“The Real Welfare Cheats”: The Big Problem Of Welfare Dependency In America Now Involves Entitled Corporations
We often hear how damaging welfare dependency is, stifling initiative and corroding the human soul. So I worry about the way we coddle executives in their suites.
A study to be released Thursday says that for each dollar America’s 50 biggest companies paid in federal taxes between 2008 and 2014, they received $27 back in federal loans, loan guarantees and bailouts.
Goodness! What will that do to their character? Won’t that sap their initiative?
The study was compiled by Oxfam and it comes on top of a mountain of evidence from international agencies and economic journals underscoring the degree to which major companies have rigged the tax code.
O.K., O.K., I know you see the words “tax code” and your eyes desperately scan for something else to read! Anything about a sex scandal?
But hold on: The tax system is rigged against us precisely because taxation is the Least Sexy Topic on Earth. So we doze, and our pockets get picked.
John Oliver has a point when he says, “If you want to do something evil, put it inside something boring.” The beneficiaries of tax distortions are counting on you to fall asleep, but this is a topic as important as it is dry.
It’s because the issues seem arcane that corporate lobbyists get away with murder. The Oxfam report says that each $1 the biggest companies spent on lobbying was associated with $130 in tax breaks and more than $4,000 in federal loans, loan guarantees and bailouts.
And why would a humanitarian nonprofit like Oxfam spend its time poring over offshore accounts and tax dodges? “The global economic system is becoming increasingly rigged” in ways that exacerbate inequality, laments Ray Offenheiser, president of Oxfam America.
One academic study found that tax dodging by major corporations costs the U.S. Treasury up to $111 billion a year. By my math, less than one-fifth of that annually would be more than enough to pay the additional costs of full-day prekindergarten for all 4-year-olds in America ($15 billion), prevent lead poisoning in tens of thousands of children ($2 billion), provide books and parent coaching for at-risk kids across the country ($1 billion) and end family homelessness ($2 billion).
The Panama Papers should be a wake-up call, shining a light on dysfunctional tax codes around the world — but much of the problem has been staring us in the face. Among the 500 corporations in the S.&P. 500-stock index, 27 were both profitable in 2015 and paid no net income tax globally, according to an analysis by USA Today.
Those poor companies! Think how the character of those C.E.O.s must be corroding! And imagine the plunging morale as board members realize that they are “takers” not “makers.”
American companies game the system in many ways, including shifting profits to overseas tax havens. In 2012, American companies reported more profit in low-tax Bermuda than in Japan, China, Germany and France combined, even though their employees in Bermuda account for less than one-tenth of 1 percent of their worldwide totals.
Over all, the share of corporate taxation in federal revenue has declined since 1952 from 32 percent to 11 percent. In that same period, the portion coming from payroll taxes, which hit the working poor, has climbed.
Look, the period of the Oxfam study included the auto and banking bailouts, which were good for America (and the loans were repaid); it’s also true that the official 35 percent corporate tax rate in the U.S. is too high, encouraging dodging strategies. But we have created perverse incentives: C.E.O.s have a responsibility to shareholders to make money, and tax dodging accomplishes that. This isn’t individual crookedness but an entire political/economic system that induces companies to rip off fellow citizens quite legally.
It’s now widely recognized that corporations have manipulated the tax code. The U.S. Treasury, the World Bank, the International Monetary Fund, the European Union and professional economic journals are all trying to respond to issues of tax evasion.
Bravo to the Obama administration for cracking down on corporations that try to move abroad to get out of taxes. Congress should now pass the Stop Tax Haven Abuse Act, and it should stop slashing the I.R.S. budget (by 17 percent in real terms over the last six years).
When congressional Republicans like Ted Cruz denounce the I.R.S., they empower corporate tax cheats. Because of I.R.S. cuts, the amount of time revenue agents spend auditing large companies has fallen by 34 percent since 2010. A Syracuse University analysis finds that the lost revenue from the decline in corporate audits may be as much as $15 billion a year — enough to make full-day pre-K universal.
Meanwhile, no need to fret so much about welfare abuse in the inner city. The big problem of welfare dependency in America now involves entitled corporations. So let’s help those moochers in business suits pick themselves up and stop sponging off the government.
