Column, 594 words

Chief Tax-Dodging Officers

Many corporations are paying their CEOs more than they pay the Treasury.

Scott KlingerSarah Anderson

Republican and Democratic leaders don’t often see eye to eye on taxes.

But surprisingly, corporate tax reform looks like one area where there might actually be some potential for bipartisan action in Washington. This should be good news, since our corporate tax system is clearly hopelessly broken.

Here’s a stark indicator of just how broken: Last year, 29 of the 100 highest-paid CEOs made more in personal compensation than their companies paid in federal income taxes. That’s according to a new report by the Institute for Policy Studies and the Center for Effective Government.

Source: Fleecing Uncle Sam,  an Institute for Policy Studies and Center for Effective Government report

Source: Fleecing Uncle Sam, an Institute for Policy Studies and Center for Effective Government report

Yes, it’s gotten that easy for large corporations to avoid the Tax Man.

This is true even for the country’s wealthiest companies. Citigroup, Halliburton, Boeing, Ford, Chesapeake Energy, Chevron, Verizon, and General Motors all made more than $1 billion in U.S. profits last year, but still paid their CEOs more than they paid Uncle Sam. In fact, most of them got massive tax refunds.

How is this possible?

While big businesses moan about the U.S. corporate tax rate of 35 percent, most of them pay nowhere near that. Between 2008 and 2012, the average large corporation paid an effective rate of less than 20 percent.

Hiding profits in tax havens is one of the most common ways large corporations avoid paying their fair share to the IRS. And indeed, the 31 firms who paid their CEOs more than Uncle Sam operate 237 subsidiaries in low- or no-tax zones like the Cayman Islands and Bermuda.

But that’s just one tax-dodging trick. Corporations have lobbied successfully for a plethora of other tax loopholes and subsidies.

Boeing, for example, has figured out how to double dip in the Treasury’s pool.

The aerospace giant hauled in more than $20 billion in federal contracts in 2013. According to Citizens for Tax Justice, taxpayers also picked up the tab for $300 million of Boeing’s research expenses last year through a tax break that Congress is now considering making permanent.

When tax time came, Boeing got $82 million back from the IRS, despite reporting nearly $6 billion in U.S. pre-tax profits. Meanwhile, Boeing chief executive Jim McNerney made $23.3 million.

Corporate tax dodging is bad for ordinary Americans — and our nation’s long-term economic health.

For example, if Boeing had paid the statutory corporate tax rate of 35 percent on its $6 billion in profits, it would’ve added an extra $2 billion to the funds available for public services. That sum could’ve covered the cost of hiring 2,775 teachers for a year.

Shirking taxes may boost the bottom line in the short term, but in the long run it erodes the economic infrastructure businesses need to be competitive.

Unfortunately, the current political rhetoric has little to do with cracking down on corporate tax avoidance.

Republicans are hooked on corporate tax giveaways. And President Barack Obama has suggested that he’s ready to reward corporations for stashing money overseas by giving them deeply discounted tax rates on their profits if they’ll just agree to bring them home.

Both of these positions are based on the unfounded claim that smaller corporate tax burdens translate into more good jobs.

In a Hart Research poll of voters on election night, only 22 percent favored taxing corporations less. In the same poll, less than 30 percent wanted Congress to make tax cuts a higher priority than investments in education, health care, and job creation.

The American people have their priorities straight. They deserve leaders who do too.

Sarah Anderson and Scott Klinger are the co-authors of Fleecing Uncle Sam, an Institute for Policy Studies and Center for Effective Government report.
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  • DFinMOzarks

    First off, let’s realize that these corporations do not pay taxes. The few taxes that they do pay get passed on to their customers. So, to the extent that things are unfair, we would admittedly be far better off with no corporate taxes.
    Do we need tax reform? Yes, in the worst ways. Congress has been writing loopholes into the tax laws for decades that allow both rich individuals and rich corporations to avoid taxes. But if Mr. Klinger and Ms Anderson think that the GOP has any reforms in mind that will remove those loop holes, I’d suggest a second look. This is the party that doesn’t believe in taxes. They apparently think the refunds they give to outfits like big oil (4 billion a year) is ‘found money’ – stuff that grows on trees.
    We already had the best congress money could buy. Now that the tax haters are in the clear majority, don’t delude yourself into thinking that anything is going to change for the folks that are their primary sponsors.

