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THANKS FOR THE FREE RIDE, SUCKERS.

September 13, 2014

THANKS FOR THE FREE RIDE, SUCKERS.

Senator Carl Levin, retiring U.S. senator from Michigan and a stalwart defender of labor, has called our attention to the growing movement by U.S. corporations to swear off their U.S. citizenship and move their mailboxes, for tax purposes, to low-tax jurisdictions. He thinks we should put a stop to corporate America’s latest attempt to enjoy all the rights and protections of an American corporation but not pay their share of the tax load, already ridiculously low at an average effective rate of 12%.

Corporate apologists on Fox News and business dirt sheets are always complaining about the high statutory rate of 35% corporations must pay, but conveniently neglect to tell us that few if any pay at that level. Many (including GE which has paid an average effective rate of 2.3% over the past several years and none in 2010 – instead enjoying a $3 billion dollar rebate from our treasury) of such highly profitable defense contractors pay little or nothing due to loopholes carved into the Internal Revenue Code by their friendly campaign contribution-loving members of Congress. Thus GE in 2010 not only paid nothing on billions in profits; its accountants even fashioned out a return that netted them $3 billion, $3 billion you and I have to make up. GE not only got free ride; you and I paid it for the privilege of playing suckers in the tax game big corporations have orchestrated via their congressional lackeys.

Apparently such next to nothing tax rates are not enough for greedy corporations; they now want to pay even less with the pretense that they are, FOR TAX PURPOSES ONLY, a foreign corporation subject to the tax laws of Ireland, The Caymans, Bermuda or other such tax havens. I have already treated Apple’s movement of income into low tax jurisdictions for purposes of advantageous tax treatment in an earlier blog and that is bad enough (lack of nexus), but this latest exercise in corporate greed goes even further.

These greedhogs want it both ways; they want to be an American corporation for all the advantages of protection of patents, intellectual properties and the American legal system but at the same time move their “headquarters” to low-tax venues for ”tax purposes only.” This effectively means that their boards of directors and not Congress are to have the power to determine what facet (corporate tax) of corporate activities will or will not be considered in isolation. It is a despicable attempt to enjoy all the “goodies” but lay the costs on the rest of us. What’s next, a move to some low-wage venue such as Sudan “for labor payment only?” A move to rape-happy India for “sexual harassment claims only?” How far can this fantasy extend and where does it end (or is there an end to total and unrelenting greed)?

How about a category that American corporations are American corporations “for all purposes,” including paying their share of the tax load instead of laying it on the rest of us, Democrats and Republicans alike? What the current situation amounts to is this: We corporations want you taxpayers to pay for all of the goodies American corporations enjoy but at no cost to us, our only costs being outsourced labor in the Orient and elsewhere, and (as we shall see) we want federal contracts paid for by you taxpayers so that we can produce such goods and services under the terms of such contracts overseas with slave labor and ship such products back to the United States (free of tariffs, of course). This “heads I win, tails you lose” arrangement is blatantly one-sided and should be both rejected and condemned by every non-corporate taxpayer wherever you go to church and however you vote.

Three months ago Senator Levin introduced the Stop Corporate Inversions Act with 22 co-sponsors. This will, it is said, put a stop to corporate inversion to wherever they want to relocate.  A few weeks ago he and Senators Reed of Rhode Island and Richard Durbin of Illinois introduced anther bill, the No Federal Contracts for Corporate Deserters Act, which would ensure that companies that shift overseas and renounce their U.S. citizenship to avoid taxes don’t get taxpayer-funded federal contracts. There have, of course, been federal restrictions on federal contracting with inverted corporations since 2002, and since 2008 there has been a government-wide provision banning contracts with inverted corporations, a provision that has been included in every annual appropriations bill; but unfortunately, there have been loopholes in the current law which corporations have used to beat the bill’s legislative intent. His No Federal Contracts for Corporate Deserters Act would close these loopholes, loopholes that have allowed some inverted corporations to continue collecting revenue from American taxpayers while at the same time shifting their tax burden upon those same American taxpayers. The bill also makes the existing ban in annual appropriations bills permanent. Both these bills should be supported by Democrats and Republicans alike, since taxpayers of whatever political temperament are being victimized by welfare-loving corporations who want all the free goodies they can get at the expense of all rest of us.

With an average effective rate of only 12%, one might reasonably ask why some corporations would want to go overseas, but as Senator Levin points out, “When companies can go to places like Ireland or the Caribbean and negotiate sweetheart deals to pay little or no taxes, there will always be tax incentives for companies to abandon their country instead of paying their tax bill, no matter what our tax rate is.” He is right, and I would additionally note that all such corporations who want to go overseas “for tax purposes” (while enjoying the rights and privileges you and I provide and pay for) do not rely on federal contracts. Many such as Apple and others simply put the pieces together in the Orient and other low-wage jurisdictions and ship them back here for sale. No federal tax money is directly involved, though Apple profits greatly from lack of having to pay fair wages, low or no tariffs, and their accounting maneuver of pretending that their profits come from low-wage jurisdictions in order to reduce income otherwise subject to a higher rate of tax liability when such profits are repatriated to the United States.

Some say that we should wait for tax reform to address this issue of inversion and federal contracting reform. I am not one of them. We are bleeding now and it’s tourniquet time, and besides, there is no assurance that we are going to have a tax reform bill or that these issues would be adequately addressed in a future reform package if we did have one given  corporate influence is such matters. Both of the bills identified here should be fast-tracked through the legislative maze and sent to the executive for signature post haste. We need sutures now, not corporate flak talkathons.

These two bills are not tax bills; they are contracting bills, so let us not be confused with Fox News drivel and dirt sheet pretense. Let’s tell our federal representatives and senators to move these bills along the road to law without delay. To delay these bills amounts to a vote for paying for this latest chunk of corporate welfare out of our own pockets, an outcome I should think would be anathema to tea partiers and liberal Democrats alike. No? O.K., all of you break out your checkbooks.   GERALD   E

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