By: Nicholas Kristof, Op-Columnist, The New York Times, April 14, 2016
“So Many Secret Accounts”: Republican Doom Talk Helps Enable Big-Time Tax Evaders
So the first impulse is to discuss these Panama Papers in terms of the big crooks like Valdimir Putin. But let’s hope they get some traction on the presidential campaign trail and put the issue of tax havens at the center of the debate.
Yeah, we all know about Swiss banks and the Cayman Islands, and just figure that rich people have this wired and this is how it will always be. But it doesn’t have to. In fact, it has changed a little bit for the better recently. Wanna take a guess who’s been trying to do the changing, and who’s stood in the way?
First, a little background. The best estimate for the kinds of tax havens discussed in the Panama leaks is that they drain about $165 billion a year from federal revenue coffers. Gabriel Zucman, a leading expert on them, estimates that the U.S. government loses $35 billion from individual tax evaders, and $130 billion from corporate evaders. (His new book was just well-reviewed by Ethan Porter in Democracy, the journal I edit.)
One hundred and sixty-five billion dollars is a fair amount of money—more than you and I shelled out for any of the following categories of federal expenditure in 2015: health care and health research ($122 billion), transportation ($107 billion), education ($90 billion), or science-environment-energy ($70 billion). So we could use it.
In Europe, efforts started in the aughts to do something about this. The Bush administration wasn’t going to do much, of course. But after Barack Obama came in and the Democrats had control of both houses of Congress, Democrats—notably Michigan Sen. Carl Levin, but others too—sought to move legislation to address tax evasion.
And… they did! You probably didn’t hear about it at the time, because the effort didn’t generate nearly as many headlines as the Democratic effort to reform the financial system, address climate change, or pass a health care reform law. But note: The Democrats used their brief two-year period of total control of both the White House and Congress to address head-on about a half-dozen problems, and tax evasion was one of them.
The bill was called the Foreign Account Tax Compliance Act, or FATCA; how they managed not to tag that final “T” on there at the end is beyond me, someone was really asleep at the wheel. But anyway it passed. In the Senate, it actually enjoyed a modicum of bipartisan support, as 11 GOP senators voted for it (as opposed to 28 who opposed; Democrats backed it 55-1). But in the House, not a single Republican voted for the bill, as Nancy Pelosi let 38 nervous blue-dogs go and join all 174 Republicans.
So what did the bill do? Well, a lot of complicated things, some good, some bad, but in the main, it gave the IRS more authority to look abroad through global financial databases and figure out who might be a U.S. citizen and if so, what they might be owing Uncle Sam that they weren’t paying. It also required foreign financial institutions to report such relevant information about U.S. citizen residents to the U.S. government.
Sounds like a pretty legit thing for the government to be doing, if you ask me. But it involved the hated IRS, so naturally, you had all these hideous predictions from Republicans and conservatives about what FATCA was going to lead to. It was going to make presumptive criminals out of all U.S. citizens living abroad. It was going to compromise the privacy needs of banks. Best of all, FATCA, once fully implemented in July 2014, was going to bring about the official demise of the U.S. dollar. Snopes.com rated that one false.
The charge is being led by just the people you’d expect. Sen. Rand Paul introduced the bill to repeal FATCA, and sued the Treasury Department over it. Utah Sen. Mike Lee went on a barnstorming tour of Europe to drum up momentum for a repeal (that doesn’t seem to have to worked too well—the Organization for Economic Co-Operation and Development issued its own tax-haven enforcement guidelines, which are for the most part tougher than FATCA’s).
But it isn’t just the fringy, von Mises-y, gold-standard crowd that’s worked up about FATCA. The Republican National Committee officially passed a resolution supporting its repeal (PDF). Interestingly, I looked at the RNC’s official resolutions from 2013-2016 inclusive, and for those four years, FATCA is the only piece of legislation singled out for a specific resolution of repeal. If that’s the case, FATCA must be doing something right.
FATCA and the OECD regs represent first steps in a process that’s going to take 20 or 30 years, if it succeeds even then. And the Democrats of course aren’t perfect on this. But at least most of them acknowledge this as an issue and are trying to do something about it.
On this point, I feel certain you’re going to be reading this week a lot about how Hillary Clinton supported a free-trade deal with Panama, the notorious tax haven whence these leaked documents came to us. This is true, but as a secretary of state working for a president who backed the deal, she could scarcely have done otherwise. And two other points are salient: one, trade deals are negotiated by the U.S. Trade Representative, not the Department of State, and two, the USTR did seek and obtain a tax information exchange agreement before the Obama administration was willing to cut the deal with Panama.
