[corporate responsibility] How to earn $3.5 Trillion and pay Zero Taxes

[Exiled in America]

This is one of those articles that has stuck with me. It's what fueled my further research into "the corporation" that plays such a critical and sweeping role in the lives of literally every person on earth.

I would like to share excerpts then make some comments.

How to earn $3.5 trillion and pay zero taxes
By David R. Francis

The April 2 release of a General Accounting Office report on corporate taxes could hardly have been better timed to get press attention. Just as millions of Americans were filling out their federal 2003 tax forms to beat the April 15 deadline, the GAO study indicated that most corporations owed no taxes from 1996 to 2000, a boom period for corporate profits.

Those untaxed corporations earned $3.5 trillion of revenues.

.....

For years, companies and their representatives, such as the National Association of Manufacturers, have complained that businesses are overtaxed. The latest studies of corporate taxation suggest that, in general, this is not true. "The usual arguments may be baloney," says Piatt.

The GAO study found that 71 percent of foreign-controlled corporations operating in the United States paid no taxes in those five years; nor did 61 percent of US-controlled companies.

The basic corporate tax rate stands officially at 35 percent. In reality, it's far below that for most companies. And the importance of corporate tax revenues for Uncle Sam has shrunk. That's shown by the numbers.

.....

As a percentage of all federal tax revenues, corporate tax payments have declined from 23 percent in 1960 to 13 percent in 1980 and 8 percent today.

Much more of the article can be found here:
http://www.csmonitor.com/2004/0419/p16s03-cogn.html

Now, this was written in 2004 so it is certainly not current. However, it is really difficult to find such truth-telling confessional articles in the mainstream press, so every time you do find one its a gem worth saving. This particular article happens to come backed by sourced data and numbers. The numbers in this report should be nothing short of startling to Americans.

Talk about trying to really let it hit home with ordinary citizens how absolutely out of control our corporatocracy really is. Every tax-paying middle / working class American should be absolutely outraged at the way corporations with a combined profit of 3.5 trillion have avoided paying a dime of taxes. Those corporations have done nothing to support the infrastructures of society on whose backs they have profited.

I used to hear debates from fiscal and free-market conservatives who argued that corporations were already paying their fair share, and whined about their 35% tax rate and demanded pity for their burden. But shouldn't we all be able to get together and agree that when SIXTY ONE PERCENT of ALL US-BASED Corporations paid ZERO IN TAXES over A F_I_V_E Y_E_A_R period that something has gone terribly wrong in our tax system?

To me, that fact is jaw-dropping and unbelievable. And what stuns me more is that whenever I have told anyone about that statistic, I have almost never gotten a similar reaction. I can not believe it doesn't stun other people more. I'm not sure how we try to change the system for the better when even the working class people against whom the system is most brutally bent don't seem to give a damn about it....

Those are my thoughts.

[nashville_brook]

1. just for "kicks" here's a link to the Corporate Welfare Shame Page

http://www.progress.org/banneker/cw.html

enjoy!

[Exiled in America]

3. Nice - I also really like corporation watch

http://www.corpwatch.org

I like their issues page which organizes material really well:
http://www.corpwatch.org/article.php?list=type&type=166

[nashville_brook]

2. here's a religious perspective on why Corporate Welfare is a SIN

http://www.justpeace.org/structures/corp.htm

"Then we see hearts harden and minds close, and men no longer gather together in friendship but out of self interest, which soon leads to opposition and disunity." Populorum 19

Woe to those who enact unjust statutes and who write oppressive decrees, depriving the needy of judgment and robbing my people's poor of their rights, making widows their plunder and orphans their prey! What will you do on the day of punishment when ruin comes from afar? (Is. 10:1-2)

Corporate welfare is the use by the rich of special pleadings to produce subsidies, preferential economic favors, trade regulations, tax abatements, and subsidies for their personal enrichment. This is not a small item in the federal budget. The Progressive Policy Institute estimates that the annual federal budget has $20.36 billion in preferential tax treatment and, while not a direct federal budget item, preferential trade rules cause $32 billion in economic cost to consumers (Shapiro 8). The libertarian Cato Institute finds a total of $87.3 billion in the cost of trade regulation. By combining the two corporate welfare approaches, this paper estimates the total federal commitment to Aid to Dependent Corporations to be $139.7 billion, of which $107.7B are direct expenditures and tax subsidies, much more than the $64 billion which the federal government spends on AFDC, food stamps, WIC, school lunch, and the earned income credit (1994 numbers).

It was not possible to derive a figure for local and state welfare to corporations, but it is likely that this figure is even higher than the federal commitment. Some of the typical local and state perks for the corporate welfare queens and dependent corporations include (a) special tax breaks for businesses that move into the area, (b) direct subsidies, (c) property tax abatements, (d) protection from competition, (e) favorable regulatory treatment for some businesses, (f) zoning and occupational licensure.

