Corporate Tax Cheaters, Part I
April 15 has come and gone and like most Americans I struggled to fill out all the elaborate forms and all the confusing formulas the IRS has for figuring out how much to deduct or how much to pay (e.g., multiply this figure by .02 or that figure by .065 or whatever). After all of that I ended up writing a check to the IRS.
Which raised some obvious questions, such as: Where does this money eventually end up and why do so many corporations and the super-rich pay little or no taxes at all?
A Google search reveals a great deal as do various books and research articles. Where does the money go? Not to the poor that's for sure. Few tax dollars end up filtering downward. Most of it heads upward, to big corporations in the form of "corporate welfare" (estimates range from $92 billion to $125 billion per year), not to mention the estimated $1 trillion in the form of recent bailouts of American corporations. Then there is the astronomical amount going to the Pentagon, which in turn hands out billions to private contractors in Afghanistan, Iraq and elsewhere. One recent analysis found that the actual cost of "national security" tops $1.2 trillion.
As for those who pay little or no taxes at all, I don't have enough space to cover this subject (it would take a book-length manuscript at least). Here are some recent examples:
- One expert recently stated that "we're losing out on upwards of $100 billion every year in lost revenue because of corporate tax dodging and overseas tax havens." He also noted that Bank of America has 115 overseas subsidiaries where they can hide their profits. Further, he noted that "Verizon hasn't paid taxes on $2.4 billion in income for the past few years," mostly because of the connection with a foreign company called Vodafone.
- A report in Forbes Magazine noted that in 2009 "General Electric ( GE - news - people ) generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion." The writer of this report also noted that "companies are keeping some $28 billion a year out of the clutches of the U.S. Treasury by engaging in so-called transfer pricing arrangements, where, say, Microsoft's ( MSFT - news - people ) overseas subsidiaries license software to its U.S. parent company in return for handsome royalties (that get taxed at those lower overseas rates)."
- Bank of America paid no taxes on $4.4 billion in income.
- A Huffington Post report noted that "A Senate report estimated in 2008 that the United States loses up to $100 billion a year in tax revenue to offshore tax havens." The "Public Interest Research Group" has presented "a state-by-state breakdown of the cost to taxpayers of tax revenue lost to 'shell companies and sham headquarters' in places like Switzerland and the Cayman Islands." Further, a study by the Government Accountability Office(GAO) "found over 80 percent of the hundred biggest U.S. companies took advantage of tax havens." For example, they found "one five-story building in the Cayman Islands, known as the "Ugland House," contained 18,857 registered businesses, very few of which had anything but a P.O. box there. Bailout beneficiaries Morgan Stanley, Citigroup, and Bank of America boast over 300 subsidiaries in the Cayman Islands."
The rich get richer and the rest of us have to "share the burden."
Posted in Blog, Political Landscape
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