Corporations Demand Budget Cuts, Owe Government $660 Billion

How MANY times have we heard corporate-funded conservatives and “centrists” whine about “deficits” and demand cuts in the things government does to make people’s lives better? How many times?

“We’re broke.” “Taxpayers can’t afford these … (pensions, health programs, infrastructure repair, food stamps, high-speed rail systems, scientific studies, you name it).” Over and over we are subjected to demands that our own government cut back on the things it does — teachers and schools, roads, food programs, dams, bridges, scientific research, health care (but never, ever on military corporate contracts).

This “deficits” drumbeat is incessant because it is so well funded with corporate cash.

Fortune 500 Corporations Owe $620 Billion In Taxes

What would you say if you learned that the same corporations funding this corporate-conservative anti-government “deficit” propaganda actually owed the government more than $600 billion (billion with a ‘B’), and another $90 billion each year?

Last week Citizens for Tax Justice (CTJ) and the U.S. PIRG Education Fund released an important report showing how Fortune 500 companies use tax-haven subsidiaries to keep $2.1 trillion out of the country to dodge up to $620 billion in U.S. taxes. These are profits already on the books, so the taxes are due – except for a “deferral” loophole that was quietly inserted into the tax code in the 1986 tax “reform” law.

The CTJ/PIRG report is titled, “Offshore Shell Games.” (Read the whole thing if you can, skim it if you can’t.) From the Executive Summary:

U.S.-based multinational corporations are allowed to play by a different set of rules than small and domestic businesses or individuals when it comes to the tax code. Rather than paying their fair share, many multinational corporations use accounting tricks to pretend for tax purposes that a substantial portion of their profits are generated in offshore tax havens, countries with minimal or no taxes where a company’s presence may be as little as a mailbox. Multinational corporations’ use of tax havens allows them to avoid an estimated $90 billion in federal income taxes each year.

Congress, by failing to take action to end this tax avoidance, forces ordinary Americans to make up the difference. Every dollar in taxes that corporations avoid by using tax havens must be balanced by higher taxes on individuals, cuts to public investments and public services, or increased federal debt.

This tax dodging also costs about $90 billion every year in lost federal tax revenue.

Again, the corporations that are funding this anti-government, conservative propaganda machine that is demanding cutbacks in everything that makes our lives better (but never, ever on military corporate contracts) are dodging $620 billion in taxes and another $90 billion every year.

Tax Repatriation Holiday

But wait, there’s more. (They have almost everything but they always want more.)

The giant corporations are engaged in a campaign to get out of paying those taxes they owe – now and in the future. They are demanding that the government cut the tax rate, not only on those taxes they already owe, but on future taxes as well.

This is a bit tricky, but just remember the word “repatriation.” If you hear someone in Congress talk about “repatriation” they are almost always talking about letting these corporations off the hook on this tax bill.

For example, when you hear that the “highway bill” can be “paid for” using “repatriation” (click the link to get a sense of this) they are saying they’ll let these corporations pay significantly less then they owe, and then use what’s left over (if any) to pay for the highway bill.

When you hear a politician say they will “raise money” using “corporate tax reform,” what they are saying is let these corporations off the hook for a chunk of their taxes now and in the future. (When you hear the word “reform” in Washington these days it means get ready to get hit upside the head with a hammer.) In this usage, “How Tax Reform Could Help Save U.S. Infrastructure” actually means let these corporations pay significantly less than the $620 billion they owe, and use the rest for … whatever.

Apologies in advance for the cliché here, but hearing corporate-conservative complaints about deficits when the corporations funding them are dodging hundreds of billions of dollars in taxes is like the child who shoots his parents and then asks for leniency because he’s an orphan. Enough about deficits and cuts already; make them pay their taxes.

Petitions

CAF petition: Tell your Senators: No tax breaks for corporations that shift profits and jobs offshore.

Americans for Tax Fairness petition: Tell Congress it’s time that corporations pay what they owe – their fair share! And when they do, we can invest in America’s future.

Progressive Congress: Tell Congress to make corporations pay what they owe on the $2.1 trillion in profits stashed offshore.

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary and/or for the Progress Breakfast.

Trump: Don’t Make Corporations Pay Their Taxes

Republican economics has been stated a thousand ways by a thousand (always paid) voices. But the basic idea behind all the schemes has been hard to pin down. Finally Republican front-runner Donald Trump has spelled it out in a way anyone can understand.

Thursday’s Progressive Breakfast (you should subscribe, it’s free, it’s really good) contains a story in which Trump clearly articulates the Republican/Billionaire/Wall Street case for a low-or-zero tax on corporate profits: “because they don’t want to pay the tax.”

Trump Sides With Multinationals
Donald Trump backs repatriation in Time interview: “Pfizer is talking about moving to Ireland. Or someplace else … Do you know how big that is? It would wipe out New Jersey … They have $2.5 trillion sitting out of the country that they can’t get back because they don’t want to pay the tax. Nor would I … We should let them back in. Everybody. Even if you paid nothing it would be a good deal. Because they’ll take that money then and use it for other things. But they’ll pay something. Ten percent, they’ll pay something.”

