“It is time to admit that we are… close to the Chinese communist model of state-sponsored capitalism. It is the corporations that need big government to protect their interests.” ~ Robert Scheer
Lindsey Graham, a senator from South Carolina, recently shared his all-too-common view about the concept of taxation in 21st Century America:
“It’s really American to avoid paying taxes, legally. As long as it was legal, I’m OK with it. I don’t blame anybody for using the tax code to their advantage. I blame us for having it so complicated and confused.
“It’s a game we play,” Graham added. “Every American tries to find the way to get the most deductions they can. I see nothing wrong with playing the game because we set it up to be a game. People play the game to their advantage. Sometimes they lose when they play the game. I’ve got no problem with people playing the game, as long as they don’t cheat.”
According to the New York Times, Willard Mitt Romney “…appears to have the most elaborate history of tax avoidance – offshore tax havens, disputed sheltering mechanisms, complex trusts – of any major presidential candidate in history.”
Romney doesn’t want to talk his tax history any more than he wants to talk about how many jobs he destroyed while running Bain Capital. He’s not keen on discussing his record as governor of Massachusetts, either. He just says that he didn’t break the law, which is probably true, but he shouldn’t get extra credit just because he didn’t cheat.
Under a fair tax structure, a business that actually makes a product or provides a service should be taxed at the same rate as its employees. If your business involves making profits for yourself and others by speculating in the value of products or commodities – or by simply moving money from one place to another – you should expect to pay a higher tax on that income.
After all, as Sen. Graham confirmed, speculation and moneychanging is basically the same behavior as online gambling, where nothing is produced except profit for a few. For example, the price of gasoline is driven upwards by the buying and selling of oil futures, which creates a huge negative impact on society. A higher tax could offset that impact and might discourage the wildest forms of speculation.
And now that the U.S. Supreme Court has decided that corporations are essentially artificial persons with Constitutional rights, it only seems fair to expect them to be taxed in equality with real persons – like me.
I didn’t make much money last year, so writing a check to the IRS this year wasn’t too painful. That same evening, I opened a nice bottle of wine and sat down to conduct another tax-time ritual – checking to see which major corporations pay less income tax than I do.
The answer was the same one I’ve been getting for more than a decade – many global corporations that do business in America pay a lower tax rate than I do, while about one-fourth of the largest pay no federal income tax at all.
It’s hard to spot a true winner in a lowest-taxes-paid competition. The tax code is full of holes big enough for lawyers to run through, not all income is taxable, and taxes collected in one year often turn into refunds or rebates the following year. Corporations of all sizes pay all kinds of taxes at the federal, state and local levels, but global corporations seldom truly pay taxes on the profits they make in America.
So I might be wrong, but I think Exxon Mobil earns the 2009 trophy – $19 billion in profits; $0 federal income taxes paid. That’s tough to beat, especially when you add the $156 million tax rebate Exxon Mobil received that same year.
Second place might go to Bank of America for a unique trifecta: cashing a $1.9 billion tax refund while making $4.4 billion in profits and taking a bailout “loan” of nearly $1 trillion from the Federal Treasury, all in the same year.
Citigroup certainly belongs in the top three for making more than $4 billion in profits while paying no federal income taxes at all. It helps that they have 427 different foreign tax havens set up to transfer most of their profits out of the jurisdiction of the IRS.
Goldman Sachs paid 1.1 percent of its 2008 income in taxes. Its listed profits of $2.3 billion don’t include the $800 billion bailout the corporation was given. Since it was taxpayer money to begin with, that income won’t be taxed at any rate.
According to the Wall Street Journal, tax breaks during the past decade allowed corporations such as General Electric to pay no taxes at all for the past two years. From 2005 through 2010, GE made $26 billion in profits in the United States – that’s profit, not income. Despite those profits, GE received a $4.1 billion tax refund from the IRS.
As the New York Times stated earlier this year, “GE is so good at avoiding taxes that some people consider its tax department to be the best in the world, even better than any law firm’s.”
Tax giveaways are supposed to create jobs, but the Journal states that instead, multinational companies “…cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”
Fifty-four percent of the GE workforce is now foreign. GE was also bailed out by American taxpayers, then promptly cut its foreign workforce by 1,000 while it cut 28,000 jobs here at home.
And then there’s Gannett Corporation, owner of 23 television stations and 82 newspapers, including USA Today. In January of 2011, Gannett employees were told there would be no raises for the third year in a row, and they would have to take a week off without pay. Two months later, $3 million in bonuses were given to the top two managers, along with about $17 million in stock options and other compensation.
So 32,000 worker furloughs saved about $17 million for Gannett, but all of it was handed to the two people who thought up the plan. Those two might pay taxes on that bonus money, but I’m guessing they have good accountants and will pay less than they should.
Maybe we need CEOs of corporations like those running our government. At least they won’t make the same decisions our current federal money managers and foreign policy folks do, like borrowing money from Saudi Arabia at three percent and loaning it to Bahrain at one-quarter of one percent.
There is, however, a down side to having modern American business “leaders” in political office. Ethical behavior is not a primary concern for many corporate management teams, and many CEOs are ethically challenged from a lack of practice.
The top 10 corporations doing business with the Department of Defense in 2009 received $144 billion in contracts. Going back to 1995, nine of those corporations have committed a total of 204 instances of contract fraud and environmental, ethics or labor violations.
The exception is Oshkosh Truck Co., which has committed no violations during the past 15 years. Oshkosh Truck is a manufacturer of specialty trucks and truck bodies for the U.S. military, fire and emergency departments, and concrete and garbage hauling companies. It has annual sales of nearly $3 billion and has products marketed under 10 different brand names.
Oshkosh Truck has followed the rules, it seems, and done quite well. It’s too bad their behavior is so rare in Corporate America.
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