Op-Ed, 681 words

It’s Time Corporations Flew Old Glory Instead of the Jolly Roger

Instead of gaming the tax system to boost corporate profits, American business leaders need to start investing more in this nation.

Scott Klinger

The swashbuckling pirates of olde amassed private fortunes by raiding ships and stealing them. Once they captured a ship, they would replace its flag — which represented one of the world’s sovereign nations — with the Jolly Roger. By flying the skull and crossbones, pirates proclaimed that they were out for their own benefit and theirs alone.

Many American corporations are following this pirate tradition. Their crews aren’t sword-wielding ruffians, but high-priced lobbyists and accountants. They fight for, win, and then exploit loopholes in the tax code that allow multinational corporations to take profits earned in the United States and legally shift them to tax havens like the Cayman Islands, Ireland, and Luxembourg.

This accounting hocus-pocus allows U.S. corporations to deny the Treasury about $100 billion a year. The money, which could go a long way toward plugging the holes in our federal budget, is tantamount to private booty stashed in a modern-day tax haven cove.

Instead of the Jolly Roger, one of these contemporary pirate gangs flies the so-called Fix the Debt flag. This lobby group has more than 100 corporate ships in its flotilla. Together they’re fighting to cut Social Security and Medicare and to scrap U.S. taxes on their offshore booty, which collectively totals $544 billion.

That’s according to “Corporate Pirates of the Caribbean,” a new Institute for Policy Studies report I co-authored. If Captain Dave Cote of the Honeywell ship, Jolly Jeff Immelt, who commands GE’s vessel, and their pals prevail, together they’ll split a $173 billion tax windfall.

Pirates of the Cayman Islands, an OtherWords cartoon by Khalil Bendib

Pirates of the Cayman Islands, an OtherWords cartoon by Khalil Bendib

For the first half of American history, taxes on business activity, like trading, paid most of the government’s bills. As recently as World War II, U.S. corporations stood by our country as corporate taxes accounted for nearly 40 percent of federal revenue. No corporate leaders back then called for tax cuts or complained that high taxes made them uncompetitive. They proudly flew Old Glory outside their businesses and paid to keep the nation strong.

The picture is quite different today. Last year, more than $1.9 trillion of U.S. corporate profits were moored offshore — none of it taxed in the United States. “American companies are now reporting more business profits in Bermuda and Luxembourg than the reported value of all goods and services these two countries produce in a year,” according to a new report published by the government’s non-partisan Congressional Research Service.

In the face of the growing budget deficit, corporate leaders like those in Fix the Debt are demanding federal spending cuts while also calling for even more corporate tax cuts. They’re arguing that they’re needed to make American businesses, already enjoying record levels of profits, stronger still.

Really? Budget cuts advocated by gangs of corporate pirates have forced more than 300,000 laid-off teachers to walk the plank and robbed hungry older Americans of four million meals due to budget cuts in the Meals on Wheels program.

The money lost when corporations avoid their taxes by burying their booty offshore hurts the country they all say they love. But it’s also bad for business. Technology leaders Google and Microsoft both claim they have to look abroad for workers with the skills they need. Perhaps if Google and Microsoft invested in America by paying their taxes, rather than by shifting vast amounts of U.S. profits offshore, our schools would have the money they need to develop the strong math and science programs necessary to compete in a 21st century world.

“We’re an American company, and we’re proud to be an American company,” Apple CEO Tim Cook recently told the Senate Permanent Subcommittee on Investigations. “We’re there because we love it there. It’s who we are as people.”

U.S. business leaders need to back up Cook’s message by replacing the Jolly Roger flying from their corporate flagpole and running up Old Glory instead.

Instead of gaming the tax system to boost corporate profits, American business leaders need to start investing more in this nation, which has done so much to make their companies great.

Scott Klinger, an Institute for Policy Studies associate fellow, is the co-author of the new IPS report “Corporate Pirates of the Caribbean: Pro-Austerity CEOs Seek to Widen Tax Haven Loophole.” IPS-dc.org
Distributed via OtherWords. OtherWords.org

  • DFahlstrom

    Since US businesses just pass on their tax load to their customers, it would appear obvious that a lower business tax and a fair graduated flat tax and VAT would be more fair and remove the disadvantage that US businesses face when competing with their foreign competition..

    • AL_Nemesis

      Why not go the other way and just tax all the businesses and do away with the other taxes? No income tax, no VAT, no sales tax… seem to me it would streamline government tax operations as they would just be all focused on business revenue (fewer businesses than people as entities to tax and track and audit)… make a heck of a lot more sense.

  • TomRyann

    Corporations are neither patriotic nor unpatriotic. “Proud to be an American company” is public relations, not policy. Corporations exist for one purpose only – to make profit.

    Seeing that they also benefit (or at least do minimal harm) to the country at large is why we have and need government.

  • AL_Nemesis

    Since businesses pass on any taxes paid to their customers, we should just tax all businesses at a fairly high rate, trade too, and get rid of consumer point-of-sales tax and income taxes. There should be no exception to taxes on business activity for any for-profit business.

    • DFahlstrom

      The idea does have merit although the one shortcoming I see in it is that big business with all their wealth and lobbying clout already has congress by the nads doing their bidding. If we go this way, how will any problem ever get fixed?

  • BostonT

    It actually won’t matter, because after a while because most of our biggest companies will be owned by foreign companies.
    Smithfield was bought by a Chinese company and now Cooper Tires of Ohio was bought out by a company in India.
    Pretty soon we just might see a For Sale sign in front of the Capitol building posted by Shanghai Realators. Call 1-800-FOR SALE.
    A long time ago, someone threw money changers out of a temple of worship.
    Perhaps it’s time to repeat that act.

  • Johnny Dollar

    “For the first half of American history, taxes on business activity, like trading, paid most of the government’s bills.”

    For the first half of American history, there was no government payment entitlement mentality among the populace either.

    • stephenverchinski

      Actually Johnny the system worked on the imposition of Tariffs on imported goods…you tax internally and that was done even by colonies like the one in Connecticut on the populace to support government. As for entitlements, the first VA pensions were instituted as entitlements for service in the military. There was even clashes over it.

      • Johnny Dollar

        A pension paid to a soldier for services performed on our behalf cannot be called an “entitlement.” It is a legitimate part of long-term compensation benefits for serving the country. A tax that is taken from somebody or some entity to fund the government is money removed from the economy, no matter what you want to call it.