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May 31, 2011
Tony Pugh, McClatchy Newspapers

WASHINGTON — As a liberal tax-code activist, Robert McIntyre shocked Washington in 1984 when he revealed that General Electric was one of 17 companies that paid no U.S. corporate taxes for three straight years.

The finding by McIntyre's organization, Citizens for Tax Justice, sparked national outrage that helped pave the way for The Tax Reform Act of 1986. That landmark legislation eliminated tax loopholes to broaden the tax base while also lowering the corporate tax rate.

It also increased corporate tax revenue flowing into the Treasury by 34 percent.

As the Obama administration readies a proposal to overhaul the nation's corporate tax structure once again, some of the same tax-code giveaways that prompted the 1986 overhaul have reappeared. GE's low U.S. corporate tax burden is still ruffling populist feathers, lobbyists and legislators have padded the tax code with hundreds of new loopholes and McIntyre is again agitating for change.

This time around, he's joined by dozens of national and state organizations that want corporations to pay down a larger share of this year's $1.5 trillion federal deficit. They're urging Congress and the Obama administration to make it happen.

To simplify the tax system, President Barack Obama wants to close a host of corporate tax breaks and use the extra revenue that would generate to offset a reduction in the corporate tax rate. America's top corporate tax rate of 35 percent is one of the highest in the world, but most companies pay a much lower effective tax rate because the system is riddled with tax breaks.

Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years — without adding to our deficit. It can be done," Obama said to applause during his State of the Union address.

But Obama's approach wouldn't take the revenue gained by ending loopholes to pay down the deficit, as the liberals propose; he'd use it all as a tradeoff for the lower corporate tax rate.

Obama's stand is rooted in political reality: Any plan to end corporate tax breaks and steer the revenues to the Treasury would be considered a tax increase by business and Republicans — and would be dead on arrival in the GOP-led House of Representatives. So instead, Obama backs a budget-neutral plan that would make the tax code more efficient and promote U.S. economic competitiveness — and that makes it hard for Republicans to reject his proposal outright.

His approach meets the terms of a tax pledge signed by more than 230 GOP House members and 41 Republican senators. In signing the pledge, sponsored by Americans for Tax Reform, a conservative lobby, lawmakers agree to fight any efforts to cut or eliminate tax breaks unless they're matched by identical cuts in the tax rate — which is exactly what the Obama plan calls for.

But McIntyre and his fellow liberal tax activists don't like it. They question why savings from a reduction in corporate tax subsidies should go right back to businesses in the form of a tax cut. Shouldn't some, even most, of the billions in new revenue go toward reducing the deficit, they ask? After all, that would provide some relief to ordinary citizens who otherwise will bear most of the deficit-reduction burden through cuts in government services.

Business lobbyists see things differently.

Caroline Harris, chief tax counsel for the U.S. Chamber of Commerce, said the federal deficit is due to overspending, not under-taxing (although that's highly debatable, as statistics show the overall federal tax burden is well below historic norms.)

"If you have a spending problem, you need to fix it with spending cuts," Harris said. "If Congress can't show fiscal austerity and make spending cuts, then taxing or putting the weight of deficit reduction on the backs of businesses that create jobs is not a good idea."
Republicans in Congress agree. However, an April Gallup poll found that 2 out of 3 Americans think corporations pay too little in taxes, while only 1 in 5 said businesses pay their fair share.

In a letter to Congress, McIntyre's group and a host of labor and liberal allies say that lawmakers, in their zeal to cut the federal budget, have ignored corporate tax subsidies, which deny the Treasury revenues and thus increase budget deficits the same as direct program spending. Why, they ask, aren't those breaks on the table in all the deficit-reduction talks?

The 10 largest corporate tax breaks will cost the federal government more than $351 billion from 2010 to 2014, according to the non-partisan Joint Committee on Taxation.

"It makes no sense for Congress to debate cuts in public services that working families rely on while ignoring the public spending that benefits corporations and is hidden in the tax code," the letter reads. "We strongly believe most, if not all, of the revenue saved from eliminating corporate tax subsidies should go towards deficit reduction and towards creating the healthy, educated workforce and sound infrastructure that will make our nation more competitive."

The sentiment has struck a note with liberal lawmakers such as Sen. Barbara Boxer, D-Calif., who says it's time for revenue-raising tax overhauls.

"It's an opportunity to put into place some fair tax policies that, in fact, produce revenue from the richest people in this country and the richest corporations that should be paying," Boxer said.

But getting any kind of tax-code clean-up through Congress is never easy, and in the polarized politics of Obama's Washington, it's harder than ever. Democratic Sen. Ron Wyden of Oregon and former Republican Sen. Judd Gregg of New Hampshire sponsored the Bipartisan Tax Fairness and Simplification Act of 2010. It would have coupled a corporate tax cut with the rollback of tax breaks for individuals and corporations.

The measure died in committee.

Until more details of President Obama's tax plan are released, it's unclear how much support it could receive from Republicans and the corporate sector.

What is clear is that there's little chance of passing legislation aimed at increasing corporate tax revenue, said Senate Budget Committee Chairman Kent Conrad, D-N.D.

"It's very hard to be revenue-neutral and reduce the (tax) rate, so going even further than that is a hard thing to do," Conrad said. "Hard in terms of the substance. Hard in terms of the politics. Hard to do."

Even McIntyre concedes that the fight will probably take several years. For inspiration, he remembers the years of work it took to pass the 1986 tax overhaul under President Ronald Reagan, a Democratic House and a Republican Senate.

"It was kind of a miracle, and the stars had to be aligned. But we can do it again," McIntyre said."

May 26, 2011, Original Post
By John D. McKinnon
Another battle is brewing over which companies pay what under the U.S. tax code.

The left-leaning Citizens for Tax Justice said it expects next week to release the first installment of its long-awaited study on the taxes that various big U.S. multinationals have been paying. The list will include a dozen or so companies “that didn’t pay much of anything in taxes,” according to CTJ Director Robert McIntyre. He said the list would include General Electric Co., which critics say has used various lawful breaks to shave its tax bills.

Mr. McIntyre did a similar report in the 1980s that was influential in building momentum for tax reform during the Reagan era. That study showed many U.S. companies were paying at low effective rates.

GE spokesman, Andrew Williams, said the company is “fully compliant with all tax laws.” He said the reason the company’s federal tax rate has been low recently is because GE Capital, the firm’s financing arm, lost billions of dollars during the financial crisis. “GE’s tax rate will be much higher in 2011 as GE Capital recovers,” he added.

GE CEO Jeff Immelt is chairman of President Barack Obama‘s Jobs and Competitiveness Council.

Mr. McIntyre did a similar report in the 1980s that was influential in building momentum for tax reform during the Reagan era. That study showed many U.S. companies were paying at low effective rates.

The new CTJ study will mark the latest round of a fight over whether U.S. companies pay a lot in tax or only a little. Many businesses and their advocates point out that the U.S. corporate tax rate is among the highest in the world, at 35%, compared with an average of about 25% for other developed economies. They’re using that argument to seek a big rate cut, saying that the statutory rate is what matters most to companies.

Many liberals contend, however, that U.S. system’s many tax breaks mean U.S. businesses actually pay much lower effective rates. They say any corporate-tax overhaul should eliminate the breaks, and they appear likely to oppose several other major reforms that businesses want, particularly in the international area.

To counter that argument, the Business Roundtable commissioned its own study that found that U.S. companies paid an effective rate of 27.7% between 2006 and 2009, compared with 22.6% for other developed nations. The effective rate for U.S. overseas rivals is even lower – 16.5% – in emerging economies.

Mr. McIntyre has argued that that measure is inappropriate, though, because it gives U.S. companies credit for taxes that they have deferred paying under the U.S. system, and might never pay. Most countries seek to tax only the money that companies make within their borders; by contrast, the U.S. system seeks to tax its companies on their global earnings. To make the U.S. more like the rest of the world, the U.S. allows companies to defer tax on their overseas earnings until the money is brought home.

(Orignal Post)

Article by: WAYNE COX
Updated: May 24, 2011 - 9:59 PM
    
This is not your mother's Minnesota Republican Party over at the Legislature, which broke up Monday night without a budget deal.