  • Ace

    USA has the best companies in terms of innovation and technology, and yet there is always someone who is whining because of taxes or whatever. I would understand if this argument was directed to financial institutions, but some of those companies needs a break to innovate. I would personally welcome such technology companies Tax free and be proud for them to operate in my country

    • DA

      Giving 20 million to a CEO to play golf and buy 10 houses, does not innovate shit. I welcome tech companies, but this article is not about companies having to give reaserach money to tax. It’s about company money given to an individual who most likely does jack research with it.

    • adrian

      side note: most of those tech companies already have big amounts saved up for innovation and research, so its already part of their financial results they show to the public.

  • A Rational Person

    Reading this article made me cringe at the author’s stupidity and entitled attitude. What makes you think corporations have any moral obligation to give you a dime of the product of THEIR workers’ time? They don’t owe you nor the government shit. Corporate taxes shouldn’t even EXIST. No man should be able to force another man to fund anyone else’s life. My earnings are the result of MY time and MY effort, and should be mine and solely mine to dispose of as I wish.

    • Baskerville Manor

      Douche bag Ayn Rand fan chimes in… how surprising.

      • Guestname

        I mean, this clearly is the most effective way of disagreeing with someone. Calling them a douchebag. At least come up with a reason for why you disagree please. Because while no taxation is bad (Government sort of needs money to function) our expenditures are ridiculously high. We can attack taxes all we want but the cost will transfer over to the consumer, especially in price-inelastic industries like Big Oil. I’d rather cut military spending if we are going to be blunt about it, we spend like 500 Bil in defense funding. There are bigger fish to fry right now, especially with wages not keeping up with inflation as it is.

    • Bruce Steever

      Money built on the back of federal roads, public infrastructure, and myriad employees shouldn’t come for free. We each pay taxes to use these things – why shouldn’t a corporation? This isn’t “taking” their money; this is a company paying for the resources it used to make that money.

    • TruePatriotsPayTaxes

      Maybe the government should be submitting bills instead to pay for the infrastructure corporations take advantage of. How well do you think any fortune 500 company would do without access to roads, ports/harbors, airports, electricity, water, internet, local fire and police departments, garbage pickup, an educated pool of candidates to hire from, defense from foreign invaders, etc. For most companies in the US, that infrastructure was already in place for them before they opened their doors. To say they built their company all on their own without any help from anyone and don’t owe anything to anyone is disingenuous and less patriotic than a draft dodging flag burner.

    • C.

      But I thought corporations were people? Are you saying that people shouldn’t pay taxes?

    • I see your cringe and raise…

      I understand it requires a bit more effort to think about how the world actually works outside of your personal domain, but you really should try sometime.

    • indiana jeff

      The same reason you and I pay taxes!! The company uses government roads to haul the products and supplies right?, and wants the government to plow the roads so it’s workers can get to work?..these are just A FEW! examples of how a corporation uses public serves just like you and I!!.so please explain to me why they shouldn’t pay taxes like you and I do?

    • ConvertOrDie

      Exactly. Anyone that actually pays taxes is stupid and entitled. No man can force me to fund their life. I don’t even work for USA currency, because it is tyranny. I only accept goats and gold bars in my businesses transactions.

    • Frank

      And yet taxes on the individual and establishment have existed for a millennia and longer. And you are going to change that all by yourself? Oh your not? Well then quick bitching on the internet and go to something constructive you paranoid tool.

    • adrian

      hahaha, and who built the streets you drive to work on? who provides you with water straight to your home? your attitude is just naive and egoistic! the rich get richer and poor get poorer because of attitudes like yours!

  • Rafik Dimian

    Income made by a United States based company will be taxed. “Sending it over seas” is a myth. It is more that a foreign based company is controlled by a United States based company. Apple is a good example of this. ~200 billion USD is controlled by Apple in over seas companies, but they would be insane to move the money into the United States. While Apple should pay its stock holders in dividends, it doesn’t want a 39.1% tax rate.

