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It’s tax time ... or not

April 8, 2013
By George J. Bryjak

As you write that check to Uncle Sam for last year's federal tax bill, or wince at the minuscule refund heading your way, consider the following:

-The Huffington Post reports that in 2011, the 10 most profitable U.S. corporations (Exxon Mobil, Apple, Microsoft and General Electric, among others) paid an average federal tax of 9 percent. On earnings of $73.3 billion, Exxon Mobil paid $1.46 billion (2 percent) in federal taxes. As corporate profits have increased to an all-time high, corporate tax rates have declined to a 40-year low.

-Citizens for Tax Justice notes that despite U.S. profits of $1.1 billion in 2012, "Facebook did not pay even a dime in federal and state income taxes." Rather, as a consequence of a single tax break, "the tax deductibility of executive stock options," the giant social networking company will get tax refunds totaling $429 million.

-Apple paid $6.2 billion in federal taxes in 2012. However, the giant tech company could have (and should have) paid much more. Like so many other American corporations, Apple shifts a significant amount of its profits to overseas tax havens. In a New York Times article, "How Apple Sidestepped Billions in Taxes," reporters Charles Duhigg and David Kocieniewski state that "Apple was a pioneer of an accounting technique known as the 'Double Irish With a Dutch Sandwich,' which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean." Variations of this tax strategy are currently being used by "hundreds of other corporations."

-According to CTJ, 92 U.S.-based Fortune 500 companies "have systematically accumulated staggering amounts of profits offshore." While much, if not most, of these profits were earned in the U.S., they have been shifted to foreign tax havens to avoid corporate taxes in this country.

-Boston Globe reporter Christopher Rowland states the Whirlpool Corporation invested $1.8 million in payments for Washington lobbyists over a two-year period and secured energy tax credits (for making high-efficiency appliances) worth an estimated $120 million for 2012 and 2013. Whirlpool officials said these tax breaks would help retain jobs. However, the company closed refrigerator plants in Indiana and Arkansas, laying off 800 hourly workers in the Arkansas plant. The jobs were outsourced to Mexico.

-According to the Congressional Joint Committee on Taxation, corporate profits earned in the U.S. and sent overseas for tax protection "will cost the federal government about $600 billion over the upcoming decade." Illinois officials estimate their state loses $4.8 billion annually to corporate tax loopholes that send profits overseas. In a recent editorial piece, The New York Times stated that American multinational corporations, insurance companies and "S" corporations have become "tax avoidance machines."

-A 2009 study in the American Journal of Political Science found that for the typical firm lobbying Congress, each dollar spent on lobbying was associated with $6 to $10 in tax benefits. According to the nonpartisan Center for Responsive Politics, the number of companies reporting lobbying activity on tax issues jumped from 1,200 in 1998 to 1,863 in 2010, an increase of 56 percent. Think Progress reports that between 2008 and 2010, 30 major U.S. corporations spent more money lobbying Congress than they paid in taxes.

-In a recent Wall Street Journal article, financial writer Al Lewis explains that the more a corporation pays its chief executive officer, the bigger the tax break it receives. That is, the tax code provides companies an unlimited deduction they can claim for CEO "performance pay." Lewis argues that CEOs have rigged the tax system to their benefit. If you don't think the tax code is stacked in their favor, Lewis states, ask yourself this: "Why can't you put more money into your 401(k)? There are no limits as to what a CEO can stuff into a retirement account. But you have strict limits. Contributions cap out at $22,000 a year for workers older than 50."

-According to the Huffington Post, Walmart plans to begin denying health insurance to recently hired employees who work fewer than 30 hours a week. Because they earn so little, many of these workers will be eligible for Medicaid coverage. Ken Jacobs, chairman of the Labor Research Center at the University of California, Berkeley, stated that "Walmart is effectively shifting the costs of paying for its employees (health care) onto the federal government." The world's largest retailer, Walmart reported profits of $15.7 billion in 2011. Labor economists at the Center on Wage and Employment Dynamics state that members of the Walton family (heirs to the Walmart fortune) have as much wealth as the bottom 41.5 percent of American families combined.

-Richard Wolff, professor of economics emeritus at the University of Massachusetts, states that in 1945, for every dollar the federal government collected from individuals, it received $1.50 from corporations. By 2011, for every dollar of revenue Washington gets from individual taxpayers, it collects only 25 cents from corporations. Wolff notes that "in literally hundreds if not thousands of ways ... corporations and rich individuals ... reduce their taxes and shift the burden to the rest of us. ... That's what class warfare means." Economist James Galbraith believes the U.S. has become a "predator state" wherein "large corporate interests rig the rules to protect their subsidies, tax dodges, and monopolies."