And judging from what they are proposing to do to the elderly, it isn't your grandmother's Republican Party, either.

Some of the sharpest criticism of legislation adopted by the Republican majorities has come from those who held elective office as members of Your Mother's GOP.

Former Gov. Arne Carlson helped create MinnesotaCare. It provides affordable health care for 160,000 Minnesotans. GOP legislation would turn it into a voucher system.

The Star Tribune covered a Carlson speech:

"Carlson said the vouchers would be so paltry that recipients would have to choose between high-cost plans they could not afford or no insurance at all. 'Lives will be lost.'

"'Sure, ask someone making $8,000 a year to buy a plan with a $1,000 deductible,' Carlson scoffed."

Duane Benson served as Senate minority leader during the 1990s. He now heads the Minnesota Early Learning Foundation. He told the Star Tribune it "truly boggles the mind" that the GOP majorities stripped "every syllable of every early education reform" from this year's legislation.

Dave Jennings was an excitable House Speaker in the mid-1980s before he developed a passion to improve schools and served as school superintendent in Minneapolis and later in Chaska.

He described, in a Star Tribune commentary, how Minnesota sensibly provides special funding to the school districts in Minneapolis, St. Paul and Duluth to reduce the achievement gap faced by the high levels of low-income students in those districts.

He dislikes legislation passed by the GOP that would take the achievement gap money from the urban districts and redistribute it to schools statewide.

He wrote: "The proposed solution appears to be a cynical effort, designed to look like help for suburban and rural schools (represented by Republicans) while crippling programs aimed at poor kids in three urban districts (represented by Democrats) and all without producing a real solution for anybody."

Former Rep. Dan Dorman served in the last decade. Now he is executive director of the Albert Lea Economic Development Agency.

He came to the Capitol along with leaders of eight Chambers of Commerce from around the state to support Gov. Mark Dayton's effort to secure new revenue to head off cuts to Local Government Aid. MinnPost reported:

"It was a message from Greater Minnesota that deep reductions to Local Government Aid, as proposed in the GOP bills, would do one thing: increase local property taxes.

The Department of Revenue estimates the GOP tax legislation would increase property taxes on homeowners and businesses by $1.2 billion between now and 2014.

House Speaker Kurt Zellers held his own press conference and said Republicans would be raising no taxes -- period. He said if local governments raised property taxes in response to cuts in Local Government Aid, that was their decision, not his.

The U.S. Supreme Court has deemed corporations are persons. It may have to give the same status to renters. That would help Speaker Zellers remember the $180 million increase in net taxes on renters he and his caucus have voted for by cutting the renters' credit.

The leaders of the Not Your Mother's Republican Party don't have to listen anymore to former Republican Gov. Al Quie, who has long argued that balanced solutions of some taxes and some cuts are appropriate ways to deal with tough projected deficits.

Nor to former U.S. Sen. Dave Durenberger, who sought in vain to get former Gov. Tim Pawlenty to support sensible health solutions.

These two leaders were purged from the Minnesota Republican Party for the crime of sometimes supporting candidates who do not subscribe to the litmus test of shrinking government until it can fit into a bathtub and be drained away.

The dirty little secret of the Not Your Mother's Minnesota Republican Party is that it takes marching orders not from local chambers of commerce in Waseca or Windom, but from Washington, D.C., groups that try to impose "no new taxes" pledges, that apparently have nice property tax escape clauses.

Gov. Dayton's tax plan nicks those at the top instead of those at the middle, in order to keep more Minnesotans working, with access to health care, and to keep pace with preparing workers and the economy for the future.

Several states have raised taxes at the top to keep their universities, their health care and their economies whole. The Minnesota Poll says that's the approach most Minnesotans are looking for.

Wayne Cox is executive director of Minnesota Citizens for Tax Justice.

(Original Post)

By Mark Engler

5:23 p.m. EDT, May 24, 2011
In 2009, when then-New York Gov. David Paterson signed a temporary tax increase on the state's wealthiest individuals — one of the so-called “millionaire's taxes” that have passed in recent years in select states across the country — at least one multimillionaire was not happy. Rush Limbaugh proclaimed he was selling his condo and abandoning that state as a part-time residence.

While Limbaugh attempted to depict himself as part of a wider trend, new studies show that surtaxes on the wealthy do not cause an exodus. Moreover, surveys demonstrate that Limbaugh's unhappiness represents a minority position. With debate in Washington focused on reducing the federal deficit and states facing yawning holes in their budgets, few ideas garner more public backing than that of top earners stepping up to help cover the gaps.

In New York, 71 percent of residents surveyed in a recent Siena poll favored an extension of higher taxes on the state's wealthiest. “This has broad popular support ... Republicans and Democrats, conservatives and liberals, upstate and downstate,” says Sunshine Ludder of New York's Center for Working Families. “If you ask people whether they'd rather have a millionaire's tax or have a billion dollars cut from education and healthcare budgets, the numbers go even higher.”

Responding to similar sentiments at the national level, a group led by Illinois Democrat Jan Schakowsky introduced the Fairness in Taxation Act on March 16, which would create a federal millionaire's tax.

The tax code makes few distinctions among the top 3 percent. Households making $250,000 per year are subject to rates almost identical to those making hundreds of millions. The Fairness in Taxation Act would create new tax brackets, starting at $1 million and going up to $1 billion. “There's no reason to treat the wealthiest 1 percent any more specially than anyone else,” said Arizona Democrat Raúl Grijalva, co-sponsor of the House bill, “and right now that's exactly what our tax system is doing.” The measure would raise more than $74 billion this year, according to estimates by the Citizens for Tax Justice.

With a Republican majority in Congress, the chances of passing a greater levy on the rich at the federal level are slim. But that has not stopped advocates from pushing to reform tax codes in the states, which tend to do even less to separate middle-class families from the most affluent residents.

Since 2008, Connecticut, Hawaii, Maryland, New Jersey, New York, North Carolina, Oregon and Wisconsin have all enacted some version of a tax increase on top earners, with varying thresholds for when new rates kick in. The measure passed in New York in 2009 raised the state's top tax rate by 1 point for individuals with incomes over $200,000 (or over $300,000 for couples) and by just over 2 points for those with incomes over $500,000.

The impact of these changes has been significant. “They have been able to help states avoid some really deep and painful cuts in important public services — layoffs of teachers and firefighters — and helped them continue to adequately fund healthcare and other safety net programs,” says Carl Davis, senior analyst at the Institute on Taxation and Economic Policy.

Despite these benefits, almost all of the taxes on the wealthy passed in 2008 and 2009 were temporary. With these expiring, state legislatures are debating about whether surcharges should be extended. Yet the political climate for these drives has been inhospitable of late.

In Hartford, the Connecticut Business & Industry Association convinced Gov. Dannel Malloy that any additional increase on top of the new top rate of 6.7 percent will send wealthy residents fleeing. New York Gov. Andrew Cuomo joined Republicans to thwart a renovated millionaire's tax this spring. And in New Jersey, Gov. Chris Christie vetoed a similar measure in 2010, vowing to do so again this year.

When Oregon reported it collected substantially less from its tax on high earners during its first year than projected, the Wall Street Journal pounced, casting the discrepancy as the result of an entirely predictable choice by wealthy taxpayers to depart.

But information from Oregon's Legislative Revenue Office indicated that the decline in the number of millionaires had little to do with migration. It suggested people were simply making less money in a recession, thereby falling into lower brackets that were not subject to the new tax.

In April, Jeffrey Thompson of the Political Economy Research Institute at the University of Massachusetts published an analysis of IRS migration data in New England. Pointing out that “more than half of American adults have never lived in any state other than where they were born,” the report demonstrated that migration across state lines is rare and taxes have little role in people's decisions to move.

“These papers show that while state policy-makers may be afraid of taking the steps to generate revenue, some of their worst fears are unlikely to be realized,” Thompson says.

The billions already collected from taxes on top earners are hardly insignificant for cash-strapped states, and these measures could be even more vital in the long term.

“With so much income growth having been concentrated at the upper end of the scale, calibrating your tax system to take account of that fact is a good thing,” Davis says. “If millionaires continue to do as well in the years ahead as they have in years past, these can become very effective revenue-raising measures.

