“Chief Tax-Dodging Officers”: It’s Gotten Pretty Easy For Large Corporations To Avoid The Taxman
Republican and Democratic leaders don’t often see eye to eye on taxes.
But surprisingly, corporate tax reform looks like one area where there might actually be some potential for bipartisan action in Washington. This should be good news, since our corporate tax system is clearly hopelessly broken.
Here’s a stark indicator of just how broken: Last year, 29 of the 100 highest-paid CEOs made more in personal compensation than their companies paid in federal income taxes. That’s according to a new report by the Institute for Policy Studies and the Center for Effective Government.
Source: Fleecing Uncle Sam, an Institute for Policy Studies and Center for Effective Government report
Yes, it’s gotten that easy for large corporations to avoid the taxman.
This is true even for the country’s wealthiest companies. Citigroup, Halliburton, Boeing, Ford, Chesapeake Energy, Chevron, Verizon, and General Motors all made more than $1 billion in U.S. profits last year, but still paid their CEOs more than they paid Uncle Sam. In fact, most of them got massive tax refunds.
How is this possible?
While big businesses moan about the U.S. corporate tax rate of 35 percent, most of them pay nowhere near that. Between 2008 and 2012, the average large corporation paid an effective rate of less than 20 percent.
Hiding profits in tax havens is one of the most common ways large corporations avoid paying their fair share to the IRS. And indeed, the 31 firms who paid their CEOs more than Uncle Sam operate 237 subsidiaries in low- or no-tax zones like the Cayman Islands and Bermuda.
But that’s just one tax-dodging trick. Corporations have lobbied successfully for a plethora of other tax loopholes and subsidies.
Boeing, for example, has figured out how to double dip in the Treasury’s pool.
The aerospace giant hauled in more than $20 billion in federal contracts in 2013. According to Citizens for Tax Justice, taxpayers also picked up the tab for $300 million of Boeing’s research expenses last year through a tax break that Congress is now considering making permanent.
When tax time came, Boeing got $82 million back from the IRS, despite reporting nearly $6 billion in U.S. pre-tax profits. Meanwhile, Boeing chief executive Jim McNerney made $23.3 million.
Corporate tax dodging is bad for ordinary Americans — and our nation’s long-term economic health.
For example, if Boeing had paid the statutory corporate tax rate of 35 percent on its $6 billion in profits, it would’ve added an extra $2 billion to the funds available for public services. That sum would’ve covered the cost of hiring 2,775 teachers for a year.
Shirking taxes may boost the bottom line in the short term, but in the long run it erodes the economic infrastructure businesses need to be competitive.
Unfortunately, the current political rhetoric has little to do with cracking down on corporate tax avoidance.
Republicans are hooked on corporate tax giveaways. And President Barack Obama has suggested that he’s ready to reward corporations for stashing money overseas by giving them deeply discounted tax rates on their profits if they’ll just agree to bring them home.
Both of these positions are based on the unfounded claim that smaller corporate tax burdens translate into more good jobs.
In a Hart Research poll of voters on election night, only 22 percent favored taxing corporations less. In the same poll, less than 30 percent wanted Congress to make tax cuts a higher priority than investments in education, health care, and job creation.
The American people have their priorities straight. They deserve leaders who do too.
By: Sarah Anderson and Scott Klinger are the co-authors of “Fleecing Uncle Sam”; The National Memo, November 19, 2014
“Relentless Wal Street Crime Spree”: Fines Are Not Adequate Deterrents To Corporate Misbehavior
When future historians look back at our era, they will doubtless be puzzled about how we allowed it to come to pass that faceless corporations were granted all the freedoms and protections of real people, but faced none of the consequences that real people face for criminal behavior. This puzzle is related to the problem I wrote about earlier this morning, in which social problems for normal people are solved with fines and jail time, but social problems caused by corporate “citizens” are given market solutions and self-regulation instead.
The latest case in point comes as six major banks guilty of manipulating currency markets were given the laughably small fine of $4.3 billion, and not a single one of the actual perpetrators is coming close to facing jail time.
On Wednesday, six massive international banks agreed to pay $4.3 billion to settle allegations from regulators in the United States, the United Kingdom, and Switzerland that their traders tried to manipulate the $5.3-trillion-a-day foreign-currency exchange market. But Wall Street watchdogs say the banks got off with a slap on the wrist.
From 2008 through 2013, traders at JPMorgan Chase, Bank of America, Citigroup, HSBC, the Royal Bank of Scotland, and UBS colluded to coordinate the buying and selling of 10 major currencies to manipulate prices in their favor….
In the real world, the crime spree being perpetrated by global corporations, particularly those in the financial sector, will never abate until the criminals perpetrating them are actually thrown in jail.
