOP tax plan certainly lacks, this means multinationals can simply book their U.S. profits in a tax haven and no longer be subject to U.S. taxes. Stated plainly, multinational corporations will not face Ryan’s new proposed 20 percent tax rate on their U.S. profits, instead they will pay nothing.

The prevalence of income shifting combined with the emphasis on territorial taxation betrays how much a 20 percent statutory rate understates how much the Ryan plan hands to corporations, and how empty the rhetoric of improving “competitiveness” by cutting corporate income tax rates is in reality. Clausing estimates that 98 percent of the revenue loss from income shifting results from profit shifting to countries with corporate tax rates less than 15 percent, with 82 percent resulting from profit shifting to just seven tax haven countries with effective rates less than 5 percent. Cutting the corporate rate to 20 percent is not going to make multinationals book their profits here instead of these havens with ultra-low rates, and switching to territorial taxation will incentivize them to further book their U.S. profits as being earned in tax havens.

The corporate tax side of Paul Ryan’s House GOP tax plan encapsulates the theme of his overall tax reforms perfectly. It highlights the extent to which Paul Ryan, the preeminent Republican budget expert, doesn’t have a clue. It highlights the extent to which House Republicans are still obsessed with tax giveaways to the rich. And finally, it highlights the extent to which they’ll use complexity to obscure this fact.