(Original Post)

I don't understand Republican math.

The budget proposed by Republican Rep. Paul Ryan eliminates Medicare as we know it, gives hundreds of billions of dollars in tax cuts to the wealthiest Americans and claims to balance the budget by 2040. This so-called balanced budget, so-called Medicare reform is a actually neither.

The Bush tax cuts and the wars in Iraq and Afghanistan will account for almost half of the $20 trillion in debt that, under current policies, the nation will owe by 2019, while the stimulus and financial rescues will account for less than 10 percent of the debt at that time. Nevertheless, the Republican-Ryan plan maintains these Bush-era tax cuts while cutting the top individual tax rate from 35 percent to 25 percent, eliminating corporate income taxes and repealing estate taxes. Yet, it still has the audacity to claim it'll keep tax revenues the same.

How do you make $5 when you give away $4? You don't. The only way to keep revenue levels the same is to increase taxes on everyone else. The Citizens for Tax Justice, using real numbers, estimates the Republican-Ryan plan will allow the richest 1 percent to pay an estimated $211,300 less, on average, but force the bottom 80 percent of taxpayers to pay an estimated $1,700 more, on average.

The best part about the Republican-Ryan plan is that it makes no significant progress in reducing the federal budget deficit. It proposes $4.3 trillion in savings by cutting programs for moderate-to-low income families and the elderly; however, these cuts are offset by $4.2 trillion in tax cuts to the wealthy. Meaning, it reduces the deficit by approximately $100 billion over 10 years.

Tax cuts will go toward wealthy companies as well. Over the past two years, ExxonMobil reported $9.9 billion in pretax profits but enjoyed so many tax subsidies its federal income tax bill was only $39 million — a tax rate of 0.4 percent. And, what did it do with those profits? In 2010, the four largest oil companies spent 60 percent of their profits on dividends and stock repurchases, but only 18 percent on exploration and development. In other words, they spent 3.3 times as much on boosting their share values (e.g. profits) as they did on research and development (e.g. reducing fuel costs). No amount of advertising or lobbying can refute these

numbers.

Today, oil is trading at more than $100 per barrel and gas prices are hovering at nearly $4 a gallon. Yet, Republicans insist on subsidizing them.

I haven't even got to the Republican-Ryan Medicare proposal. You know, the one where seniors end up paying twice as much out of their own pockets, or more than $12,510 a year according to the nonpartisan CBO, raises the portion of the premium paid by beneficiaries from 25 percent to 68 percent, and shifts — not reduces — shifts $34 trillion in costs to the elderly. One observer writes, "If you replace a system that actually pays seniors' medical bills with an entirely different system, one that gives seniors vouchers that won't be enough to buy adequate insurance, you've ended Medicare. Calling the new program 'Medicare' doesn't change that fact."

Republican presidential hopeful Newt Gingrich even called the Republican-Ryan Medicare plan as "right-wing social engineering." If your own presidential hopeful doesn't like it, you have a problem.

Then you have that little problem known as job creation. Republican economist Mark Zandi estimates the plan will cut 1.7 million jobs in its first two years. But don't worry, eight years after that we'll all be swimming in health insurance company jobs because of all the cash flowing to insurance companies from seniors and their families. If your own economist doesn't like it, you have a really, really big problem.

By disinvesting in productivity and competitiveness (i.e. education, infrastructure, and science technology) and giving tax cuts to the wealthiest people and wealthiest companies, the Republican-Ryan budget and Republican-Ryan Medicare plan puts zero value on America's economic future and hardworking middle class Americans.

Frankly, none of it adds up.

Joshua Stockley is a professor of political science at ULM.

(Original Post)

May 19, 2011
Ruth McCambridge

May 18, 2011; Source: Bloomberg.com | A number of high profile nonprofits and unions called on Congress yesterday to increase taxes on corporations by eliminating tax subsidies. In doing so they have taken a leadership position that is in opposition not only to Republicans but also to President Obama, who is looking for an elimination of deductions and credits, but also seeks to cut the 35 percent tax rate on corporations.

The group, which includes the Service Employees International Union, the AFL-CIO, the Children’s Defense Fund, National Education Association, National Low Income Housing Coalition, and Citizens for Tax Justice writes, “we strongly believe most, if not all, of the revenue saved from eliminating corporate tax subsidies should go towards deficit reduction and towards creating the healthy, educated workforce and sound infrastructure that will make our nation more competitive.”

Corporations have been making themselves heard in force on proposals to alter the tax code, saying they are hampered in overseas competition because of their 35 percent tax burden and taxes on repatriated offshore profits.

The nonprofit coalition says that competitiveness depends more upon infrastructure and education than on tax breaks and urged Congress to examine the many ways in which corporations avoid paying the 35 percent levy.—Ruth McCambridge

A new law designed to prevent offshore tax evasion has set off a surge of lobbying, with several foreign financiers and trade associations turning to K Street for the first time.

At issue is the Foreign Account Tax Compliance Act (FATCA), which requires foreign financial institutions to report their accounts held by American citizens to the U.S. government. Firms that fail to provide that information would face a 30 percent withholding tax on their U.S. revenue.

The IRS is crafting regulations to implement the law, which was passed in March of 2010 in an attempt to crack down on offshore havens that are often used to dodge tax payments.

 “It is going to affect all foreign financial institutions unless the IRS grants them an exemption,” said Tom Yancey, a partner in Sidley Austin’s tax firm. “It includes banks, brokers, investment funds and some insurance companies. It has a very broad scope.”

 FATCA is set to take effect in 2013. Since the midterm elections, close to a half-dozen banks and business groups with overseas ties have hired leading tax lobbyists to work on the law.

 In November, Patton Boggs disclosed that it was lobbying for the Australian Bankers’ Association. The firm’s lobbying team includes Stephen McHale, who worked at the Treasury Department for 12 years, including a stint as acting general counsel, according to lobbying disclosure records.

 Barclays Capital Inc. signed up with Washington Council Ernst & Young to help lobby on the law, according to records released this March. Nick Giordano, once chief tax counsel for the Senate Finance Committee and a former aide to Sen. Max Baucus (D-Mont.), is lobbying for the bank.

Jeff Levey, the firm’s executive director, who is also registered to lobby for Barclays, said Congress has left it to the executive branch on how the tax law is applied. 

“There’s just a tremendous amount of detail left to the IRS and Treasury to determine through regulations so it would make sense that financial institutions would want to be fairly aggressive in talking to regulators,” Levey said.

 And according to disclosure records released last month, Deloitte Tax was hired to lobby for the Investment Funds Institute of Canada, the Life Insurance Association of Japan and the Association of Private Client Investment Managers & Stockbrokers, a London-based trade group. The firm, however, has already filed terminations for those clients.

 Some of the biggest names in finance and business are lobbying on the law, including IBM, JPMorganChase and New York Life Insurance Co., according to lobbying reports from the first quarter of 2011.

 Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice, said foreign banks fear losing their U.S. clients because of the law.

 “They are using arguments like ‘competitiveness’ and ‘regulatory burden.’ What they are really afraid of is they are going to lose their tax-evading customers,” Wilkins said.

 Foreign governments are also concerned. In an April 6 letter to Treasury Secretary Timothy Geithner and IRS Commissioner Douglas Shulman, Hungarian Finance Minister György Matolcsy and the European Union’s tax commissioner, Algirdas Šemeta, called for a dialogue on how to apply the law without hurting the European financial sector. 

 Yancey, of Sidley Austin, is part of his firm’s legal team representing the Cayman Islands government, which is particularly anxious about the looming tax rules. At a seminar sponsored by the government at the Marriott Grand Cayman Island Beach Resort last month, Yancey said organizers had to stop a speech he was delivering because of an overflowing crowd.

 “They cleared the room and brought in more seats so more people could get in,” Yancey said.

 Yancey helped file a comment with the IRS for the Cayman Islands last year on the new tax law. He said the Caymans want to help the U.S. government figure out how best to apply it.

 “They, like others, have concerns about what exemptions will be granted to investment funds and other structures that they believe do not present a high risk for U.S. tax evasion,” Yancey said.

