- Trump hits populist notes in inaugural address
- Trump promised to resign from his companies — but there's no record he's done so
- Live weather radar
- Trump's inaugural: '2 simple rules: Buy American & hire American'
- 1-3 ft. blizzard snows, high winds forecast for S. Az mountains Friday
- Pima County schedules 5 public meetings on Monsanto 3
- Letter to business leaders: Step in on PCC's behalf3
- Grijalva joins dozens of other Democrats boycotting Trump inauguration2
- Backpage.com executives plead Fifth in hearing on sex trafficking2
- Mexican officials destroy guns connected to 'Operation Fast and Furious' 1
Posted Sep 3, 2011, 7:35 pm
Would it surprise you to know that $7.5 billion of the taxes you paid were redistributed back to some of America’s largest corporations as “tax refunds?” Would you believe that this same group of America’s most profitable companies paid nothing in taxes? How could that be? To understand, you’ll have to jump into the numbers. It’s a wonky trip but entirely worth the effort. I promise.
As Republicans tell it, taxes are way too high, especially taxes on America’s corporations. “We have the highest corporate tax rates in the world,” they bellow. But what they don’t say that we have some of the lowest corporate tax collections in the world.
The current corporate tax rate is roughly 35 percent. But deductions and loopholes Slap-Chop that tax bill until it’s no longer recognizable. Afterward, the U.S. corporate tax collection rate is about 10 percent. None of our European competitors has a lower rate of corporate tax collection.
In truth, we have a revenue problem. And our under-taxing problem begins with some of America’s most well-known corporations—names like Coca Cola, Verizon, Dow, Prudential, Ford, Boeing, General Electric, e-Bay and others. They are robbing your children—directly robbing their future—through both legal and questionable tax loopholes like off-shoring profits and accelerated depreciation.
Off-shoring is any of a number of strategies for hiding profits overseas. Accelerated depreciation is an accounting trick aimed at making tax-deductible expenses look higher than they really are. These are only two of a bagful of mostly legal strategies that companies use to avoid paying taxes, even when they run up record profits. Even when they do it by betting against economic recovery.
Now comes a report by the Institute for Policy Studies. Things have become so screwed up that among the 100 highest-paid U.S. CEOs, one in four took home more personal pay than their company paid in U.S. taxes. Who are they? To the list above add International Paper, Motorola, Black and Decker, Prudential, Honeywell, Capital One, Qwest, and others. These companies have a big role in our consumer life. You’d find it very hard to boycott the entire list. Yet they’re some of our very worst corporate citizens.
In 2010 these companies made $47.5 billion in net profits. They paid about $417 million in CEO Salaries. And together, they paid minus $7,606 million in taxes. You read that correctly, on $47.5 billion in profits they collectively received a tax refund of over $7.5 billion. They made a profit on taxes. In fact, on top of huge profits, they increased their bottom lines another 6.3 percent straight out of your pocket.
Is your head spinning yet? To put it in perspective, just these twenty five companies alone increased the federal deficit by over $24 billion. At those rates, they will increase the Federal debt by almost half a trillion dollars by the time your 1-year-old turns 20. Mad yet?
How could they have managed this? Well, during the same year—last year—they also spent $21.5 million in campaign contributions, and another $129 million on lobbyists. It turns out that’s a pretty good investment. Put simply, $150 million in political spending earned $24 billion in extra profits. That’s the highest profit margin of any product any of them offered. Buying politicians is more profitable than making things, selling things, or creating things. Sheesh.
After a dalliance and retreat during the Reagan era, the deliberate under-taxing of corporations began in earnest in 2000 (see the chart from the IPS report below.) So using todays numbers (an admittedly rough calculation) this small group of 25 corporations have—by themselves—contributed over $256 billion to the national debt. They’ve underpaid their taxes by well over one quarter of a trillion dollars.
But this is just the tip of the iceberg. There are another 27.5 million corporations in the United States. Two thousand of them are really big. If the big 2,000 used similar tricks, they’ve increased the debt by over half a trillion dollars since 2000. Obviously, the entire federal debt isn’t from corporate under-taxing, but half a trillion certainly ain’t chump-change.
Fixing all of this won’t be easy. There is little chance that Congress—especially this Congress—will honestly eliminate these hundreds of loopholes. And nothing is likely to happen in an election year.
But comprehensive tax reform is required. For starters, we need an alternative minimum tax for corporations—a percentage of profits that they will contribute to the nation despite whatever loopholes they’ve been able to buy for themselves. Fifteen percent of pre-tax profits would be a good start. Barring that, maybe we ought to establish an alternative minimum tax based on a multiplier of CEO salary (including benefits, deferred compensation and stock options.) Four or five times that amount sounds about right. Actually, it sounds like the very least they can do.
Jimmy Zuma splits his time between Washington, D.C. and Tucson. He writes the online opinion journal, Smart v. Stupid. He spent 5 years in Tucson in the early ‘80s, when life was a little slower, swamp coolers were a little more plentiful, Tucson’s legendary music scene was in full bloom, and the prevailing work ethic was “don’t - unless you have to.”