Corporate Tax Loopholes are Robbing You Blind
David Cay Johnston, Pulitzer Prize-winning reporter and author of The Fine Print: How Big Companies Use 'Plain English' to Rob You Blind, believes corporate tax loopholes have created corporate socialism — and put the burden of taxes on ordinary citizens instead.
Carl Levin (D-Michigan) asserts “the scandal is the law” as tax loopholes and other financial law abuses end up costing American citizens an arm and a leg after all is said and done in the aftermath of tax season.
According to Levin: “What these gimmicks do is shift the burden of taxes onto citizens and business who don't use armies of lawyers and accountants."
A law was passed in 1909 prohibiting companies from holding more cash than necessary to reasonably run their business. If the company chooses not to reinvest the extra cash income into the business itself or pay dividends, they'd be penalized with a 15% tax... UNLESS they keep the extra cash stashed overseas.
That's a pretty sweet loophole if you're a company like Microsoft (MSF) and Hewlett-Packard (HPQ), and you get to borrow against some of those foreign assets...
Offshore tax evasion is the norm these days.
Johnston also documents another corporate tax loophole that permitted 2,700 companies in 19 states to pocket state income taxes that were withheld from employees' pay. He claims these corporate tax breaks set the average American family of four back by about $900 each year.
That's your money they're taking.
This concept certainly isn't foreign to most of you. Back in 2011, we reported GE paid ZERO taxes on $14 billion in profits. But GE isn't the only guilty big name out there. Among the other 10 worst corporate income tax avoiders are ExxonMobil, Bank of America, Chevron, Boeing, Valero, Goldman Sachs, Citigroup, Conoco Phillips, and Carnival.
Johnston refers to these tax practices as examples of "corporate socialism" in that the tax burden is distributed to everyday citizens instead of the corporations.
Meanwhile, corporations and Wall Street argue that the U.S. has the highest marginal corporate tax rate in the world at 39.2%, meaning U.S. companies can't stay competitive in the global economy. Most experts agree with this statement.
However, with the loophole laws intact, no one is paying that much.
Presently, corporate taxes only account for under 10% of federal revenues, according to the nonpartisan Tax Policy Center.
How are we ever going to successfully tackle our debt crisis and budget gap without more revenue?
Senator Levin says increasing revenue from large corporations that avert taxes would be a big step in the right direction.+6
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