 Others are also looking for exemptions. Veritas Pension Insurance Co., a Finnish company, filed an April 12 comment to the IRS asking for an exemption to FATCA that could work for it and other Finnish pension providers.

 The passage of the tax law came on the heels of the scandal that swirled around Switzerland’s largest bank, UBS, after it helped thousands of Americans evade U.S. taxes by setting up Swiss bank accounts for them. In February 2009, the bank agreed to pay $780 million in fines to settle U.S. criminal and civil charges. 

 Public interest groups are keeping an eye on the law as it moves through the regulatory process.

 Citizens for Tax Justice lobbied for the law last Congress. The group is part of the Financial Accountability and Corporate Transparency, or FACT, coalition, which launched last month to fight tax haven abuse and help bring down the federal deficit.

 Wilkins said that the Treasury Department loses up to $100 billion each year in owed taxes due to offshore accounts.

 “I hope they are not able to get through regulatory means what they couldn’t get through legislation. The Treasury should enforce the law,” Wilkins said.

(Original post)

May 18, 2011

By Sam Goldfarb, CQ Staff

A coalition of 250 organizations, mostly consisting of labor unions and nonprofit groups, is urging Congress to reject any tax overhaul proposal that would lower the corporate tax rate or fail to reduce the deficit.

“Some lawmakers have proposed to eliminate corporate tax subsidies and use all of the resulting revenue savings to pay for a reduction in the corporate income tax rate,” the groups wrote in a May 18 letter that was sent to every House member and senator.

“In contrast, we strongly believe most, if not all, of the revenue saved from eliminating corporate tax subsidies should go toward deficit reduction and toward creating the healthy, educated workforce and sound infrastructure that will make our nation more competitive.”

Steve Wamhoff, legislative director at Citizens for Tax Justice, said that his group had drafted the letter and recruited labor unions, including the Service Employees International Union, to sign onto it.

Wamhoff said that his organization and others were trying to grab the attention of lawmakers, particularly Democrats, who have contemplated reducing the corporate tax rate, which currently stands at 35 percent.

“Not many people in Washington are trying to get more revenue from corporations,” Wamhoff said in an interview, adding that the letter was drafted partly in response to suggestions that President Obama’s administration could release a corporate tax overhaul proposal soon.

Obama endorsed broadly lowering the corporate tax rate in his State of the Union address in January and also proposed eliminating specific corporate tax breaks in order to create a more streamlined tax system that could boost economic growth.

Many Republican lawmakers, including House Ways and Means Chairman Dave Camp, R-Mich., are also eager to drop the tax rate for corporations, although they oppose treating the corporate side of the tax code separately from the individual side.

While the U.S. has an unusually high corporate tax rate among advanced countries, liberals note that the effective tax rate for many businesses is much lower than 35 percent, in part because businesses are able to take advantage of tax breaks such as the research and development credit.

Advocates for reducing the corporate tax rate argue that it would prevent businesses from trying to lower their tax liability by setting up operations in less-heavily taxed countries.

(Original post)

May 18, 2011

U.S. banks fight to keep foreign nationals' accounts secret

By Michael Hudson

Imagine a coming wave of human and financial disasters:  Kidnappings in Latin America. Bank failures in Florida. Millions of jobs lost across the United States.

What could cause such chaos?

According to American bankers and their allies, a little-noticed proposed change in U.S. tax regulations.

These critics were out in force Wednesday at a public hearing in Washington, speaking against an Internal Revenue Service plan that would require U.S. banks to report the interest paid to foreign nationals with deposits. Bank industry groups told IRS officials that the proposal could drive capital out of the country, put banks at risk and leave well-off Latin Americans at the mercy of criminal thugs and corrupt politicians.

Supporters of the IRS proposal to help other countries crack down on tax cheats said these dire predictions are overblown.

Rebecca Wilkins, an attorney with Citizens for Tax Justice, said U.S. banks are using scare tactics to prop up a regime of financial secrecy that allows tax evaders and money launderers to thrive.

There is no evidence that there will be a wholesale flight of capital if the rule is approved, she said. The only people who will pull their money out of American banks will be tax evaders, she said.

“Those who oppose this regulation are those who favor tax evasion,” Wilkins said.

Wilkins spoke on behalf of the Financial Accountability & Corporate Transparency Coalition, which describes itself as a network of small business, consumer, grass-roots, financial policy, faith-based, labor and government accountability organizations.

As iWatch News has reported, the United States is a major tax haven for affluent Latin Americans even as the IRS fights to stop American taxpayers from hiding money in Swiss banks and other offshore destinations. Robert Goulder, editor-in-chief of U.S.-based Tax Notes International , calls the United States “the biggest tax haven in the world.”

American banks deny they help foreign nationals evade taxes in their home countries.

Under U.S. law, foreign nationals living outside the United States who deposit money in American banks don’t have to pay U.S. taxes, and the deposits and interest generally don’t have to be reported.

The current controversy over the issue began in January, when the IRS revived a 2001 plan that would require U.S. banks to report interest paid to foreign nationals. The earlier proposal, which drew widespread condemnation by bankers and politicians, was eventually watered down to apply only to Canadians.

The opposition from bankers and lawmakers is just as intense this time around. All 25 members of Florida’s U.S. House delegation have written President Barack Obama to ask him to kill the proposal.  

At the Wednesday hearing, opponents invoked both economic concerns at home and human rights worries abroad.

Thomas Cardwell, Florida’s commissioner of financial regulation, said that if the rule is approved, it’s “a real possibility” that some Florida banks could lose half their foreign deposits. Institutions with a high percentage of foreign deposits, he said, could face liquidity crises and, possibly, failure.

Grisel Vega, a board director of the Florida International Bankers Association, said that many Latin American nations are “global hot spots for kidnapping and ransom,” and Latin Americans fear they could become targets if information about their U.S. bank accounts is shared among tax authorities.

Wilkins of the Tax Justice Network said such fears are unfounded. Terrorists, drug dealers and kidnappers “already know who the wealthy people are” in their countries, she said.

IRS officials at the meeting gave no indication of the agency’s timetable or how it will proceed with the proposed rule. The agency received more than 60 letters and emails before the public comment period closed on April 7. Federal regulators typically spend weeks or months reviewing comments before deciding whether to finalize a proposed rule.

Elise J. Bean, chief counsel of the Senate Permanent Subcommittee on Investigations, added that the IRS already has extensive experience sharing information with other countries. The agency has procedures in place to make sure it doesn’t share data with foreign governments that might misuse the information, she said.

Speaking at the hearing on behalf of Sen. Carl Levin, a Michigan Democrat who has spent years investigating offshore tax havens, Bean said Levin “strongly supports” the new information-reporting proposal.  Levin would like to see the rule strengthened, she said, so that it also applies to foreign shell corporations that could be used by foreign nationals and by American citizens to hide their money from tax authorities.

(Original Post)

By Bernie Becker - 05/18/11 01:10 PM ET

Organized labor and other groups are pushing to eliminate corporate tax credits and deductions – and to use the extra revenue to roll back deficits, not pay for lower tax rates.

In a letter being sent on Wednesday to every member of Congress, scores of groups – including the AFL-CIO, AFSCME and Citizens for Tax Justice – say that it would be wrong for policymakers to move to bring down rates for companies that are making money while discussing cutting public services.

Washington officials on both sides of the aisle have called for a corporate tax overhaul, arguing that comparatively high U.S. tax rates in that sector need to come down to increase competitiveness for American businesses.

But the new letter pushes back on those assertions, saying that public investments that improve the country’s workforce and infrastructure would do a better job at giving companies a leg up globally.

“These public investments — such as education, health care, nutrition assistance, environmental protection and transportation — will face deeper cuts if we fail to rein in tax subsidies to profitable corporations,” the letter reads.

Tax reform, and the use of new tax revenue to reduce deficits, has been a common discussion topic in Washington of late.

Treasury Secretary Timothy Geithner and the top tax writers in both chambers – Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, and Sen. Max Baucus (D-Mont.), the Finance Committee chairman – are among those who favor a tax reform plan that would reduce rates while taking away some so-called tax expenditures.

Geithner has stressed that a corporate reform framework his department is working on would be revenue-neutral – neither adding nor subtracting from the deficit.

