It’s getting near that time again, April 15th (actually 18th because of the weekend), when you have to file your 2010 federal income tax returns. For the self-employed, it’s a pretty detailed and burdensome effort, and even homeowners with complex deductions have it rough. Looking at the raw numbers can make you blanch, and suddenly all that Tea Party rhetoric is beginning to look really attractive… except making more dollars in an austerity-driven economy with lots of unresolved employment and home-value issues still lingering might not appeal to the majority of taxpayers anyway. Still, they have a point. And perhaps it would be terrific if we were allowed to employ some of the methods enjoyed by America’s biggest corporations, particularly those with large international operations, to avoid taxes… quite legally. Picture a universe where there is a point of no returns!
The techniques for avoiding taxes are legion. For example, if you are selling a high-margin product in the U.S. that was manufactured overseas, all you have to do is to insert an off-shore entity based in a tax haven with differing ownership between the entity overseas making the product and your U.S. affiliate. If you structure it right, the big mark-up, where the profits in that product are really made, takes place off-shore… and the tax haven structure sells that product to the U.S. entity at such a high price that only a small profit shows up on the books of the U.S. company.
Other methods are common, and large U.S. corporations employ legions of the best and the brightest, often former top Dept. of Treasury officials, folks who once worked as tax-code-writing experts for Congress and former partners at top tax law and accounting firms. General Electric’s John Samuels, whose department has been called the “world’s best tax law firm,” is just such an ex-Treasury official with just such a team of excellent experts. They not only maximize the tax values for their shareholders in using the tax laws effectively to find loopholes, they also routinely talk to those on Capitol Hill who actually write the laws.
The March 24th New York Times embellishes this standard major corporate practice: “While General Electric is one of the most skilled at reducing its tax burden, many other companies have become better at this as well. Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.
“In a regulatory filing just a week before the Japanese disaster put a spotlight on the company’s nuclear reactor business, G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals. Even those figures are overstated, because they include taxes that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back…Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.”
In this time of major deficits, these practices are no longer tolerable. Individual taxpayers cannot continue to be the disproportionate carriers of the burden that support the financial system that allows these multi-nationals to prosper. You can’t fault the companies; they’re in this world to maximize profits, and they are doing a damned good job of it. But you sure can fault Congress for constructing a regulatory and tax scheme that rewards the special interest elite and shifts that burden to individual taxpayers… all tax code changes made since the 1950s for the sole benefit of companies. And I do agree with that Tea/Tax Party faction that seeks an overhaul of our entire tax code; I just think it’s about restoring the balance between individual and major corporate taxpayer s… not reducing business taxes further. Telling the world that U.S. companies pay the highest taxes in the world – simply based on looking at the corporate tax rate and not what is actually paid – simply taxes my credibility.
I’m Peter Dekom, and fairness and balance appear to be hard to come by these days.
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