There it is in a nutshell. The Republican case for low or no taxes: “because they don’t want to pay the tax.”

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In Tax Battles, “Competitiveness” Means Coercion

Watch out for this one. With fast track trade authority done, the big corporations are now pushing for massive tax giveaways. This is another exercise of raw corporate power by the few to take what they want from the many. The corporations use complexity to get people to tune out, and their schemes are masked by smooth words like “reform” and “competitiveness,” but it is all just another grab for (even more) money and power.

There are two areas where the corporations are coming at us. The first is a blatant grab to keep somewhere up to $700 billion in tax money they already owe on “offshore” profits. The second is a push to permanently cut corporate tax rates – even more.

Taxes Owed On Offshore Profits

Multinational corporations avoid paying U.S. taxes using a “deferral” loophole. This loophole lets them dodge taxes on profits made outside of the country until they bring the profits back into the country (called “repatriation”).

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Six Corporate Tax Myths In One Letter to Editor

How MANY mistruths can you count in a letter in today’s San Jose Mercury News?

Lower corporate taxes would boost economy

When the government wants to raise taxes, the counter argument is always that people and corporations will work harder if they can keep their earnings. It is either that, or pass the costs to the consumers. Either way, high taxes are a no-win situation for everybody. Now that we have the highest taxes of any industrialized nation, corporations are “voting with their feet” and using legal tax-inversion strategies to stay competitive. The administration that pushed for high taxes is crying foul and saying this is not patriotic. Now they don’t like the consequences of their greedy tax policies. Drop the corporate tax rate to 15 percent and watch the economy soar.

  1. Myth: People will work harder if they can keep their earnings. Actually, wouldn’t people work harder to make up for the money that goes to taxes?
  2. Myth: Corporations pass the “cost” of taxes onto consumers. Actually corporations can’t pass taxes to consumers. (And taxes are not a “cost.”) Summary: taxes are on profits and prices are already as high as the company can charge. If corporations could just increase prices to cover taxes then the profits would go up, which raises the taxes, so they wold have to increase prices again, which would increase profits, which raises taxes, so they have to increase prices again, etc.
  3. Myth: Taxes are no-win. Actually they pay for the reads, schools, courts, police, military and the rest of the things that enable corporations to prosper.
  4. Myth: We have the highest taxes. Actually we don’t. Corporations are shifting profits out of the country to avoid ever paying taxes. The solution is to make them pay their taxes, not lower tax rates to let them get away with this.
  5. Myth: The administration raised taxes on corporations. Actually the administration didn’t raise corporate taxes. Corporate taxes have been lowered from 46% to 35% since the 80’s.
  6. Myth: If the corporate tax rate was lowered to 15% the economy would soar. Actually there is no relationship between lower tax rates and higher economic growth. In fact, there is a correlation between lower rates and lower growth, possibly because lower taxes cause government to cut back on the things that help the economy prosper, like education, investing in infrastructure, basic research, etc.

The letter-writer probably actually believes the stuff he wrote. Many people do. This shows the effect of decades of corporate/conservative propaganda on the public. Unfortunately these beliefs are leading to policies that are killing our economy and our democracy.

Tax Tricks – Do Corporations Pass Taxes On To Customers?

Here is a tax trick you hear all the time: we shouldn’t tax corporations because they just “pass the taxes along to customers.” Go to any of the usual anti-tax, anti-government sites and you’ll see them trying to trick people with this.

First of all, if companies really did “pass taxes along to consumers,” so what? Is that a reason not to pay for the roads, bridges, schools, courts etc., that enable the company to be profitable enough to pay taxes? But actually they don’t — because they can’t.

This tax trick is based on a popular assumption that businesses can just raise prices whenever they want to. But a well-run business is already charging what they should charge for their product or service. If they have room to raise prices they should already have done so. But of course doing so this will cause them to lose sales to competitors.

Taxes are on profits, and profits are calculated at the end of a tax year by adding up all the revenue and subtracting all the costs. When a product or service is sold the company doesn’t really know yet how much profit, if any, it will have at the end of the year, so it doesn’t know what the tax will be, so how can it adjust prices? But if a company was able to just raise prices based on anticipation of profits, then the result would be that profits would be higher because of the higher price charged, which means taxes would be even higher, so the company should have raised prices even more, but that means the profit would be even higher, so they have to go back and charge more, but then … I think you are starting to see how silly this idea of raising prices to cover taxes can get.

About those competitors – if one company is doing well and therefore making a profit, and another company is not doing so well, and therefore not making as much profit, and the first company raises prices to cover the taxes on the profit, then the second company has a price advantage so the first company loses sales and isn’t going to have a profit after all so they really should put the prices back down, but then the other company’s price advantage goes away and they are making a profit again so they should raise prices but … Hey, this just gets silly, too!

Companies do not pass on taxes to their customers. So don’t fall for this tax trick, it’s just silly.

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF. Sign up here for the CAF daily summary.