In general, the tax reform discussion appears to be in early stages, with potential hurdles such as whether to tackle the corporate code first or take a more comprehensive approach, as Camp has endorsed.

Those talks are also happening as Democrats are pushing the use of new tax dollars to help battle deficits, something GOP lawmakers have opposed.

But top Republicans like Sen. Jon Kyl (D-Ariz.) have appeared more open to taking away tax expenditures than raising tax rates or implementing a surtax on millionaires.

(Original Post)

By Richard Rubin -

U.S. labor unions and nonprofit groups, including the Service Employees International Union and the National Education Association, called on Congress to raise corporate taxes by eliminating “tax subsidies” and to resist calls by business groups to reduce the corporate tax rate.

That position puts the groups in opposition to the Obama administration, which is seeking an overhaul of the corporate tax code that would remove deductions and credits and cut the top corporate rate of 35 percent.

“In contrast, we strongly believe most, if not all, of the revenue saved from eliminating corporate tax subsidies should go towards deficit reduction and towards creating the healthy, educated workforce and sound infrastructure that will make our nation more competitive,” wrote the groups, which included the Children’s Defense Fund and Citizens for Tax Justice.

Lawmakers are considering a broad overhaul of the U.S. tax code. Last week, chief financial officers from Caterpillar Inc. (CAT), Zimmer Holdings Inc. (ZMH), United Technologies Corp. (UTX) and Kimberly- Clark Corp. told the House Ways and Means Committee that the top 35 percent rate and the U.S. tax on repatriated offshore profits hamper them against foreign competition.

In today’s letter, the groups wrote that competitiveness depends more on public investments in education and infrastructure than on tax policy. They urged Congress to examine the ways in which companies often pay less than the 35 percent rate.
‘Tax Loopholes’

“These tax loopholes often subsidize corporations for engaging in activities that do not make economic sense and some may even subsidize corporations for moving jobs offshore,” wrote the groups, which include the AFL-CIO and the National Low Income Housing Coalition. “Some U.S. corporations use these loopholes to avoid U.S. income taxes entirely.”

The Treasury Department is working on a corporate tax overhaul proposal. Secretary Timothy Geithner said yesterday that he hoped to make progress on the issue this year or next.

“We’d like to take a run at doing this ahead of the election,” he said in response to questions following a speech at the Harvard Club in New York.

Labor unions, which have supported President Barack Obama, have resisted some Democratic tax proposals, including attempts during the health care debate in 2009 and 2010 to impose a tax on the most expensive health care plans. Their efforts led Congress and the administration to scale back the proposal.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

(Original Post)

By Mark Trumbull, Staff writer / May 12, 2011

The oil industry, under fire from congressional Democrats for reaping big tax breaks even while amassing huge profits, responds with a simple argument: Don't pick on us.

Called to testify on Capitol Hill Thursday, executives from major oil companies like Exxon Mobil said eliminating tax-code perks for their drilling activities would amount to unfairly singling them out versus other industries that get tax breaks.

On this issue, the oil execs may have a valid point.

The Obama administration argues that rolling back tax incentives in the oil industry could save the federal government $44 billion over 10 years.

But, whether you agree with those tax breaks or not, the reality is they're part of a corporate tax code filled with special provisions that benefit a broad spectrum of industries.

Consider the finding of a 2008 study by Congress's Government Accountability Office: In 2005, it found, about 1 in 4 large corporations paid no corporate income tax. That's despite an official tax rate that calls for firms to pay 35 percent of their earnings to the federal government.

The reasons (not enumerated in the GAO study) include that many companies had no net profits to be taxed. But tax policies that corporations have lobbied for over the years also played a role in the outcome. Tax credits, overseas tax-shelter strategies, and tax benefits for stock-option awards to executives are among the key factors reducing corporate taxes.

More recently, companies such as General Electric have also been in the news for what critics say are large tax breaks. This week, it's the oil industry's turn.

"If we're going to have welfare for needy corporations," says tax expert Robert McIntyre, the oil industry is "not on the list." But he pushes that logic a step further: Why have tax policies that amount to welfare for corporations, he wonders, especially at a time when the federal government is running gaping deficits?

Arguments for corporate tax reform are being heard more loudly this year from tax specialists who are both liberal (Mr. McIntyre is director of the left-leaning Citizens for Tax Justice) and conservative. Such reform is viewed now as a crucial part of any serious effort to curb federal deficits over the long term.

Some important partisan differences exist.

Republicans typically say tax reform should be done in a way that reduces federal tax revenue from corporations, with the goal of America competing better against other nations as a place for companies to create jobs.

Many Democrats, by contrast, argue that reform can include both simplification – with a lower top tax rate and an enhanced ability for the United States to lure jobs – and more revenue for the federal government.

Either way, talk of streamlining the corporate tax system is rising. If the idea rolls forward, some corporations stand to lose favorite perks, but the idea is also backed by many business leaders as a step to make the US economy more competitive and efficient.

The official corporate tax rate of 35 percent is higher than rates in other advanced economies, because of tax cuts in those nations over the past three decades. But when it comes to the amount of money that companies actually pay in taxes, a 2007 US Treasury study found that American companies pay less in taxes than their counterparts based overseas.

US companies in the period from 2000 to 2005 paid taxes equal to 13.4 percent of their "operating surplus" (one way to measure profits), the study found. In advanced industrial nations overall, taxes totaled 16.1 percent of operating surplus.

The current tax code includes allowances for accelerated depreciation of the cost of investing in things like factories, equipment, or oil wells. But the provisions can vary for different types of assets that companies invest in. That, coupled with industry-specific tax advantages, means that some industries are effectively taxed at lower rates than others.

The oil industry, according to some academic research, pays taxes that are typically higher than in some industries (metal mining) and lower than in many others (restaurants or banks).

The Center on Budget and Policy Priorities, a liberal research group in Washington, argued in a recent analysis that corporate tax reform should move "toward a more even-handed treatment of different kinds of investments" to improve economic efficiency.

"Policymakers may still want to favor certain activities, such as research and development, that produce benefits beyond those that the individual firm will realize itself," the center recommended.

But determining when an exception is warranted and when it's just corporate welfare isn't easy.

In testimony presented to the Senate Finance Committee on Thursday, Exxon Mobil chief executive Rex Tillerson said that one large tax break – which the Obama adminstration wants to eliminate for the oil giants – is available to a wide range of industries as an incentive for job creation.

"Tax provisions such as the Section 199 Domestic Production Activities Deduction are not special incentives ... for oil and gas," Mr. Tillerson said, "but rather standard deductions applied across all businesses."

Although that's true, it's also the case that some industries like oil benefit a lot more than others from these deductions, McIntyre says.

(Original Post)

Eric Rosenbaum
05/12/11 - 02:47 PM EDT

NEW YORK (TheStreet) -- The bosses of Big Oil were called before the Senate Thursday morning in an attempt to defend the tax breaks that the government would like to take away from them.

Amid the grandstanding by politicians and the boilerplate rhetoric about U.S. competitiveness from oil-industry CEOs, a simple question arose: Is this an issue that energy investors need to monitor closely?

Certainly there are big stakes for Big Oil in the big tax debate, from the rush to invest in U.S. shale plays, to the use of profits to pay investor dividends and buy back shares, thereby boosting earnings.

For the senators on the Finance Committee, there were political point-scoring opportunities aplenty. They made pains to point out that even as oil companies book hefty profits, with the price of crude racing above $100 a barrel (at least until recently), the federal deficit grows ever more massive.

Yet in introducing the "Close Big Oil Tax Loopholes Act" N.J. Senator Robert Menendez wrote in an attack mode that took aim directly at issues dear to the hearts of investors: "According to a recent report from Citizens for Tax Justice, Big Oil companies spent most of their profits in the purchase of their own stocks and boosting its dividends between 2005-2010. In 2010, four of the largest 'Big Five' oil companies (excluding BP due to the oil spill) allocated only 18% of their post tax profits on exploration and 60 percent on dividends and stock repurchases."