This creates a rather seedy climate where communities bid against other communities to lure factories from one area to another. There are many government organizations devoted to such raiding of their neighbors. Yet, how many actual new jobs are created? Often, they are simply moved around -- one area loses 200 jobs while another area gains 200. Too many businesses are learning that it is easier to loot the taxpayers than it is to earn an honest profit. This corruption is another market problem rarely addressed by conservatives, whose attitude seems to be that whatever a business can grab from the taxpayers is justified.

One factor driving the welfare reform crusade is the need to balance the federal budget and do something about the huge federal debt. But if the real concern is balancing the budget, why not start with Aid to Dependent Corporations? This is where the money is (together with Aid to Wealthy Seniors). Supporters of corporate welfare allege that these welfare checks for big business are socially useful because they "create" jobs, and the economy needs jobs in order to improve the plight of the poor. However, many of these subsidies only result in rearranging jobs, and the pro-corporate welfare argument does not consider the effects of taking money from the economy and then awarding it based on political power. How many jobs were not created because this particular batch of money was handed out in this way, based on political patronage and not upon market realities,and was not available for other productive uses? It seems unlikely that any jobs were created via corporate welfare that would not have been created anyway.

[Exiled in America]

5. That's pretty interesting, and I appreciate a positive religious perspective like that

[Dyedinthewoolliberal]

4. I think many people

are afraid to admit this goes on. Because the multi-national corporate monster (mncm) has grown so large, many people shrink at the thought of trying to 'do' anything. Coupled with the fact the MNCM has the ability and resources to influence lawmakers and public policy the question becomes, where to start?
I wish I knew the answer. They (MNCM) can engineer all the loopholes and get out from under their responsibilities.
Where are the corporations with a conscience?

[Exiled in America]

6. don't you think in the end, that corporations with a conscience is a contradiction?

I mean let's face it - the absolute and ultimate aim of a corporation is to make money via any and all means available to it. The Documentary the Corporation and the corresponding book argues that if corporations are considered legal persons under the law, then we should be able to evaluate them sociologically as persons. And if we do that, then corporations fit all of the characteristics of a sociopath.

[CrispyQ]

7. Plus anytime you mention reigning in these behemoths,

you are accused of being anti-business, anti-capitalism. :eyes:

We start with challenging the 1886 ruling in Santa Clara County vs Southern Pacific Railroal, where the court clerk, Bancroft, who was a former railroad executive, inaccurately summed up (deliberately?) the court rulings that corporataions are persons.


http://www.thomhartmann.com/restoredemocracy.shtml

snip...

The Supreme Court ruled on an obscure taxation issue in the Santa Clara County vs. The Union Pacific Railroad case, but the Recorder of the court - a man named J. C. Bancroft Davis, himself formerly the president of a small railroad - wrote into his personal commentary of the case (known as a headnote) that the Chief Justice had said that all the Justices agreed that corporations are persons.

And in so doing, he - not the Supreme Court, but its clerical recorder - inserted a statement that would change history and give corporations enormous powers that were not granted by Congress, not granted by the voters, and not even granted by the Supreme Court. Davis’s headnote, which had no legal standing, was taken as precedent by generations of jurists (including the Supreme Court) who followed and apparently read the headnote but not the decision.

What is especially ironic about this is that Davis knew the Court had not ruled on this issue. We found a handwritten note in the J.C. Bancroft Davis collection in the Library of Congress, from Chief Justice Waite to reporter Davis, explicitly saying, “we did not meet the constitutional issues in the case.” (In other words, the Court had decided the case on lesser grounds, which it always prefers to do when possible.)

[nashville_brook]

25. it's not for corporations to have conscience, WE CREATE THEM...

it's our responsibility to keep them in check.

corporations are argreements among individuals to make money. they have a built-in survival instinct. GOVERNMENT exists to keep "agreements among individuals" fair and square.

the job of "conscience" is ours, in the form of our elected leaders.

[mom cat]

8. And those were "the Clinton years". You know that it is worse now!

[Exiled in America]

9. Seriously - I'm keeping my eyes open for an updated 2000-2005 study

Because I can't even imagine how bad it would be.

[Egalitariat]

10. I stopped reading this when it used "earned" and "revenues" in a grossly

misleading way. As in "Those untaxed corporations earned $3.5 trillion of revenues". This article is obviously designed to raise the ire of the ignorant.

First, in all businesses, the word "earn" is related to "earnings" or "profits" or "income". Not revenue.

You pay income tax on income. You don't pay income tax on revenue.

