Nel's New Day

April 16, 2013

Corporations’ Excessive Tax Breaks

While you faithfully paid your taxes by yesterday, 26 major American corporations that made $205 billion in pretax profits paid nothing in federal corporate income tax between 2008 and 2011. In 2011 corporations paid a 12.1 percent effective tax rate, the lowest in four decades. Corporations want to have the same rights as “persons,” but real persons can’t have the tax advantages of corporations.

Corporations get tax breaks when they…

Break the law: BP’s toxic mess in the Gulf of Mexico or Wells Fargo’s abusive lending practices that cost tens of thousands American families their homes were fully deductible.

Fall on hard times: When corporations lose money, they can use these losses not only to fully offset taxes for that year but also carry those losses into the future for up to seven years.

Face no income threshold: After Superstorm Sandy devastated millions of American families, they picked up the full cost of damage equal to 10 percent of their annual reported income before any tax deduction. Corporations can deduct every cent of their losses. Firms including Verizon and other utilities serving the New York and New Jersey areas saved millions of dollars on their 2012 taxes by deducting the full costs of Sandy damage.

Take advantage of deferral: The five million U.S. citizens working abroad pay U.S. taxes on foreign earnings; U.S. corporations can indefinitely delay paying U.S. taxes on income earned abroad.

Go public: Facebook made a profit of more than $1 billion last year but paid no corporate tax and got a refund of $451 million after its initial public offering. Using the tax deductibility of executive stock options, Facebook will avoid paying $2 billion in future year.

Hire a lobbyist: Big business hires 17,500 registered tax lobbyists (5400 of them past Congressional lawmakers) to keep their taxes low while the rest of the people have almost no one arguing their interests.

Keep a cow: Florida, wealthy developers, lawmakers, and some corporations put cows on their land for a short time and then qualify for agriculture tax breaks. From New Jersey to Colorado, people use everything from sheep to beehives to take advantage of this break.

Choose a nation with low or no taxes: U.S corporations have trillions stashed offshore in countries where they have no employees or offices by registered their patents in a tax haven nation that imposes no taxes on corporate income. Until recently, people just muttered about how outrageous these are without realizing their unbelievably huge holdings. Until now.

A computer leak, complete with two million names and email addresses, shows that the rich shelter up to $32 trillion in cash in the British Virgin Islands. Equivalent to the economies of both the U.S. and Japan, this is half the world’s GDP. Just $3.5 trillion could eliminate the world’s poverty in 20 years. Below is a visual with $100 bills double-stacked as high as a person to show just one trillion dollars. The tiny figure in the lower left-hand corner represents a person. Then imagine $32 of these.

trillion

The leaked records detail offshore holdings of people and companies in more than 170 countries and territories over the past 30 years. Among nearly 4,000 American names is James R. Mellon, a member of the dynasty starting such companies as Gulf Oil and Mellon Bank. Like many other owners of offshore entities, he used third parties’ names as directors and shareholders of his companies that transferred tens of millions of dollars among his bank accounts.

The United States is losing at least $150 billion a year in taxes because of these offshore havens, $90 billion from corporations. A study from the Massachusetts Public Interest Research Group found that offshore tax dodging annually costs the Commonwealth $1.6 billion. For example, Pfizer pharmaceutical company, with $73 billion stashed in offshore havens, has not reported any taxable income in the last five years in this country.

Documents identified 30 American clients accused in lawsuits or criminal cases of fraud, money laundering, or other serious financial misconduct. They include ex-Wall Street titans Paul Bilzerian, a corporate raider who was convicted of tax fraud and securities violations in 1989, and Raj Rajaratnam, a billionaire hedge fund manager who was sent to prison in 2011 in one of the biggest insider trading scandals in U.S. history.

In the 1990s, the Organization for Economic Cooperation and Development tried to get tougher on money laundering, but the effort ebbed in the 2000s. Offshore remains a “zone of impunity” for anyone determined to commit financial crimes, said Jack Blum, a former U.S. Senate investigator who is now a lawyer specializing in money laundering and tax fraud cases.

Another legal corporate tax scam has been highlighted by Pulitzer Prize-winning journalist David Cay Johnston, who wrote that 21 states allow 2,700 specially-selected corporations such as GE and Procter & Gamble to keep leftover taxes that are withheld from workers. The state marks the workers’ taxes as paid, and the workers don’t get back any extra taxes.

Workers don’t know that they are losing billions of dollars to corporations. They think that their taxes are going for public projects.

Johnston wrote about the report  prepared by Good Jobs First, a nonprofit taxpayer watchdog organization:

“Why do state governments do this? Public records show that large companies often pay little or no state income tax in states where they have large operations. Some companies get discounts on property, sales and other taxes. So how to provide even more subsidies without writing a check? Simple. Let corporations keep the state income taxes deducted from their workers’ paychecks for up to 25 years.”

Johnston described some deals that states cut with corporations to divert $5.5 billion from public needs to corporate gain, highlighting Illinois, New Jersey, Ohio, and Kentucky. His latest book, The Fine Print, describes laws that allow the largest corporations to raise prices and reduce services. His two earlier books are Perfectly Legal, about taxes, and Free Lunch, about all the subsidies given to rich people. According to Johnston, 2,600 corporations out of the 6 million corporations in this country own 80 percent of the nation’s business assets.

Keep in mind that conservatives are wrong when they tell you that corporations need these cuts to keep creating jobs. They have consistently either cut jobs or moved them overseas in the past few decades while they benefited from keeping the profits, mostly tax free. Almost two years ago, a Federal Reserve report showed that U.S. corporations are holding more cash on their balance sheets than at any time in nearly a half century because they aren’t investing or hiring workers.

We need these loopholes closed. Tell your Congress representatives and senators!

3 Comments »

  1. Reblogged this on Joanne Tosti-Vasey Blogging for Equality and commented:
    This is a great report on how corporations avoid paying their fair share of taxes!
    If we can also overturn Citizen’s United, then I believe part of the issues raised here could be dealt with when corporations are no longer treated as “people” and can no longer outspend real live people in electing and talking to our representatives.
    We’ll still have to deal with their paid lobbyists, but at least we can reduce their influence to some extent on who is elected in our own back yards.

    Like

    Comment by civilrightsactivist — April 17, 2013 @ 6:21 AM | Reply

  2. Thanks for this great report! I’m going to reblog it on my sight as it gives great information. If we can also overturn Citizen’s United, then I believe part of the issues you raise her could be dealt with when corporations no longer outspend the real people in electing and talking to our representatives. We’ll still have to deal with their paid lobbyists, but at least we can reduce their influence to some extent on who is elected in our own back yards.

    Like

    Comment by civilrightsactivist — April 17, 2013 @ 6:18 AM | Reply

  3. Hey, let’s make up for this corporate thievery by cutting Social Security! What a great idea!

    Like

    Comment by Lee Lynch — April 16, 2013 @ 11:50 PM | Reply


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