Congress sees an additional $21 billion in tax revenue over ten years if the proposed legislation is passed. Big Oil argues that the tax revenue gained will be offset by the tax revenue lost when it pulls out of drilling programs in the U.S., state-by-state. Big Oil executives also made the case that the way to raise tax revenue from the oil and gas industry is to open up more land to drilling, which also increases U.S. energy independence.

On the dividend issue specifically, during the Thursday testimony Republicans turned this debate around, asking the Big Oil executives what the repercussions for Big Oil dividends would be if the tax changes were made and what the impact would be on U.S. pensioners whose pension assets are invested in state-run plans that rely in part on dividend streams from companies like the Big Oil stocks.

When BP had to suspend its dividend during the oil spill, institutional investors -- primarily representing British pension assets-- sold out of BP shares in droves.

The shares of all the five Big Oil companies declined on Thursday, though so did energy stocks and the equities market, and by the afternoon, the losses were minor.

Among the Big Oil big five called to the Senate, ConocoPhillips(CVX) shares were down the most of any of the Big Oil companies, at a 1% decline in the afternoon. On Wednesday, ConocoPhillips released a statement calling the tax plan "un-American," and its CEO James Mulva took a beating for the comment in the Senate testimony.

Royal Dutch Shell(RDS.A) and BP(BP) shares declined by less than 1%.

ExxonMobil(XOM) shares and Chevron(CVX) shares were flat in trading on Thursday afternoon.

Phil Weiss, an energy analyst at Argus Research who used to work in the tax accounting business, said any time that politicians are talking about making corporate tax changes, it's best to wait until the legislation is signed on the dotted line before seriously weighing the financial impact on stocks. "Whatever happens, even in final legislation, can be very different, or not happen at all," the analyst said.

The changes being contemplated in Washington D.C. go beyond the Senate bill introduced on Wednesday by Robert Menendez (D-N.J), called the "Close Big Oil Tax Loopholes Act." President Obama has called for an end to all oil & gas industry tax breaks, and Argus Research's Weiss and other analysts say that it's the smaller independent & exploration companies that would feel the brunt of the pain if the broader legislative effort is achieved. This may be one reason why the Senate is just focusing on the Big Oil big five in its act of selectively applied tax changes. At least the oil and gas industry can't say the small guy will be crippled.

"It matters more to the little guy, but the big guy can't give up because it is going to increase costs. The problem is that it ultimately increases costs and ultimately those costs flow through to bottom line," Weiss said. "Even if the percentage is the same, it's more relevant for smaller companies because it is same size piece of a smaller pie," Weiss added.

Allen Good, Morningstar energy analyst, said it was no surprise to him that the government is going after Big Oil, and it happens every time that the price of oil rises rapidly. Yet he noted that Republican control of the House and many Democrats from the oil state of Louisiana make the political math complicated. Additionally, the effort to eliminate the tax breaks for Big Oil coincides with President Obama's ambitious plan to reduce reliance on foreign oil by one-third, and from that perspective, "this doesn't square," the Morningstar analyst said.

To drive this rhetorical salvo home, a Republican senator rolled the videotape on footage of President Obama saying in a recent speech that as Brazil finds more and more offshore oil, the U.S. wants to step up and be Brazil's big buyer.

"The major integrated oil and gas companies may not be affected much, but they can rethink what they do domestically if the tax picture changes," Morningstar's Good said, and this was a point made by the Big Oil executives on Thursday morning repeatedly. The Morningstar analyst said, "Look at what's going on with all the big oil companies buying into the U.S. shale plays. They are still banking on that but this can change the cost dynamic. In future years Big Oil is more exposed to these domestic taxes given their investment in shale, so they are not overlooking the issue one bit," Good said.

While the focus on the Big Oil big five wouldn't hit the bottom lines of the smaller exploration and production companies, Morningstar's Good noted that the independents are "built to sell," and that a change in the cost dynamic of these operations with the elimination of tax breaks isn't immaterial in terms of their strategic plans.

The situation has also changed since the last time Big Oil was dragged in to defend its corporate tax treatment, noted Argus Research's Weiss. "It's come up repeatedly but never happened because of the fiscal position, and now with Congress needing to find ways to raise funds, picking on those with the deepest pockets feels like it has higher risk to me," the analyst said.

"If we are going to get serious about addressing our national debt, we can no longer afford to keep giving away taxpayers' money to the most profitable companies in the world. There are going to be some tough decisions when it comes to cutting back, but I hope we can agree that our government writing checks to oil and gas companies with tax dollars should be on the chopping block," Senator Claire McCaskill (D-Mo.) stated in a release introducing the legislation on Wednesday.

Indeed, at one point Democratic Senator Charles Schumer of New York demanded that Big Oil executives answer the tenuous-at-best "logical" question: "Should you get tax breaks or students receive financial aid....? Because that's the choice we have to make."

During the Senate hearing, Ron Wyden (D-OR) played videotape from a similar hearing in 2005 when oil had risen to $55 a barrel, and the Big Oil executives were asked if they needed government incentives. Every single Big Oil executive said 'no,' a statement that Senator Wyden made the Big Oil executives repeat on Thursday.

ConocoPhillips CEO James Mulva suffered the most abuse for his company's Wednesday press release calling the tax proposals "un-American," but it was Senator Jay Rockefeller of West Virginia who best reflected both sides of the debate. Rockefeller first threw a softball compliment to ExxonMobil CEO Rex Tillerson for working with the Boy Scouts in West Virgina, but went on to say that Big Oil was anything but Boy Scout-like in its behavior.

Senator Rockefeller compared the Big Oil big five to Saudi Arabia, in being defensive and out of touch with Americans. "You are really out of touch and deeply and profoundly committed to sharing nothing," Rockefeller said. Not that Rockefeller expressed the greatest hope for the legislation passing as is, either.

"My guess is you will be able to protect yourselves, through lobbyists and friendships and refineries placed in key states. You assume you will prevail," the Senator said to Big Oil during his pointed criticism of the companies.

Chevron CEO James Watson had said earlier during the hearing, "I'm proud of our profits."

Indeed, anything less would be "un-American."

-- Written by Eric Rosenbaum from New York.

(Original Post)

By Bernie Becker - 05/12/11 10:50 AM ET

A quartet of top corporate financial officers on Thursday called for the U.S. to move toward a system where profits made outside the United States would not be taxed.

In testimony before Congress, the chief financial officers of United Technologies Corporation, Caterpillar, Zimmer Holdings and Kimberly-Clark all called for the U.S. to move to a so-called territorial system, saying it would bring the country in line with its major trading partners and increase competitiveness.

“The current U.S. worldwide tax system imposes a significant tax on foreign earnings that are brought back to the U.S. for reinvestment here at home, discouraging job-creating domestic investment,” Mark Buthman of Kimberly-Clark said in his prepared remarks before the House Ways and Means Committee. “By eliminating this extra layer of tax, the disincentive for American companies to reinvest their foreign earnings in the U.S. would be significantly reduced.”

The comments from the corporate world came at a hearing on tax reform, an area where Treasury officials and lawmakers are currently working.

As it stands, in the U.S.'s tax system, generally speaking, all of a corporation’s profits are taxable, regardless of where they are made.

U.S. multinationals can currently defer paying those taxes until they bring them into America. At 35 percent, the U.S. top corporate tax rate is high compared to other major economic powers, so corporations pay the difference of what they already paid to foreign governments when they repatriate funds to the U.S.


On some level, the CFO testimony is not a surprise – prominent business groups including the Business Roundtable and the U.S. Chamber of Commerce have also pushed for a territorial system. Rep. Dave Camp (R-Mich.), the Ways and Means chairman, also expressed concern about the current system of taxing worldwide profits, saying many believe it “is a further barrier to the growth of American companies.”

For his part, Rep. Sandy Levin (D-Mich.), the Ways and Means ranking member, said there were revenue implications of moving to a territorial system that would need to be examined. Liberal groups such as Citizens for Tax Justice have said that a territorial system encourages corporations to move jobs outside of the U.S.

Rep. Kevin Brady (R-Texas), also a Ways and Means member, has recently introduced legislation that would allow multinationals to temporarily bring offshore profits to the U.S. at a reduced rate. Some have called for that to occur in the interim, while policymakers work toward overhauling the tax code.