With the country in an ongoing "fiscal crisis," politicians continue to subsidize "corporate wealthfare" while slashing social programs that primarily benefit the lower and middle classes. Republicans, and some Democrats, consider cutting Medicaid, Medicare and Social Security benefits as necessary monetary policy, yet refuse to compel corporations to pay their fair share of the nation's tax burden when these companies are reporting record profits and sitting on more than $5 trillion in cash reserves. According to "Open Secrets: Center for Responsive Politics," in the 2012 election all candidates (including candidates in the primary races) running for the U.S. House of Representatives, the U.S. Senate, and the office of president, raised a total of $3.17 billion from all sources. (Editor's note: The previous sentence has been corrected.) Whose interests do you think they're looking out for?

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George J. Bryjak lives in Bloomingdale, retired after 24 years of teaching sociology at the University of San Diego.

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Sources

"Apple, Microsoft and Eight Other Corporations Each Increased Their Offshore Profit by $5 Billion or More in 2012" (2013), Citizens for Tax Justice, March 11th, HYPERLINK ctj.orgctj.org

Eichler, A. (2012) "10 Most Profitable U.S. Corporations Paid Average Tax Rate of Just 9 Percent Last Year" Huffington Post, August 6, HYPERLINK www.huffingtonpost.comwww.huffingtonpost.com

Duhigg, C. and D. Kocieniewski (2012) "How Apple Sidestepped Billions in Taxes" The New York Times, April 28th, HYPERLINK www.nytimes.cowww.nytimes.com

"Facebook's Multi-Billion Dollar Tax Break" (2013), Citizens for Tax Justice, February 14, HYPERLINK ctj.orgctj.org

Fiegerman, S. (2013) "Apple Paid $6.2 Billion in Corporate Taxes in 2012" Mashable, January 5, HYPERLINK www.mashable.comwww.mashable.com

Garofalo, P. (2012) "Walmart Heirs Have As Much Wealth AS Bottom 40 Percent of Americans Combined" Think Progress, July 17, HYPERLINK thinkprogress.comthinkprogress.com

Gibson, C. (2013) "Close Corporate Tax Loopholes, Not Public Schools" Reader Supported News, March 28, HYPERLINK readersupportednews.orgreadersupportednews.org

Hall, R. and A. Deardorf, (2006) "Lobbying the Legislative Subsidy" American Journal of Political Science, Number 1, February pp.69-84

Jilani, Z. (2011) "Between 2008 and 2010, 30 Big Corporations Spend More Lobbying Congress Than They Paid in Taxes" Think Progress, December 7, thinkprogress.org

"Lobbying Database" (accessed, April 1, 2013) OpenSecrets.org Center for Responsible Politics, HYPERLINK www.opensecrets.corwww.opensecrets.org

Lewis, A. (2012) "CEOs Tax the People" Wall Street Journal, August 18th, HYPERLINK online.wsj.comonline.wsj.com

Rowland, C. (2013) "Tax lobbyists help businesses reap windfalls" The Boston Globe, March 17th, HYPERLINK www.bostonglobe.comwww.bostonglobe.com

Straus, S. (2011) "Actually, Corporations That Lobby Congress and Make Campaign Contributions Get Special Benefits" The Huffington Post, December 12,

HYPERLINK www.huffingtonpost.comwww.huffingtonpost.com

"The Real Problem" (2013) New York Times, March 16th, HYPERLINK www.nytimes.comwww.nytimes.com

Vanden Heuvel, K. (2013) "The corporate 'predator state'" The Washington Post, March 26, HYPERLINK www.washingtonpost.comwww.washingtonpost.com

"Walmart's New Health Care Policy Shifts Burden to Medicaid, Obamacare" (2012) Huffington Post, December 1, HYPERLINK www.huffingtonpost.comwww.huffingtonpost.com

Weissmann, J. (2012) "The $5 Trillion Stash: U.S. Corporations' Money Hoard is Bigger Than the GDP of Germany" The Atlantic Monthly, July 18, HYPERLINK www.theatlantic.comwww.theatlantic.com

Wolff, R. Occupy the Economy: Challenging Capitalism (2102) Open Media Series: New York University

 
 

 

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