Obama’s not the enemy here. Nor is Clinton. The people on the wrong side of this one are the same people who always are, and whose dire predictions of economic catastrophe, whether about this or raising the minimum wage or anything else, almost never seem to come to pass.
By: Michael Tomasky, The Daily Beast, April 5, 2016
“A Different Set Of Rules”: Tax Dodger Running For Governor In Illinois
If you are not in the Chicago media market, you might not know much about Bruce Rauner, the Mitt Romney-like candidate for governor in Illinois, who is running ahead in the polls against Democratic Governor Pat Quinn.
If Rauner wins, Illinois will have a lot more in common with its neighbor, Wisconsin. Politically, Rauner resembles union-basher and school privatizer Scott Walker. Only Rauner is much, much richer.
In an interview with the Chicago Sun Times, Rauner talked about his career at GTCR, the Chicago-based private equity firm he founded.
“I made a ton of money, made a lot of money,” he told Sun Times reporter Natasha Korecki.
When Korecki asked Rauner, a billionaire who owns nine homes and made $53 million last year, if he is part of the 1 percent, he corrected her: “Oh, I’m probably .01 percent.”
Last Sunday, the Sun-Times broke the news that Rauner has made himself even richer by avoiding taxes and hiding a lot of his wealth in the Cayman Islands.
Rauner has not released his current tax returns, so the full value of his offshore accounts is not verifiable, but the Sun Times was able to document five offshore holdings by Rauner in the Caymans.
A detailed analysis by the Chicago Tribune shows that Rauner used many other complicated tax strategies “out of reach for those of more modest means” to cut his tax bill to less than half the rate paid by other earners in the top bracket:
Thanks to one business-tax strategy, Rauner paid no Social Security or Medicare taxes at all in 2010 or 2011, the Trib reports.
Meanwhile, Rauner is campaigning against “government union bosses,” and teachers unions in particular, and is targeting public employee pensions, with a plan to freeze the Illinois pension plan and convert it into a 401(k)-style retirement account, in order, he claims, to save the state billions.
He says he got into the race because he wants to “reform” public education, and is a big charter school advocate.
“I am adamantly, adamantly against raising the minimum wage,” Rauner said in a campaign event captured on video in January.
He has since backed off that position, and says he supports a minimum-wage increase.
Rauner’s campaign has also had to respond to stories about his phone call to Obama’s education secretary Arne Duncan, pulling strings to get his daughter into prestigious Walter Payton College Prep High School, after the school rejected her.
The Sun-Times reported in January that Rauner made a $250,000 contribution to Payton after his daughter was admitted.
Rauner’s story shows what’s behind all that union-bashing and belt-tightening for the poor and middle class–rightwing billionaires like Rauner push these policies, even as they play by an entirely different set of rules, dodging taxes, pulling strings, and get special treatment most people could never afford.
If he is elected, Rauner, like Walker, might support legislation to loosen the rules to help other wealthy investors and corporations avoid taxes by parking their assets abroad–leaving even less revenue for the public sector he and his rightwing billionaire friends love to bash.
By: Ruth Conniff, Editor-in-Chief of The Progressive Magazine; Published at The Center for Media and Democracy, August 6, 2014
“Corporate Artful Dodgers”: We’re Heading Toward A World In Which Only The Human People Pay Taxes
In recent decisions, the conservative majority on the Supreme Court has made clear its view that corporations are people, with all the attendant rights. They are entitled to free speech, which in their case means spending lots of money to bend the political process to their ends. They are entitled to religious beliefs, including those that mean denying benefits to their workers. Up next, the right to bear arms?
There is, however, one big difference between corporate persons and the likes of you and me: On current trends, we’re heading toward a world in which only the human people pay taxes.
We’re not quite there yet: The federal government still gets a tenth of its revenue from corporate profits taxation. But it used to get a lot more — a third of revenue came from profits taxes in the early 1950s, a quarter or more well into the 1960s. Part of the decline since then reflects a fall in the tax rate, but mainly it reflects ever-more-aggressive corporate tax avoidance — avoidance that politicians have done little to prevent.