(Reuters) - The world's biggest oil companies on Wednesday launched broadsides against Democratic plans to pare back some of their cherished U.S. tax breaks, saying the measure was "un-American" and would only push up already high gasoline prices.

Top executives from the five biggest oil companies will testify about the tax breaks on Thursday before the Senate Finance Committee. A day before the hearing companies and lawmakers traded barbs over the effort that Democrats say could help cut the deficit by about $21 billion over a decade.

Senate Majority Leader Harry Reid has said he hopes a bill repealing the tax breaks will be voted on in the full chamber next week.

Eliminating the tax breaks has been a goal of President Barack Obama and the call by lawmakers has become louder with stubbornly high fuel prices ahead of next year's elections. The effort will face opposition by Republicans and some Democrats who fear it could send gasoline prices higher. But with $4 a gallon gasoline, it could also be an awkward time for many politicians to appear to be supporting oil companies.

Senators who sponsored the bill said the companies needed to do their part to cut the deficit and they could afford to give up the tax breaks.

"We're here to say 'enough already' to Big Oil. You're doing fine enough on your own," said Senator Charles Schumer, standing at a Washington gas station where prices started at about $4.30 a gallon (3.78 liters).

"Right now people are paying as much for gas as they're paying for healthcare and groceries," said Senator Debbie Stabenow. "Now's the time to take away subsidies."

But Republicans said it would act as a tax that the oil companies would pass onto consumers by pushing up fuel prices.

"JOB DISCRIMINATION" AND "UN-AMERICAN"

Rex Tillerson, the chief executive of Exxon Mobil one of the five companies to appear before the Senate panel, will say at Thursday's hearing that the tax breaks are not special incentives for oil companies, but standard deductions applied across many businesses, including corn farmers, movie producers and coffee roasters.

"Frankly, to then deny a select few companies within the oil and gas industry this standard deduction is tantamount to job discrimination," Tillerson will say, according to a copy of his oral testimony obtained by Reuters.

ConocoPhillips, one of the five oil companies that will testify called the tax proposals "un-American" in a release, angering the bill's main sponsor, Senator Robert Menendez, who demanded the company apologize at Thursday's hearing.

Conoco said the proposal unfairly singles out the five biggest oil companies for additional taxes and would cost jobs and shrink government revenue.

Oil companies, on the defensive after raking in huge profits in their first quarter, also said consumers would pay more if they lose their drilling incentives.

"At a time when everyone is concerned over the cost of gasoline, Congress shouldn't do anything that could actually worsen the situation," said Jim Mulva, the ConocoPhillips chief executive.

Exxon wants Congress to pass Republican bills in the House to open offshore drilling, which they say has been held back by Obama administration rules after last year's BP oil spill.

The Republican-led House passed a bill on Wednesday requiring the Interior Department to act within 60 days on permits requested by oil and gas companies to drill on offshore federal tracts. It is one of three bills the Republicans say would boost domestic energy and government revenues. But the measures face stiff opposition in the Senate.

Several of the oil companies said they already pay more taxes than many other industries. But the Citizens for Tax Justice, an advocacy group, says consumers and workers pay some of the taxes, not the oil companies.

In addition to Tillerson and Mulva, Shell Oil Co U.S. President Marvin Odum, BP America Chairman Lamar McKay, and Chevron Chief Executive Officer John Watson will testify.

Reid and Menendez sent Republicans a letter urging them to support the legislation.

"If we are to truly address our national debt, we will all have to tighten our belts and make sacrifices -- even the most wealthy and powerful among us," the letter said.

(Additional reporting by Tom Doggett; Editing by Cynthia Osterman)

(Original Post)

By Robert L. Brady Jr. - 05/11/11 12:58 PM ET

On Tuesday, Sen. Harry Reid (D-Nev.) and other Senate Democrats introduced legislation to increase taxes on the five largest oil companies. On Thursday, senior executives at those same five energy companies accepted a hasty invitation to Capitol Hill to attend a Senate Finance Committee hearing on the taxes paid by their industry.

Both the bill and the hearing were thrown together quickly. But neither were surprising.

Gas prices are higher than ever, as are the profits of oil and gas companies. What government would continue paying billions in incentives and subsidies to energy companies under these conditions, particularly in the middle of a budget crisis?

Luckily, America isn't doing anything of the sort. But you'd never know it from the debate as it's played out in Congress and the media.

Terms like "incentives" and "subsidies" make for convenient shorthand when discussing complex tax arrangements. But they are misleading at best, and at worst they could incite policies that could negatively affect our nation's recovery and energy progress.

It is a fundamental pillar of the U.S. income tax system that businesses are taxed on net income and not capital. This is what's laid out in the sixteenth amendment to the U.S Constitution. That system has always provided a way for companies of all kind to reclaim costs. Much of what is referred to on Capitol Hill and in the media as "subsidies" are in fact tax deductions, not unlike what other industries receive.

Just some of the many deductions often referred to as subsidies or incentives include: Intangible Drilling Costs, by which companies can deduct the costs that are necessary to finding wells (another unfortunate name, as there is nothing intangible about labor, which can account for 80 percent of the cost of a well); the Domestic Manufacturers' Deduction, a claim available to all taxpayers who produce goods in the U.S. (though the oil and gas industries are limited to 6 percent compared to the standard 9 percent); and the Expensing of Tertiary Injectants, a wonky name for a vital deduction that covers some of the costs associated with maintaining production from older reservoirs.

Part of the reason such deductions get labeled "subsidies" is that few people outside of the IRS --and probably not many inside it -- can easily make sense of them. Reforming the tax code would go a long way to ending the confusion over how much money the government is "giving" energy companies.

But eliminating such deductions amounts to a tax increase for a consumer-driven industry, a move that would negatively resonate through the economy.

First, it would threaten jobs by reducing income for oil companies. And America's oil and natural gas industry currently provides Americans with 9.2 million jobs, mostly at higher-than-average wages, and accounts for 7.5 percent of our national GDP.

Second, it would raise gas prices, as energy companies would be forced to pass these new costs along to consumers. Not a smart move if Congress is looking to appease touchy consumers.

Finally, it would suppress energy production over the long term, as energy companies would have less money for R&D. This would increase our dependence on foreign oil, a policy that the Obama Administration is on record as opposing.

Another lost fact in this debate is that the energy industry already pays one of the highest tax rates in the country. About 44 percent of every dollar earned by oil and gas companies goes to income tax. By contrast, banks pay between 20 and 30 percent. Technology firms pay similar rates -- between 2005 and 2009, Microsoft averaged an effective tax rate of 26.7 percent. And the Obama administration's 2012 budget proposal already includes almost $90 billion in new taxes for the oil and natural gas industry.

Already, the oil and gas industry pays about $100 million, per day, to the U.S. Treasury!

Reducing the number of tax deductions available to energy companies should be part of an overall simplification of the tax code. Streamline the process to make it easier for companies to comply with and simpler for taxpayers to understand. Tax neutrality between firms in an industry and between industries has long been a goal of economic efficiency.

But to eliminate deductions for oil and gas companies while keeping them for more politically correct ones is tantamount to selective prosecution, the singling out of a vital but unpopular industry in a bow to political pressure. The proper term for that is "disincentive."

Robert L. Bradley Jr. is the CEO and founder of the Institute for Energy Research and author of six books on energy history and public policy.

(Original Post)

by Sean Lengell

Published on May 10, 2011

A group of Senate Democrats introduced a bill Tuesday that calls for an end to taxpayer-funded subsidies to the five biggest oil companies.

"At a time when families are feeling the pain at the pump and our deficit keeps growing at an alarming rate, we simply can't afford to keep giving away billions in taxpayer handouts to oil companies that are doing nothing to help lower prices," said Sen. Robert Menendez of New Jersey, one of the bill's sponsors.

Another sponsor, Sen. Claire McCaskill of Missouri, said that if Congress is to get serious about reducing the national debt, "we can no longer afford to keep giving away taxpayers' money to the most profitable companies in the world."

Other sponsors of the measure are Sens. Sherrod Brown of Ohio and Jon Tester of Montana.