It's true that most corporations pay little or no tax on their earnings (profits, income, whatever you want to call it as long as you don't call it revenue). That fact, and the data that supports it, are enough to write a seething article on US tax policy without resorting to moron-baiting as the author did.

Because the author did resort to such a misleading attention getter, I can only assume he has no clue what he's writing about (not likely) or he's trying to fan the flames of his readership who he hopes will not know any better and gather up their torches and pitchforks and march to whereever he's trying to lead them.

Either way, it can't be worth the read.

[Canuckistanian]

16. Well, what are the dividing lines between revenue and profit?

What is the definition of revenue?

I can remember working at a place where "revenue" meant "income", some of which, I presume, is profit.

Is this wrong usage of the word "revenue"?

[Egalitariat]

17. Revenue equates to Gross Sales BEFORE you pay for

raw materials, employees, equipment, advertising, rent, R&D, private jet rentals, two martini lunches, etc.

Income and profit are the same thing. They are what's left over AFTER you pay for all those things.

[Exiled in America]

23. Income and profit are NOT the same thing.

My taxable income is the total amount I earn, not the amount I've earned minus all my personal expenses, like my car payment housing bill, utilities, food, etc.

Revenue is the business term for total corporate INCOME. It is the total amount earned before expenses.

In my life, I am not able to subtract all my bills from my income before it is taxed. After all my personal expenses each month I have about 200$ left over - 200$ of profit if you will. I don't get to pay taxes on just that 200$. Saying that only that 200$ is my "income" for the month is a lie.

I personally don't think the rules for corporations should be any different, after all corporations lobbied to be considered legal persons under the law, and got those rights. Great - I think they should be treated like people then. Corporations should be taxed on the money they take in, regardless of whether or not all corporations are good budgeters. I don't get to not pay taxes just because I manage my costs poorly and go into debt. I still owe what I owe on the income I've earned. Why should it be any different for corporations. Corporations that can function under the same rules everyone else has to play by should fail and be absorbed by the market.

Now, its fine if we disagree about that. But please don't be misleading.

Again, I refer you to a definition of revenue. This one is just wikipedia's, but they all essentially say the same thing:

"Revenue is defined thusly: is a U.S. business term for the amount of money that a company earns from its activities in a given period, mostly from sales of products and/or services to customers. In Europe (including the UK) the term is turnover. For individuals, the equivalent term is income" REVENUE is equivalent to Income, not Profit.

Here's the Dictionary definition of Revenue: "1 : the total income produced by a given source <a property expected to yield a large annual revenue>"
http://www.m-w.com/dictionary/revenue

[Greyhound]

27. Not according to any of my accounting textbooks. n/t

[Exiled in America]

22. You are the one being misleading, I'm afraid.

The statement, "those untaxed corporations earned $3.5 trillion in revenues." is simply a statement of fact.

Revenue is defined thusly: is a U.S. business term for the amount of money that a company earns from its activities in a given period, mostly from sales of products and/or services to customers. In Europe (including the UK) the term is turnover. For individuals, the equivalent term is income.

Essentially, revenue is the the term for income for a corporate person as opposed to an individual person. Earnings and income are related to revenue. Only profits is not. Profits of course comes after all costs are deducted from total revenue, i.e. income earned. Revenue is called the top line, while profit comes from the bottom line after the subtraction of expenses.

See, some of us believe that if you've made a combine total of 3.5 trillion in revenue (and yes, we mean revenue and know what we're talking about) the fact that you can pay zero in taxes - not 10%, or even 5% and certainly not the 35% that corporations like to say they pay but 0% - for not one but five years in a wrong, we all ought to be able to get together and agree that something is wrong with that.

I'll tell you what I've come to dismiss: I've started to dismiss people who make posts that say "I stopped reading here." Well, that's usually why their comments that follow are so ill-informed and ignorant. Maybe instead of being hyper defensive, you should actually read the article carefully first before bothering to respond, that way you could have at least some basis for commenting.

I don't agree that the opening is misleading - in any way. It's just a statement of fact, and I don't know what you assume about most other people at DU but I'm actually intelligent enough to understand what revenue means - I wasn't confused about the facts of the statement. Furthermore, if you HAD bothered to read further on, you would find that this article is largely a recitation of statistics which come from a GAO report. The main conclusion of the author is nowhere NEAR as radical as I would like it to be. He simply says, based on new information just released in this report, it is very quite likely that a government struggling to make up lost tax revenues may come knocking on the doors of corporations who have enjoyed continually decreasing tax burdens. He warns that this may soon change, without really taking a stand on the legitimacy or illegitimacy of the way corporations operate in America.

I would have been happy if he had - corporations are the instutionalize sociopaths of our society and are totally, utterly out of control. But the author of the article makes no such claim.