Which brings us to the tax-avoidance strategy du jour: “inversion.” This refers to a legal maneuver in which a company declares that its U.S. operations are owned by its foreign subsidiary, not the other way around, and uses this role reversal to shift reported profits out of American jurisdiction to someplace with a lower tax rate.
The most important thing to understand about inversion is that it does not in any meaningful sense involve American business “moving overseas.” Consider the case of Walgreen, the giant drugstore chain that, according to multiple reports, is on the verge of making itself legally Swiss. If the plan goes through, nothing about the business will change; your local pharmacy won’t close and reopen in Zurich. It will be a purely paper transaction — but it will deprive the U.S. government of several billion dollars in revenue that you, the taxpayer, will have to make up one way or another.
Does this mean President Obama is wrong to describe companies engaging in inversion as “corporate deserters”? Not really — they’re shirking their civic duty, and it doesn’t matter whether they literally move abroad or not. But apologists for inversion, who tend to claim that high taxes are driving businesses out of America, are indeed talking nonsense. These businesses aren’t moving production or jobs overseas — and they’re still earning their profits right here in the U.S.A. All they’re doing is dodging taxes on those profits.
And Congress could crack down on this tax dodge — it’s already illegal for a company to claim that its legal domicile is someplace where it has little real business, and tightening the criteria for declaring a company non-American could block many of the inversions now taking place. So is there any reason not to stop this gratuitous loss of revenue? No.
Opponents of a crackdown on inversion typically argue that instead of closing loopholes we should reform the whole system by which we tax profits, and maybe stop taxing profits altogether. They also tend to argue that taxing corporate profits hurts investment and job creation. But these are very bad arguments against ending the practice of inversion.
First of all, there are some good reasons to tax profits. In general, U.S. taxes favor unearned income from capital over earned income from wages; the corporate tax helps redress this imbalance. We could, in principle, maintain taxes on unearned income if we offset cuts in corporate taxes with substantially higher tax rates on income from capital gains and dividends — but this would be an imperfect fix, and in any case, given the state of our politics, this just isn’t going to happen.
Furthermore, ending profits taxation would greatly increase the power of corporate executives. Is this really something we want to do?
As for reforming the system: Yes, that would be a good idea. But the case for eventual reform basically has nothing to do with the case for closing the inversion loophole right now. After all, there are big debates about the shape of reform, debates that would take years to resolve even if we didn’t have a Republican Party that reliably opposes anything the president proposes, even if it was something Republicans were for just a few years ago. Why let corporations avoid paying their fair share for years, while we wait for the logjam to break?
Finally, none of this has anything to do with investment and job creation. If and when Walgreen changes its “citizenship,” it will get to keep more of its profits — but it will have no incentive to invest those extra profits in its U.S. operations.
So this should be easy. By all means let’s have a debate about how and how much to tax profits. Meanwhile, however, let’s close this outrageous loophole.
By: Paul Krugman, Op-Ed Columnist, The New York Times, July 27, 2014
“Magically Becoming Irish”: If Corporations Are People, Shouldn’t They Have To Expatriate Like People?
It’s a common complaint among American expatriates: no matter how far away you go, you can’t escape Uncle Sam’s taxes.
But that’s not the case with American corporations that move their putative “headquarters” overseas, as President Obama noted the other day:
In his toughest comments yet on the subject, he accused big US corporations of trying to play “the system” by “magically becoming Irish” through so-called tax inversion deals.
“I don’t care if it’s legal, it’s wrong,” Mr Obama said. “It sticks you for the tab to make up for what they’re stashing offshore.”
There has been a raft of such deals in recent months which have seen big American companies become “Irish” for tax purposes through buying smaller firms registered here. The same trend is happening in the UK and Switzerland. Fears America is losing out on taxes have made the deals controversial.
It’s understandable if businesses have a different tax code that subjects them to different rules to a certain extent, though shady tax dodging is still an enormous moral and financial problem.
But the issue starts to become even more open and shut once we start claiming that corporations are people. If a corporation has “free speech rights” to buy elections, then it should be subject to American taxes even if it “moves” overseas just like actual American people are. If a corporation like Hobby Lobby has personal “religious rights” not to cover its employees’ contraception, then it’s enough of a person to pay expatriate taxes if it decides to move to Ireland.
It has to be one or the other. You can’t become a person when it’s convenient to your bottom line, but not when it isn’t.
By: David Atkins, Washington Monthly Political Animals, July 26, 2014
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