    But because the companies Apple controls are not American, Apple is not required to pay Taxes. If they were American, then they would be forced to pay Taxes, even if the money was made outside the United States.

    • DA

      You make it sound as if it’s coincidence that they have a broad companies.

      Samsung had a big lawsuit with Apple about design, yet at the time and to this day, samsung produces screens for their imac/macbook line and the Iphone I Think as well.

      That right there tells you it’s game. True competitors don’t do things for each other. It’s PR gimmick, and in workings to create an artifical “u either are an Iphone user, or a samsung user” See how many people label other’s as Apple fanboys.

      They have succeeded in separating people and create an artificial choice, for the sake of choice, because giving people the feeling of choice makes them choose one, and ignore smaller companies.

      I worked high in a company which I won’t name in fear of legal retribution, and this fake competition was also present in my company. The board owned the same venture 2 blocks away, yet they were putting out signs which said they were better than this other company, while after turnover of both, the profit landed in the same hands.

      • DA

        Actually samsung produced up until 2013 the chips and processors for Apple phones, yet I’ve seen much marketing how Iphone is faster than it’s competitor.

        The screens of apple devices are made by LG also a direct phone competitor.

        How people cannot see how skewed and fake that is is beyond me.

        • DA

          If it’s still too difficult to gras (my apologies for over-replying)p

          If Apple sold Iphone generation 1 to 3 or 4, then one part of the profit went to Samsung for the processor, one part to LG for the screen, and what’s left is for Apple themselves.

          Yet those 3 are portrayed as being the 3 big phone companies that try to out innovate each other. How can Iphone say their screen is better then say LG when LG gives it to them.

          You have HTC I guess, (looks up their business relations).. Ah Apple some time ago sued them for many, many patents..reads further. Oh they got a deal for 10 years with undisclosed details, and suddenly there is no problem and HTC is allowed up their. Sounds they “joined the club”.

          • Gummybear

            They build the phones around different designs. Then they use the best components for those design criteria. That faster processor may use more battery life, generate more heat, and have a smaller cache. The reason the competitor gets the right to make the components is because they own the patent on how to make the best screen, or the best processor, or the best [blah]. These trade offs mean that while the technology ceiling is the same, the trade-off that the engineers decided on when designing the phone are what make them different. Tech companies have tried to do complete line development before, look at apple in the 90’s, when they made all their own components, and as a result, their computers sucked. Its really not that different from how Mazda pays Ford for their use of fuel-efficiency technology. Someone owns the patent on the piece of tech you need to use, so you either buy that item from them or you pay them a fee for use of that patent.

          • DA

            Do you think a competitor would give acces to tech patent, because they are nice? They all calculate it to make sure it profits everyone, and it keeps small companies out of the loop. Why do you think the 100 or so richest people own more (or almost) than all the millions of people left over combined.

            That’s exactly what keeping it (the money) in a small loop means. It’s pseudo monopoly, cause they just share all their tech so noone can ride with them at the top.

            Do you think Samsung would let me use their patent? No it’s because they don’t have to fear me as a competitor, so I’m no threat to diminish their profit, nor would I make profit.

            I mean that’s fair, but I know for example Microsoft has said to hardware manufactures, that they are willing to invest a lot in them (aka kaching for Intel/IBM/HP0 if they sell their computers with Windows pre-installed with no toher OS also installed or provided on disc for that matter. People only say yes, if they know another company won’t get it, to ensure monopoly.

            What I try to say is, that on paper it’s great tech companies work together to ensure a good product. In reality however it also makes them a lot of money adn grants them a pseudo monopoly status.

  • howmuchdoteachersearn

    $2 billion would cover the costs for 2,775 teachers to work one year earning 720K. Teachers obviously don’t earn that much. In reality, $2 billion would cover the costs for 2,775 teachers to work >10 years (or, alternatively, for hiring something like 40,000 teachers for the year).

    • slayer under pussy!!!¡

      80,000 teachers can be hired with that money!

  • Michael Mantion

    It sickens me that we even have corp taxes. Its a small world. If we charge more in taxes the companies will move or give up. We don’t need overpriced baby sitters we need profit able companies that provide jobs. Thousands of good companies move overseas and countless more start up in areas that don’t penalize them for being profitable. We need less taxes