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Commentary :: Politics
Skipping Out
15 Feb 2009
Recently and during the presidential campaign issues of global trade and US tax laws regarding domestically based companies has been an issue. Among the reasons given for US companies relocating overseas are high US tax rates. This mantra has been repeated for years claiming companies based in the US are paying huge amounts of taxes and can't be competitive on a global market. However when you look at the way the tax laws are today including provisions for shelter loopholes that just isn't the case. The idea that American companies moving overseas and abandoning US workers and voters is just good business, especially at this moment in our history, doesn't hold water.
containers_overseas_removal.jpg
We've been hearing for years corporations complain about high US tax rates and we hear the same thing today. We hear certain pundits and politicians alike explain US corporations have to move overseas in order to stay competitive and that if the tax burden on them wasn't so high perhaps they would stay. What they fail to mention is that through a series of steps US corporations have been able to whittle their taxes from 35%, which is what we're told they pay, down to around 7% and sometimes less.
In an interview with PBS Bob McIntyre of Citizens for Tax Justice it was revealed companies use a variety of methods provided to them by our government including, "allowing rapid depreciation, write-offs, exempting overseas earnings, allowing loopholes and protecting shelters." During his time in office President Bill Clinton proposed doing something about this, but congress at the time blocked his efforts. During the Bush administration efforts were blocked by President Bush himself and in Congress primarily the chairman of the Ways and Means Committee, Bill Thomas.
Mr. McIntyre gave an example of Wachovia in 2002 to help illustrate one way taxes can be avoided. Wachovia was recently forced into being bought out by Wells Fargo, but it was due to sub-prime lending practices not taxes. Here is the example from 2002:

"Wachovia... in 2002, even though it reported $4 billion in profits, reported that it didn't pay any taxes and, in fact, got a tax rebate from the government of about $160 million.

They worked it by sheltering all of their income, and then having excess shelters that they carried back and got a refund of what little taxes they'd paid in the past.

They said they saved $3 billion in taxes over the last three years from leasing, and that implies that they took tax write-offs of $9 billion or $10 billion. So, huge write-offs."

What that means for the rest of us is that while we have been struggling to make ends meet we also have been carrying much of their burden. If a fire broke out in a Wachovia branch and firefighters were called to put it out who paid for that? We did. If a Wachovia was held up and police were called we paid for the initial call, the investigation, part of the trial then incarceration of any individuals charged with the crime. If Wachovia transported money in armored vehicles we had to pay for the maintenence of the roads they traveled on. If construction of a new branch took place we paid for maintaining the roads materials were transported back and forth on. Any local, state or federal processes Wachovia needed to go through legally we footed part of that bill as well. On top of that we paid the $160 million in rebates that year.
One might say they provided jobs and brought revenue to local businesses. That's true, but all their employees and the local small business owners paid the taxes which afforded them all the services listed above and more not to mention all other taxpayers. Of course it's unfair to pick on them alone as this was and continues to be done every year by multiple companies. Oh and those arguments about highest taxes in the world certain talking heads and bloviators go on about? McIntyre looked at that and after the process by which large corporations end up paying 7% here in the US on average we start to look very competitive. In fact only 5 countries have lower taxes.
That does not include tax shelters, but keep in mind those are in the end tax scams which our government permits. The fact is the shelters are simply mailbox addresses in countries where for example US corporations can say they are headquartered, like Bermuda, keep their money in banks based there and pay a governor in that country say $20,000 or the like annually to avoid US taxes altogether. This is permitted under outdated laws dating back to the cold war. It begins to erode the idea these companies are hurt by US laws and thus need to relocate overseas to compete. It comes down to cheap labor and more money in their pockets at our expense.
People who feed us information about why we should allow US jobs to be shipped overseas because corporations have no choice aren't painting the complete picture. Corporations are paying taxes far lower than the rest of us due to special privileges heaped on them and left unchecked or corrected for years.
We can't afford to lose jobs right now and need to create as many as possible. The supposed "unregulated market" has had many regulations only the stipulations of those regulations were written to favor corporations at the expense of ordinary tax payers.
New York Times investigative journalist David Cay Johnston recently revealed that, adjusted for inflation, as of 2005 the average US income tax return shows 90% of Americans are making $74 less a week than in 1973. However, between 2003 to 2005, the top 1% enjoyed $1.37 increase in income for each dollar of income that went to the poor. So, even in ordinary times it's the citizen who foots most of the tax bill for the wealthiest companies. Arguments for US companies moving overseas and bashing the US over taxes to try and placate US workers and voters doesn't hold hold forth a true picture. In the end it is just plain unfair.

To read about my inspiration for this article go to http://www.lawsuitagainstuconn.com.
See also:
http://www.lawsuitagainstuconn.com

This work is in the public domain
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