It's time to stop US corporate tax schemes

Ironically, the Tea Party looked like they were going to be the real deal – using leftist civil disobedience strategies to try and forge a more “true conservative” populace America. But sadly, instead of recreating Norman Rockwell, they ended up creating a 21st century version of George Lincoln Rockwell

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By Rocky Boschert
Financial Editor

Do you know you pay more money in taxes than many huge well-known U.S. corporations? In fact, the 10 bucks in your pocket is more than many of the largest corporations paid in U.S. taxes in 2009, including Bank of America, Verizon, General Electric, Boeing, and Citigroup. Other companies like Federal Express and ExxonMobil pay effective tax rates of less than 10 percent (even though the “official” corporate tax rate is 35%).

To insult middle class workers even more, these same companies pay their CEOs and top managers $ millions a year in salary and perks – and spend millions lobbying a grateful United States Congress for preferential tax and socially irresponsible regulatory leniency. The Republican Party politicians seem to be the biggest campaign and corporate lobby money whores, but the Democrats are certainly not walking away from the pig’s influential feeding trough.

In what should be a massive public outcry, corporate tax dodgers are taking money directly out of the pockets of middle class workers – which severely hurts the American economy and its citizens. Corporations use foreign tax havens and loopholes to siphon money and jobs offshore - while not paying their fair share of domestic taxes for US infrastructure, public services and the educational investments they directly exploit to achieve their huge profits.

The truth is we would NOT be broke at the federal, state, or county level – IF the politicians would actually represent the people who voted for them. It is a rage-inducing fact that lobby money corrupted politicians are actually helping the rich and the Wall Street corporate elite to drain state and federal budgets (hence, county and city budgets) by giving US multinational corporations huge tax breaks and allowing them to dodge taxes through overseas tax havens.

Here is how the scam works. The average effective U.S. corporate tax rate – the amount of tax corporations actually pay – ends up being far lower than the 35 percent the whining free markets ideologues tout. Thanks to the widespread use by many companies of hundreds of billions of dollars in tax breaks, and because the earnings of many firms are reported on individual, rather than corporate returns, the U.S. raises very little tax revenue from many huge US corporations.

Most relevant, many American multinationals shift most income to low-tax countries. And it turns out that more than half of taxable business income in the U.S. is earned by tax advantaged pass-through companies such as partnerships and S corporations that are set up by the multinationals as lower rate tax havens. These “shell” pass-through business entities then pay lower individual tax rates on this income – but owe no corporate tax at all.

Additionally, corporate tax dodgers hurt smaller responsible U.S. businesses that have to compete unfairly against legal corporate tax “cheats.” A domestic U.S. business that pays its share of taxes honestly because it can’t afford a huge cadre of tax attorneys and lobbyists is at a distinct competitive disadvantage with big corporations that game the system and shift profits to foreign tax havens.

Yes, states are facing the worst budget gaps in living memory – with estimates of combined budget gaps in all U.S. states of over $100 billion. But if we just closed overseas tax havens – even while continuing to allow favorable domestic tax write-offs – it would generate an estimated $100 billion-plus of US tax revenue. And if we made the corporate tax dodgers pay their fair share of taxes we wouldn’t have to make anywhere near the cuts to state and county budgets that particularly punish senior citizens and victimize children.

The combined “legal” tax evasion of both wealthy individuals and multinational corporations deny the US Treasury between $125 billion and $150 billion a year. Hence, responsible US business owners and struggling individual taxpayers have to pick up the slack to pay for the infrastructure and services all of us are privileged to use – including many US transnationals domiciled in the US that make $ billions a year in profits.

It's telling that in the 1950s, a third of federal revenue came from corporate income taxes. By 2009, it has declined to 10 percent. Every year increasingly profitable US multinational corporations are paying fewer taxes – and middle class individuals and smaller businesses are paying more and more taxes.

Examples of Corporate Tax Dodgers

BANK OF AMERICA didn’t pay a single penny in federal income taxes in 2009. They argue this is because they lost money. Yet Bank of America gave $5.184 million to political campaigns and paid CEO Thomas Montag $29 million in 2009.

BOEING CORPORATION: Over the three year period from 2008 to 2010 had total pre-tax profits of $9.7 billion but did not pay a dime of its profits in federal taxes. Boeing Corporation has 38 subsidiaries in foreign tax haven jurisdictions.

VERIZON: Take out your Verizon phone bill. See the part of the bill where you paid a few dollars in taxes? Guess what? You paid more taxes on your monthly phone bill than Verizon paid in 2009. They reported $24.2 billion in pre-tax U.S. income, and yet “somehow” claimed a federal corporate refund of $1.3 billion.

GENERAL ELECTRIC: Between 2006 and 2010, General Electric told their shareholders they had $26.3 billion in profits, but paid no U.S. taxes.

EXXON-MOBIL: The Texas-based oil giant uses offshore subsidiaries and other loopholes, paying no US taxes whatsoever in 2009. Yet somehow ExxonMobil did come up with $68 million to lobby Congress between 2008 and 2010.

WELLS FARGO: Wells Fargo escaped paying any federal taxes in 2009 by writing all of its losses off after its acquisition of Wachovia. Yet the CEO saw a salary of $5.6 million paid in cash and stock awards of more than $13 million.

So the next time you hear some politician – or some think tank or budget group – say we have a spending problem and not a revenue problem, they are simply exacerbating the problem. The bottom line is this: If you want to solve our enormous national, state, and county budget crises, institute a fair tax on the rich and their corporate cousins (the richest 10% of Americans own 70% of all outstanding US stocks and bonds) – and get rid of our wasteful and outdated military empire around the world.

It’s time we have our own really effective revolution here in America – where we force the monopolistic two-party economic system to relinquish their breast-feeding corporate welfare state. Ironically, the Tea Party looked like they were going to be the real deal – using leftist civil disobedience strategies to try and forge a more “true conservative” populace America. But sadly, instead of recreating Norman Rockwell, they ended up creating a 21st century version of George Lincoln Rockwell.