But critics say the banks, which were not forced to admit wrongdoing, deserved a much harsher punishment. “The global too-big-to-fail banks are again allowed to evade responsibility and accountability by using shareholders’ money to pay big fines, which will generate headlines but do little if anything to stop the relentless Wall Street crime spree,” Dennis Kelleher, the president of Better Markets, a financial reform advocacy shop, responded in a statement.
David Weidner, who covers Wall Street for MarketWatch, agrees. The settlements “appear to be just another cost-of-doing-business budget line for the banks,” he wrote. What’s more, financial reformers say, none of the employees involved in the rate-fixing will face criminal charges. “It’s corrupt, as usual,” says one House staffer. Regulators should “send crooks to jail.”
Fines are utterly inadequate to deter this sort of behavior. We understand this implicitly when it comes to check kiters and liquor store robbers. If you’re convicted of those things you go to jail. But if you collude to debase another country’s entire currency for your own profit, your company pays a small fine.
That’s going to look very weird and very corrupt in about 100 years. Or else it won’t–in which good luck to us all.
By: David Atkins, Political Animal, The Washington Monthly, November 15, 2014
“Layaway Purchase Plan”: GOP Nightmare Reveals Secret Corporate Donors
Some people have myriad recurring nightmares about being publicly embarrassed, such as rising to give a speech and realizing you know nothing about the topic — then realizing you’re naked.
You might be surprised to learn though, that corporations also have such nightmares. OK, corporations aren’t really people, no matter what the Supreme Court fabulists claim, so they can’t dream, but their top executives can, and several recently suffered the same chilling hallucination. Only, it wasn’t a dream… it was real.
Perhaps you think that corporations use their campaign donations to buy privileged access to state and national policymakers. Perhaps you even think that their political money actually buys those politicians — after all, they do deliver the public policies the corporate donors want. Perhaps you think this whole monetized political system is corrupt, anti-democratic, and…well, stinky.
You would, of course, be right about all of the above. As Lily Tomlin has put it, “No matter how cynical you get, it’s almost impossible to keep up.”
The corporate purchase of Washington, DC is pretty widely reported, but — keep up now — for the kleptocratic stinkiness fast consuming our statehouses as well. The Republican Governors Association has devised a layaway purchase plan allowing brand-name corporations to make secret donations of $100,000 or more a year to the RGA in support of the corporate-friendly agenda of various GOP governors. And a lot of execs have been buying.
These are chieftains of brand-name corporate giants who have secretly funneled millions of their shareholders’ dollars into the “dark money” vault of the Republican Governors Association. In turn, the RGA channels the political cash into the campaigns of assorted right-wing governors. This underground pipeline has been a dream come true for corporations, for it lets them elect anti-consumer, anti-worker, anti-environment governors without having to let their customers or shareholders know they’re doing it.
But — oops! — the RGA made a coding error in its database of dark-money donors. So in September, a mess of the GOP’s secret-money corporations were suddenly exposed, standing buck-naked in front of customers, employees, stockholders and others who were startled and angered to learn that the companies they supported were working against their interests.
A lifelong champion of political money reform, Fred Wertheimer, put it this way: “This is a classic example of how corporations are trying to use secret money hidden from the American people to buy influence, and how the Governors Association is selling it,”
Feed the RGA’s political favor meter with $250,000 a year (as Coca-Cola, the Koch brothers, and others do), and the association cynically anoints your corporation with the ironic title of “Statesman,” opening up gubernatorial doors throughout the country. Well, sniff the participants, the money buys nothing but “access” to policymakers. But wait — when was that access put on the auction block? Shouldn’t everyone have access to our public officials? Of course, but call your governor and see if you can even get an office intern to call back.
If you’re an RGA corporate “Statesman,” however, you could get a tête-à-tête with Rick Perry, the recently indicted governor of Texas, or a private breakfast with Bob McDonnell, the now-convicted former governor of Virginia. See, membership in the corrupt club has its privileges.
Now let’s call the roll of some of the privileged corporate dreamers that were pulling the wool over our eyes, hoping we would slumber in ignorance: Aetna, Aflac, Blue Cross, Coca-Cola, Comcast, Exxon Mobil, Hewlett-Packard, Koch Industries, Microsoft, Novartis, Pfizer, Shell Oil, United Health, Verizon, Walgreens and Walmart.
The corporate donors to this previously secret scheme of plutocratic rule says it’s OK, for they also give money to Democrats. Oh, bipartisan corruption — that makes me feel so much better… how about you?
By: Jim Hightower, The National Memo, October 1, 2014
Justice Ginsburg Was Right”: Hobby Lobby Decision; Already Wreaking Havoc
One of the hallmarks of the ongoing conservative legal revolution is that judicial decisions with enormous consequences are often downplayed by their engineers as just another day at the office (Citizens United, Carhart v. Gonzales), or as having no significance as precedent (Bush v. Gore). As Jeff Toobin explains at the New Yorker, the same phenomenon is occurring with respect to Burwell v. Hobby Lobby Stores, Inc.