So, since you didn't bother to read the article from a pretty mundane source like the Christian Science Monitor, you end up sounding silly. You rant against a benign article and "assume" the author is stupid and writing for "morons" without having any idea what your talking about... which only makes you sound a lot like the people you are accusing the rest of us and the author of being.

I'm fed up with people who take their ignorance and then act arrogant about it. If you don't want to read and comment on the article - that's totally great. If you DO, the at least read it before you start pontificating a bunch of bullshit. If you have concrete specific disagreements with the statistical FACTS pointed out in the article great - name them, and site data that contradicts those facts. If you have a problem with the totally benign conclusion the author draws which is that a) corps don't pay much taxes b) the rate of taxation on corps continues to fall and c) corps may not escape shouldering more of the tax burden for much longer then fine - say something about that.

But please don't insult my intelligence or the intelligence of every other DU reader by writing an ignorant blanket dismissal of something you haven't even looked at.

You want to talk about "i stopped reading" comments? I SHOULD have stopped reading the moment you wrote, "I can only assume...." Yeah, that's always a sign of someone about ready to say something pretty substanceless.

[PreacherCasey]

11. Have you read "Perfectly Legal" by David Cay Johnston?

If not, check it out and be prepared to be more pissed off.

[Exiled in America]

20. No but I heard and interview with David Cay Johnston discussing the book --

pretty brutal.

[PreacherCasey]

12. In one scam they "sell" their intellectual property (trademark, logo, ect) to

dummy companies(which they own) with headquarters in the Cayman Islands or some other tax haven. Then the have to "pay" the dummy company for the use of their previously held intellectual property. Thus, they can show a reduction in profits without losing profits in actuality.

[Greyhound]

28. One of literally thousands of "legal" schemes that they have bought

from our politiwhores.

One thing the article could/should have included, if they extend the time line back a little further in 1945 corporations paid 95% of the federal taxes, individuals paid the last 5%. So in 51 years we have seen a transfer of the burden shifted almost entirely to the working-class, meaning everybody that draws a paycheck and proprietors.

One other note, this process has continued, uninterrupted through every administration and congress, coincidentally populated almost entirely by the beneficiaries of this thievery.:grr:

[Blue_Tires]

13. k+r

[Kerrytravelers]

14. k&r

And bookmarking!

[devilgrrl]

15. kick!

:kick:

[PVnRT]

18. If they have an ACTUAL loss, this is not a problem

You wouldn't tax a corporation that posts a loss anymore than you would tax a person who earned no money in a year.

The problem occurs when companies find shift accounting methods to make a profit turn into a loss for the IRS, but make a profit even bigger when they when they're trying to sell shares of stock. A lot of problems would be solved if the IRS would force companies to file their taxes the same way they write their prospectus.

[Exiled in America]

19. Yes, and if you read the article, you'll see that it is companies making profits paying zero taxes--

not companies operating at a loss.

Though I must admit, I don't think that operating at a loss is an excuse to not pay taxes.

I think that every penny of profit earned by a corporation should be taxed, just like every penny earned by ME is taxed. After all, a corporation is considered a person right? So the profit a corporation takes in is like its paycheck. It's not MY fault if the corporation doesn't manage its money well and runs itself into debt. When I don't manage MY money well and run myself into debt guess what, the money I earn STILL gets taxed.

[porphyrian]

21. This is completely fucking unacceptable. - n/t

[DaveJ]

24. Just to play devil's advocate...

If corporate profit is taxed, and shareholders pay tax on their profit, isn't that double taxation?

Don't get me wrong, I'm completely for raising income tax on the rich to 80-90%, where it was in the 50's when America was great, and average people could afford a home, retirement, and kids' college on one salary.

[nashville_brook]

26. my salary is taxed, then i pay tax on everything i buy...

double taxation is everywhere.

[Greyhound]

29. Not at all.

Since the corporations are not required to pay dividends, except when it is voluntarily written into the charter (still no legal obligation), there is no tax paid by the investors until they sell shares for a profit. This income is separate, and additional to, the company's profits and when they are paid the funds constituting the profit come from the purchaser, not the company.

So, the answer is no, it is not double taxation.

[Exiled in America]

30. Yeah, that's an important discusison, though I think the response just above me was good.

Greyhound's response really sums it up for me. But I also thing that nashville_brook's point that when you really stop and think about it, double taxation is everywhere is a good one too.

One other point I'd like to make. Corporations are considered people under the law. So for me, the money a corporation makes is its income - that income should be taxed. What that corporation does with its money after that (pays out shareholders, covers its expenses, etc.) is its own thing, and shareholders getting a "salary" from this corporate person should pay taxes on it just like anyone else. :)

But then I'm a tax you back to the stone age kind of guy hehhee :)

[Greyhound]

31. Kicking this excellent piece.

:kick: