Would you sign a petition to end corporate tax dodging?
Diane
2011/09/04 23:46:55
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43 votes
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15 votes
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Executive Excess 2011: The Massive CEO Rewards for Tax Dodging
By Sarah Anderson, Chuck Collins, Scott Klinger, Sam Pizzigati
CEOs rake it in while their corporations dodge taxes.
Guns don't kill people, the old saw goes. People do.
By the same token, corporations don't dodge taxes. People do. The people who run corporations. And these people — America's CEOs — are reaping awesomely lavish rewards for the tax dodging they have their corporations do.
In fact, corporate tax dodging has gone so out of control that 25 major U.S. corporations last year paid their chief executives more than they paid Uncle Sam in federal income taxes.
This year's Institute for Policy Studies Executive Excess report, our 18th annual, explores the intersection between CEO pay and aggressive corporate tax dodging.
We researched the 100 U.S. corporations that shelled out the most last year in CEO compensation. At 25 of these corporate giants, we found, the bill for chief executive compensation actually ran higher than the company's entire federal corporate income tax bill.
Corporate outlays for CEO compensation — despite the lingering Great Recession — are rising. Employment levels have barely rebounded from their recessionary lows. Top executive pay levels, by contrast, have rebounded nearly all the way back from their pre-recession levels.
This contrast shows up starkly in the 2010 ratio between average worker and average CEO compensation. In 2009, we calculate, major corporate CEOs took home 263 times the pay of America's average workers. Last year, this gap leaped to 325-to-1.
Among the nation's top firms, the S&P; 500, CEO pay last year averaged $10,762,304, up 27.8 percent over 2009. Average worker pay in 2010? That finished up at $33,121, up just 3.3 percent over the year before.
What are America's CEOs doing to deserve their latest bountiful rewards? We have no evidence that CEOs are fashioning, with their executive leadership, more effective and efficient enterprises. On the other hand, ample evidence suggests that CEOs and their corporations are expending considerably more energy on avoiding taxes than perhaps ever before — at a time when the federal government desperately needs more revenue to maintain basic services for the American people. This disinvestment also undermines the infrastructure and services that small and large businesses also depend upon.
Investigative journalists and tax research organizations have been documenting how U.S.-based global companies are aggressively shearing — and even totally eliminating — their federal income tax obligations. This past March, for instance, The New York Times traced the steps General Electric has taken to avoid U.S. corporate taxes for the last five years. Citizens for Tax Justice, as part of a forthcoming study on tax avoidance among the Fortune 500, has identified 12 corporations that have paid an effective rate of negative 1.5 percent on $171 billion in profits.
How do corporations avoid taxes?
In our analysis of companies that last year paid their CEOs more than Uncle Sam, the companies' low tax bills — or large refunds — could not be explained by low profit rates. A large majority of the 25 companies on our list reported high profits in 2010. The low IRS bills these companies faced reflected tax avoidance pure and simple.
Our 25 hyperactive tax-dodging corporations employed a variety of avoidance techniques. Not all of these techniques are nefarious. Some corporate tax breaks can have redeeming social value. Incentives that encourage our economic transition to a green energy economy offer one example of these beneficial breaks. But such incentives as these play only a minor role. The lion's share of tax breaks reward corporate behaviors — from "offshoring" to accelerated depreciation — that are of questionable value to society, especially over the long term.
Ironically, and tellingly, corporations can even lower their tax bills by overcompensating their executives. The higher CEO paychecks soar, the more corporations can deduct off their taxes.
No tax-dodging strategy over recent years has filled U.S. corporate coffers more rapidly than the offshoring of corporate activity to tax havens in low- or no-tax jurisdictions. Eighteen of the 25 firms highlighted in this study operate subsidiaries in offshore tax haven jurisdictions. The firms, all combined, had 556 tax haven subsidiaries last year.
Tax havens are costing the federal treasury, by one estimate, $100 billion a year. These havens are speeding the transfer of wealth out of local communities and the global south into the bank accounts of the planet's wealthiest and most powerful. Tax havens, or more accurately "secrecy jurisdictions," can also facilitate criminal activity, from drug money laundering to the financing of terrorist networks.
How do tax havens work? One common corporate accounting technique, "transfer pricing," helps corporations shift profits offshore. Technology and drug companies regularly open shell companies — in tax havens — that hold their intellectual property rights. They then charge their U.S.-based operations inflated amounts for the use of these rights. These inflated costs get deducted off U.S. taxes. The overseas tax haven profits go un- or lightly taxed. Adding insult to injury, a coalition of corporate tax dodgers is now asking Congress to reward their tax avoidance with a deeply discounted five percent tax rate if they bring these funds back home where many of them started.
This offshore tax gaming has spawned a massive global tax avoidance industry, with teams of lawyers and accountants who add nothing to market efficiency or product development. This "shadow" banking industry played a key role in the 2008 financial crisis. The "shadow" system's reckless financial maneuvering operated through layers of opaque offshore tax havens.
The two biggest bank recipients of U.S. taxpayer bailouts — Citigroup and Bank of America — both just happen to be tax haven-happy. Citigroup operates 427 subsidiaries in tax havens, the Bank of America 115.
Accounting games like "transfer pricing" have sent the corporate share of federal revenues plummeting. In 1945, U.S. corporate income taxes added up to 35 percent of all federal government revenue. This year, corporate income taxes will make up just 9 percent of federal receipts. In 1952, the year Republican President Dwight Eisenhower was elected, the effective income tax rate for corporations was 52.8 percent. Last year it was just 10.5 percent.
Proposals to rein in tax dodging and excessive pay
Tax-dodging corporations argue they are breaking no laws. They are just, the argument goes, operating "under the rules that Congress has established." They are indeed. But massive corporate outlays for lobbying and campaign contributions shape those rules. The 25 firms highlighted in this study spent a combined total of more than $150 million on lobbying and campaign contributions last year.
All the companies highlighted in this report benefit enormously from their institutional presence in the United States. They utilize our taxpayer-funded infrastructure for transportation. They tap into government-sponsored research and subsidies for technological innovation. They expect the U.S. law enforcement and judicial systems to protect their intellectual and physical property. And they rely on the U.S. military to defend their assets abroad.
U.S. corporations also benefit from the public education of their workforces. In fact, 16 of the 25 CEOs included in this study received at least a portion of their post-secondary education in taxpayer-supported public universities. Yet these same corporations remain content to let others pay the bills.
We have, in short, a corporate tax system today that works for top executives — and no one else.
In this year's edition of our Executive Pay Reform Scorecard, we highlight the many efforts underway to change the rules that are contributing to executive pay excess. These include efforts to rigorously implement the executive pay provisions in the Dodd-Frank financial reform law, as well as more far-reaching proposals that would use tax and procurement policies to discourage runaway pay.
By Sarah Anderson, Chuck Collins, Scott Klinger, Sam Pizzigati
CEOs rake it in while their corporations dodge taxes.
Guns don't kill people, the old saw goes. People do.
By the same token, corporations don't dodge taxes. People do. The people who run corporations. And these people — America's CEOs — are reaping awesomely lavish rewards for the tax dodging they have their corporations do.
In fact, corporate tax dodging has gone so out of control that 25 major U.S. corporations last year paid their chief executives more than they paid Uncle Sam in federal income taxes.
This year's Institute for Policy Studies Executive Excess report, our 18th annual, explores the intersection between CEO pay and aggressive corporate tax dodging.
We researched the 100 U.S. corporations that shelled out the most last year in CEO compensation. At 25 of these corporate giants, we found, the bill for chief executive compensation actually ran higher than the company's entire federal corporate income tax bill.
Corporate outlays for CEO compensation — despite the lingering Great Recession — are rising. Employment levels have barely rebounded from their recessionary lows. Top executive pay levels, by contrast, have rebounded nearly all the way back from their pre-recession levels.
This contrast shows up starkly in the 2010 ratio between average worker and average CEO compensation. In 2009, we calculate, major corporate CEOs took home 263 times the pay of America's average workers. Last year, this gap leaped to 325-to-1.
Among the nation's top firms, the S&P; 500, CEO pay last year averaged $10,762,304, up 27.8 percent over 2009. Average worker pay in 2010? That finished up at $33,121, up just 3.3 percent over the year before.
What are America's CEOs doing to deserve their latest bountiful rewards? We have no evidence that CEOs are fashioning, with their executive leadership, more effective and efficient enterprises. On the other hand, ample evidence suggests that CEOs and their corporations are expending considerably more energy on avoiding taxes than perhaps ever before — at a time when the federal government desperately needs more revenue to maintain basic services for the American people. This disinvestment also undermines the infrastructure and services that small and large businesses also depend upon.
Investigative journalists and tax research organizations have been documenting how U.S.-based global companies are aggressively shearing — and even totally eliminating — their federal income tax obligations. This past March, for instance, The New York Times traced the steps General Electric has taken to avoid U.S. corporate taxes for the last five years. Citizens for Tax Justice, as part of a forthcoming study on tax avoidance among the Fortune 500, has identified 12 corporations that have paid an effective rate of negative 1.5 percent on $171 billion in profits.
How do corporations avoid taxes?
In our analysis of companies that last year paid their CEOs more than Uncle Sam, the companies' low tax bills — or large refunds — could not be explained by low profit rates. A large majority of the 25 companies on our list reported high profits in 2010. The low IRS bills these companies faced reflected tax avoidance pure and simple.
Our 25 hyperactive tax-dodging corporations employed a variety of avoidance techniques. Not all of these techniques are nefarious. Some corporate tax breaks can have redeeming social value. Incentives that encourage our economic transition to a green energy economy offer one example of these beneficial breaks. But such incentives as these play only a minor role. The lion's share of tax breaks reward corporate behaviors — from "offshoring" to accelerated depreciation — that are of questionable value to society, especially over the long term.
Ironically, and tellingly, corporations can even lower their tax bills by overcompensating their executives. The higher CEO paychecks soar, the more corporations can deduct off their taxes.
No tax-dodging strategy over recent years has filled U.S. corporate coffers more rapidly than the offshoring of corporate activity to tax havens in low- or no-tax jurisdictions. Eighteen of the 25 firms highlighted in this study operate subsidiaries in offshore tax haven jurisdictions. The firms, all combined, had 556 tax haven subsidiaries last year.
Tax havens are costing the federal treasury, by one estimate, $100 billion a year. These havens are speeding the transfer of wealth out of local communities and the global south into the bank accounts of the planet's wealthiest and most powerful. Tax havens, or more accurately "secrecy jurisdictions," can also facilitate criminal activity, from drug money laundering to the financing of terrorist networks.
How do tax havens work? One common corporate accounting technique, "transfer pricing," helps corporations shift profits offshore. Technology and drug companies regularly open shell companies — in tax havens — that hold their intellectual property rights. They then charge their U.S.-based operations inflated amounts for the use of these rights. These inflated costs get deducted off U.S. taxes. The overseas tax haven profits go un- or lightly taxed. Adding insult to injury, a coalition of corporate tax dodgers is now asking Congress to reward their tax avoidance with a deeply discounted five percent tax rate if they bring these funds back home where many of them started.
This offshore tax gaming has spawned a massive global tax avoidance industry, with teams of lawyers and accountants who add nothing to market efficiency or product development. This "shadow" banking industry played a key role in the 2008 financial crisis. The "shadow" system's reckless financial maneuvering operated through layers of opaque offshore tax havens.
The two biggest bank recipients of U.S. taxpayer bailouts — Citigroup and Bank of America — both just happen to be tax haven-happy. Citigroup operates 427 subsidiaries in tax havens, the Bank of America 115.
Accounting games like "transfer pricing" have sent the corporate share of federal revenues plummeting. In 1945, U.S. corporate income taxes added up to 35 percent of all federal government revenue. This year, corporate income taxes will make up just 9 percent of federal receipts. In 1952, the year Republican President Dwight Eisenhower was elected, the effective income tax rate for corporations was 52.8 percent. Last year it was just 10.5 percent.
Proposals to rein in tax dodging and excessive pay
Tax-dodging corporations argue they are breaking no laws. They are just, the argument goes, operating "under the rules that Congress has established." They are indeed. But massive corporate outlays for lobbying and campaign contributions shape those rules. The 25 firms highlighted in this study spent a combined total of more than $150 million on lobbying and campaign contributions last year.
All the companies highlighted in this report benefit enormously from their institutional presence in the United States. They utilize our taxpayer-funded infrastructure for transportation. They tap into government-sponsored research and subsidies for technological innovation. They expect the U.S. law enforcement and judicial systems to protect their intellectual and physical property. And they rely on the U.S. military to defend their assets abroad.
U.S. corporations also benefit from the public education of their workforces. In fact, 16 of the 25 CEOs included in this study received at least a portion of their post-secondary education in taxpayer-supported public universities. Yet these same corporations remain content to let others pay the bills.
We have, in short, a corporate tax system today that works for top executives — and no one else.
In this year's edition of our Executive Pay Reform Scorecard, we highlight the many efforts underway to change the rules that are contributing to executive pay excess. These include efforts to rigorously implement the executive pay provisions in the Dodd-Frank financial reform law, as well as more far-reaching proposals that would use tax and procurement policies to discourage runaway pay.
Read More: http://www.ips-dc.org/campaigns/tax-dodging-ceos/
Top Opinion
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jeniijo!BN! 2011/09/05 01:45:38Yes, I will sign the petition. (Link to the petition is at the end of the art...
I hope I didn't come off as too obnoxious. Sometimes I get so angry over the greed of corporations that don't give a hoot. I try to be a fair person & like getting perspectives from "people in the know."
How many of you use an accountant or H&R Block or similar tax service to file your taxes for you ever year? How much to you think a big corporation pays these type firms for their accounting and tax advisory expertise?
On a national basis, American individuals and businesses spend over $480 Billion on such services each year.
That's $480 Billion that doesn't get spent on finding a new cure for cancer, or building a 80mpg car, or finding new sources of economical energy. That $480 Billion provides Americans with NO INTRINSIC VALUE other than to keep the devil from robbing us of any more than the absolute minimum we can get away with.
The FairTax eliminates that cost and moves ...
How many of you use an accountant or H&R Block or similar tax service to file your taxes for you ever year? How much to you think a big corporation pays these type firms for their accounting and tax advisory expertise?
On a national basis, American individuals and businesses spend over $480 Billion on such services each year.
That's $480 Billion that doesn't get spent on finding a new cure for cancer, or building a 80mpg car, or finding new sources of economical energy. That $480 Billion provides Americans with NO INTRINSIC VALUE other than to keep the devil from robbing us of any more than the absolute minimum we can get away with.
The FairTax eliminates that cost and moves it over to the benefit side of the economic ledger. A benefit for whom ever creates a better widget, and the consumer that gets to use that widget to make their daily lives better. That's the REAL cost of our complex and draconian tax code.
And instead of nibbling around the edges with useless petitions asking to tax one group more than they tax some other group. Why not simply replace the entire system with one that is far more efficient?
In Florida, which has no income tax, just 6% of the retail businesses collect over 90% of all tax revenue collected by the state.
That's efficiency. And the FairTax would do the same thing.
We don't need to change the tax code. We just need to close some loopholes.
Only the easy stuff that is not full of intellectual property goes overseas. This is good business, and allows me to hire seasoned professionals. The type of work we do is all non-disclosure stuff, so we sometimes require employees to have a certain security clearance. (Hence high pay and no turnover).
P.S. We generate more sales outside of the USA then inside, so we are one of the few companies who are bringing a net gain in the trade deficit
That's why abolishing our gerrymandered hodgepodge of taxes is what's really needed.
If we really want to be fair, simply tax what people consume and let them keep all their income, wages and wealth they can create and accrue. Everyone buys stuff... even fat cat CEO's.
Whether its a Toyota Corolla for $14k or a big Mercedes for $140k, a $5 foot-long from Subway, or a $75 Rib-Eye at Ruth's Crist's Steak House...everyone pays the same tax rate at the check-out, and everyone gets the same tax refund on basic necessities. Easy, Simple, Fair and Cost Effective.
If you choose to buy a USED car, used boat, existing house, etc, you pay no sales tax. Same with educational tuition... No sales tax. Dittos for investments, no sales tax. (suddenly the whole investment universe is your IRA!) What ever you buy, you are spending your UNTAXED earnings. If you are currently in the 25% income tax bracket and pay 7.65% employment tax, you effectively are paying 1/3 of your earnings in tax. If you want to buy a $100 item, you first have to earn $150 and have the gov't take $50 away from you before you ever see it.
With the FairT...
That's why abolishing our gerrymandered hodgepodge of taxes is what's really needed.
If we really want to be fair, simply tax what people consume and let them keep all their income, wages and wealth they can create and accrue. Everyone buys stuff... even fat cat CEO's.
Whether its a Toyota Corolla for $14k or a big Mercedes for $140k, a $5 foot-long from Subway, or a $75 Rib-Eye at Ruth's Crist's Steak House...everyone pays the same tax rate at the check-out, and everyone gets the same tax refund on basic necessities. Easy, Simple, Fair and Cost Effective.
If you choose to buy a USED car, used boat, existing house, etc, you pay no sales tax. Same with educational tuition... No sales tax. Dittos for investments, no sales tax. (suddenly the whole investment universe is your IRA!) What ever you buy, you are spending your UNTAXED earnings. If you are currently in the 25% income tax bracket and pay 7.65% employment tax, you effectively are paying 1/3 of your earnings in tax. If you want to buy a $100 item, you first have to earn $150 and have the gov't take $50 away from you before you ever see it.
With the FairTax, there is no income or employment tax, and no withholdings. You keep the entire $150 to buy whatever you want.
Did you know that the average small business pays out $1.82 for every actual dollar that the fed collects in tax revenue? That's because the average small business has to hire expensive tax advisors and preparers to do their taxes for them... and as they become more successful, they need greater (and more expensive) tax consulting services.
Most small start-up businesses don't even owe any taxes because they didn't generate any profits in the first couple years of operations... but they still have to hire "tax experts" to tell them that they don't owe any money... so the complexity of the system imposes a penalty on even those that don't have to any tax owed. And for those that do their tax filings themselves, Americans spend more man/hours calculating and documenting their own taxes than all of the manhours spent on building all of the cars, all of the boats, all of the airplanes and all of the new homes in the United States... and we don't get paid one dime for our time and efforts!
With the FairTax, the more than $480 Billion that is now spent on tax advisory, consulting and documentation services would become unnecessary. That's almost a half Trillion dollars that could be put to better use, like business development, expansion and job creation.
Removing the "tax component" from manufacturing things would make our nation a tax haven for global companies that sell their products overseas. These are the firms that would want to build their next factory right here in the U.S. And that means hiring Americans to work there.
By imposing just another layer of complex regulations so as to force CEOs and Corporations to pay "there fair share" will only motivate these companies to 1) find other loopholes in the system, 2) hire lobbyists to CREATE loopholes in the system... or 3) much worse... simply leave to go to another more tax friendly country where they can build their products without all the burdensome regs and taxes.
On the other hand... the best and simplest solution is to simply cure the problem... Abolish the current Tax Code and replace it with the FairTax.
As an employee I pay the same social security, medicare, ...
As an employer, I pay social security again, at a similar rate. (So that is 2X)
As a business owner, I pay taxes on corporate earnings, either on my personal return as income (if an S-Corp); or if a C-corp, then the corporation pays it.
Then, of course, we have state taxes.
So don't think that businesses can ever get away without paying any taxes. Ask any accountant. I don't have the balls to ask the IRS how much they will pay me if I let cows graze in my yard like Michael Dell does .. see below ;)
According to an article in The Nation, that’s what Michael Dell did with his second home—a suburban ranch in Austin. Because he hunted there periodically and maintained a “well-managed deer herd,” he was able to reduce the property’s 2005 market value from $71.4 million to an agricultural value of $290,000. That saved Dell—but cost Texas—$1.2 million. In 2007, The Wall Street Journal reported that Korea’s Samsung Electronics was able to qualify for a “wildlife management” agricultural tax exemption on more than fifty acres of land outside its semiconductor plant in Austin simply by ...
As an employee I pay the same social security, medicare, ...
As an employer, I pay social security again, at a similar rate. (So that is 2X)
As a business owner, I pay taxes on corporate earnings, either on my personal return as income (if an S-Corp); or if a C-corp, then the corporation pays it.
Then, of course, we have state taxes.
So don't think that businesses can ever get away without paying any taxes. Ask any accountant. I don't have the balls to ask the IRS how much they will pay me if I let cows graze in my yard like Michael Dell does .. see below ;)
According to an article in The Nation, that’s what Michael Dell did with his second home—a suburban ranch in Austin. Because he hunted there periodically and maintained a “well-managed deer herd,” he was able to reduce the property’s 2005 market value from $71.4 million to an agricultural value of $290,000. That saved Dell—but cost Texas—$1.2 million. In 2007, The Wall Street Journal reported that Korea’s Samsung Electronics was able to qualify for a “wildlife management” agricultural tax exemption on more than fifty acres of land outside its semiconductor plant in Austin simply by erecting some birdhouses, eradicating ants, and taking a wildlife census. By doing that, the company reduced its tax bill by nearly 100%–from $21, 080 to $135! It’s sad to note that all the agricultural tax breaks in Texas have cost public schools in the state $1.5 billion in lost revenue.
A Few More Examples of Agricultural Tax Breaks
Colorado: Assessors in the state were reported to have said that even parking lots have qualified for agricultural tax breaks after some cows were brought in to graze on grassy strips between lanes. (Common Dreams)
Florida: Walt Disney World has received a farming tax break on 1,600 acres where it grows plants for its theme parks. At the time this was reported, the land owned by Disney was actually valued at $194 million but was taxed on a value of $12.3 million. (Common Dreams)
Alabama: In Mobile County, Ala., Delaney’s Inc. has planted pine seedlings on 54 acres left over after building a Hampton Inn, Marriott Courtyard, Lowe’s and Wal-Mart. This “tree farm” has been subdivided and laced with paved streets in preparation for development, and local officials insist that the land is not suitable for growing timber. But the developer’s lawyer pointed out that the law doesn’t require Delaney’s to be a good farmer — just a farmer. The result: a 2003 tax bill of $152 instead of $64,230. (Common Dreams)
How about defending your claim that its harmful to all but the rich?
Give me a hypothetical for instance... with a $60k family and a $20k family... or YOU choose the income...
http://www.fairtax.org/site/P...
Sad but the truth is the truth my friends If you want it to continue that way I urge you to continue to vote for the for the President. However if you can recognize the peril our country is in, then I URGE you to support TEA party recommended candidates in 2012 and 2014
Neither of them have any motivation to change that system. That is primarily why the TEA party was started. Their goal is to reform our tax system to take away the ability of Congress to run what is for all intents and purposes a clearing house where tax write offs and deductions are for sale and they are the sellers. That's why no matter which party is in power we see exactly the same things happening.. Company's like GE and many others making massive profits yet having no tax liability. Now you will either take the time and just consider the possibility that what I am saying is basically the truth or not. I hope you will.
Senators Carl Levin (D-MI), Kent Conrad (D-ND), Bill Nelson (D-FL), Bernie Sanders (D-VT), Jeanne Shaheen (D-NH) and Sheldon Whitehouse (D-RI) introduced S. 1346, the Stop Tax Haven Abuse Act, in the Senate on 14 July 2011.
http://www.opencongress.org/b...
I've been spending time on the House side since all tax legislation must originate there.
If I have to save all the nickels from my flavored water deposits to contribute to his campaign I'm gonna do it.