Justice Samuel Alito insisted, in his opinion for the Court, that his decision would be very limited in its effect. Responding to the dissenting opinion by Justice Ruth Bader Ginsburg, who called it “a decision of startling breadth,” Alito wrote, “Our holding is very specific. We do not hold, as the principal dissent alleges, that for-profit corporations and other commercial enterprises can ‘opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs….’ ”
A sampling of court actions since Hobby Lobby suggests that Ginsburg has the better of the argument. She was right: the decision is opening the door for the religiously observant to claim privileges that are not available to anyone else.
One such matter is Perez v. Paragon Contractors, a case that arose out of a Department of Labor investigation into the use of child labor by members of the Fundamentalist Church of Jesus Christ of Latter-day Saints. (The F.L.D.S. church is an exiled offshoot of the Mormon Church.) In the case, Vernon Steed, a leader of the F.L.D.S. church, refused to answer questions by federal investigators, asserting that he made a religious vow not to discuss church matters. Applying Hobby Lobby, David Sam, a district-court judge in Utah, agreed with Steed, holding that his testimony would amount to a “substantial burden” on his religious beliefs—a standard used in Hobby Lobby—and excused him from testifying. The judge, also echoing Hobby Lobby, said that he needed only to determine that Steed’s views were “sincere” in order to uphold his claim. Judge Sam further noted that the government had failed to prove that demanding Steed’s testimony was not, in the words of the R.F.R.A., “the least restrictive means of furthering that compelling governmental interest.” That burden seems increasingly difficult for the government to meet.
The Supreme Court itself has suggested that the implications of Hobby Lobby were broader than Alito originally let on. Just days after the decision, the Court’s majority allowed Wheaton College, which is religiously oriented, to refuse to fill out a form asking for an exemption from the birth-control mandate—while retaining the exemption. There is another case, Little Sisters of the Poor v. Burwell, which is also pending, where a religious order asserts that the filling out of a form (which, if granted, would exempt them from the law’s requirements) violates their rights.
If just filling out a form can count as a “substantial burden,” it’s hard to imagine any obligation that would not.
It looks like the Court will soon have abundant opportunities to prove Ginsberg was absolutely right.
By: Ed Kilgore, Contributing Editor, Washington Monthly Political Animal, October 1, 2014
“Corporate Tax Deserters”: Shirking Their Responsibility To Pay For What They Get
Corporations love to wrap themselves in the flag with sun-drenched TV commercials that proclaim a deep devotion to American workers and communities. But when it comes to actually taking responsibility for supporting the workers and communities that create the conditions for corporate profits, a record number of big businesses are deserting America.
Burger King is the latest corporation to announce it is moving to Canada — at least on paper — where it will pay lower taxes. In the past three years alone, at least 21 companies have completed or announced mergers with foreign corporations to avoid taxes in an operation known as “inversion.” That compares with 75 over the past 30 years. These only-on-paper moves will gouge a $20 billion tax loophole over the next decade.
These companies may be moving their taxes overseas, but they’re not ending their reliance on the U.S. government to operate profitably. They are just shirking their responsibility to pay for what they get. The companies still make money in the United States, where they hire workers educated by public schools, ship their goods on public roads, are kept safe by local police officers and firefighters, and protect their patents in America’s courts.
Of course, small businesses and American families can’t play the same traitorous game. We can’t hire lawyers and accountants to pretend to ship our homes and our income overseas. And most of us wouldn’t do that if we could.
We understand that paying taxes is part of our basic obligation as citizens and essential to building strong communities.
What we do resent about taxes is that the current system is upside down — big corporations and the wealthy game the system so they pay a smaller share of their income in taxes than working families and small business. The share of profits corporations spend on taxes stands at a record low. And those profits are reaching record highs.
It’s time to turn the tax system right side up by closing the tax loopholes that allow billionaires and huge corporations to escape paying their fair share to support the country that made them rich.
The Obama administration just took a major step to do that. Tiring of Republican objections to closing the corporate tax deserter loophole, Treasury Secretary Jack Lew announced he was issuing new regulations aimed at making it much harder for companies to reap tax benefits from an offshore move.
This step may curb some corporate desertion. In the long run, it would be best if Congress took action. Two bills (S2360 and HR4679) would end the current practice of treating corporate deserters as foreign companies when they are still really based right here.
Consumers can play a role too. In August, Walgreens — which bills itself as “America’s drugstore” — abandoned its plan to dodge $4 billion in taxes in the next five years by changing its corporate address to Switzerland. Walgreens reversed course when outraged consumers protested at its stores and on the Internet.
This nation faces huge challenges in building an economy that works for all of us. If we plan to build a better future for our children, we must insist that corporations be held accountable for their responsibilities to our families and communities.
By: Richard Kirsch, Senior Fellow at the Roosevelt Institute; The National Memo, September 26, 2014
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