The Close Big Oil Tax Loopholes Act would repeal or revise several tax rules that allow oil companies to deduct a portion of their costs for such endeavors as oil exploration and drilling. The savings would be used to help reduce the deficit.

The Democrats say the measure also would close a tax loophole that allows U.S. oil companies to disguise royalty payments to foreign governments as foreign taxes, thus allowing them to lower their tax bills in the United States.

The Democrats cited a study by Citizens for Tax Justice that said the major oil companies spent most of their profits in the purchase of their own stocks and boosting their dividends between 2005 and 2010.

While the measure likely will be well received in the Democratic-controlled Senate, it would face a roadblock in the Republican-held House.

(Original Post)

By Bernie Becker - 05/08/11 07:41 PM ET

A liberal interest group is sharply criticizing a bill aimed at making business taxation simpler, arguing the measure will in fact do the opposite.

Citizens for Tax Justice, a group with significant union ties, said in a Wednesday letter to lawmakers that the Business Activity Tax Simplification Act (BATSA) would both increase litigation and government meddling in the marketplace.

Proponents of the tax measure, like Rep. Bob Goodlatte (R-Va.) and business groups, say the bill will help companies by giving them a greater understanding of what it means to have a physical presence in a state. (The Supreme Court ruled almost two decades ago that a state can only tax a business headquartered elsewhere if that company has that sort of status in their state.)

In general, BATSA would apply what its supporters dub a “bright line” test, saying that a business would have a physical presence in a state if it owns or leases property there or has at least one employee working in the state for 15 days or more a taxable year.


The measure, versions of which have been introduced for the last several Congresses, deals with corporate income and other business taxes, but not sales tax. Sen. Dick Durbin (D-Ill.) is getting set to push legislation that would deal with sales tax for Internet purchases.

BATSA’s backers say the need for clarification also has become even more necessary of late, as technology has expanded companies’ ability to expand their reach and with states having differing interpretations of when an out-of-state business can be taxed. A long list of business groups and corporations expressed their support for the bill in a letter of their own last week.

But CTJ says the legislation would spark more aggressive business tax planning and basically allow the government to pick business winners and losers, giving larger companies the chance to use loopholes to get around the physical presence benchmark that smaller companies could not use.

The group and state tax collectors also say that the bill would hamstring revenue collection efforts for state and local governments at a time when many of them are strapped for cash.

In testimony prepared for a House panel last month, Bruce Johnson, the Utah tax commissioner, cited a 2005 study from the National Governors Association that said an earlier version of the legislation would cause between $4.7 billion and $8 billion in lost revenues for states.

CTJ also says that the physical presence standard is outdated in the Internet age – with Robert McIntyre, the group’s director, telling The Hill that BATSA essentially “codifies the Supreme Court’s mistake.”

“Companies that ship products into a state benefit from the roads that facilitate delivery, the state and local courts that are used to enforce contracts, and the telephone and cable lines that are regulated by state agencies,” McIntyre wrote in his letter to Reps. Howard Coble (R-N.C.) and Steve Cohen (D-Tenn.), the chairman and ranking member of the House Judiciary subcommittee on commercial and administrative law.

For his part, Goodlatte rejected the tax group’s argument that BATSA would increase complexity, calling it “totally lacking in credibility.”

“Instead of dealing with this on a case-by-case basis, debating and fighting over it and litigating it, this bill spells out exactly what a physical presence is,” Goodlatte told The Hill.

The Virginia Republican added that the bill, which has attracted a handful of cosponsors since being introduced about a month ago, once again had bipartisan support and that he expected it to “do well” this Congress.

The business tax measure has been introduced in Congress dating back to at least 2003, with Rep. Bobby Scott of Virginia among the House Democrats backing it this time around.

Only once in that span, in 2006, has the measure made it out of the House Judiciary Committee. A spokesman for that panel did not respond to a request for comment on the bill’s chances in the current Congress.

Sens. Chuck Schumer (D-N.Y.) and Mike Crapo (R-Idaho) introduced a version of the legislation in their chamber in 2007.

(Original post)

Editorial

May 6, 2011

It’s a perennial complaint of the business community that corporate taxes are too high. Combine federal, state, and local corporate taxes, and the top statutory tax rate in 2010 was 39.2 percent. That’s about equal to Japan’s combined rate (39.5), but higher than the rate in France (34.4 percent), Germany (30.2 percent), and Britain (28 percent). It’s far higher than Ireland’s 12.5 percent.

But when you look at what large companies actually pay, the story changes significantly. In the United States, the effective average rate for 2008 was 27.1 percent. That means the actual tax burden was lower than in Germany and Japan, on par with Britain, and a bit above France. Some critics of corporations insist the data, which comes from a recent business-sponsored report by PricewaterhouseCoopers, overstates the US burden. But even at face value, it demonstrates that the weight on American businesses isn’t nearly as onerous as corporate-tax-cut advocates would have you believe.

Still, it’s far from ideal to have a tax code where rates are relatively high, but corporations routinely use breaks, loopholes, and subsidies to reduce their liability substantially. Sometimes they eliminate it altogether. The Globe’s Beth Healy recently reported that some 30 Massachusetts-based companies that realized a profit last year paid no federal taxes. Meanwhile, according to Citizens for Tax Justice, a liberal Washington policy group, some 45 companies that turned a profit over the past three years have paid an average effective rate of just 12 percent.

So Washington policymakers should look with a gimlet eye on proposals to reduce corporate rates without also limiting breaks and loopholes. Further, they should consider strengthening the corporate alternative minimum tax, which was designed to prevent overuse of loopholes but has been weakened during the last two decades and further relaxed during the recession. Once the economy recovers, it’s reasonable to expect that corporations that turn a profit should pay their fair share of taxes.

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May 5, 2011

By Jia Lynn Yang

Amid record corporate profits and a raging debate in Washington about how to close the country’s budget deficit, the Treasury Department has finished drafting a plan to reform the taxes companies pay.

A major goal: lowering the tax rate for businesses.

Faced with a fledgling economic recovery, the Obama administration sees an overhaul of the corporate tax code as a way to spur growth. But the Treasury plan, which is being reviewed by the White House, could be a political minefield for the president and lawmakers who are occupied with questions about the country’s debt and deficit.

“I find it amazing,” said Ken Kies, a longtime corporate tax lobbyist. “I wouldn’t be surprised if the [White House] political types are going, ‘Are you guys nuts?’ ”

The administration has been wary of discussing the Treasury plan, which would be paid for by closing various loopholes — each of which could unleash its own lobbying storm. And while a senior administration official said a “white paper” laying out the proposals could be released as early as this month, he also warned that disagreements on Capitol Hill could delay any rollout.

The timing is up to the White House, which has many priorities to weigh, the official said, speaking on the condition of anonymity so he could discuss the matter freely.

So far, lawmakers involved in the discussions with Treasury say they have not broached the grittier details of which industries will give up which tax breaks. And some expect the plan will not include specifics.

“There was no discussion of details,” said Rep. Sander M. Levin (D-Mich.), ranking member of the Ways and Means Committee, who twice met with Treasury Secretary Timothy F. Geithner on the matter along with Sen. Max Baucus (D-Mont.), Sen. Orrin G. Hatch (R-Utah) and Rep. Dave Camp (R-Mich.).

Levin said that a major goal of any reform must be to encourage firms to create jobs in this country, noting that Geithner seemed to agree.

Not agreed on the basics

The U.S. corporate tax rate of 35 percent is one of the world’s highest. But subsidies and breaks have created a wide variation in what companies pay. Retailers tend to pay more than technology and pharmaceutical companies, for instance, in part because they do not benefit from credits for research and development.

Industry groups such as the Business Roundtable, a coalition of chief executives of major U.S. multinational companies, argue that lowering the rate would make domestic firms more competitive — and help the U.S. economy.

Yet as a percentage of overall taxes collected, corporations paid 8.9 percent in 2010, compared with about 25 percent in the 1950s.

Even among Democrats, there is disagreement over whether to squeeze more taxes out of corporations as a way of closing the budget deficit. Polling shows that Americans want taxes raised on corporations before they are raised on individuals.

“It’s the low-hanging fruit. To throw it away is weird,” said Bob McIntyre, director of the left-leaning Citizens for Tax Justice.

Levin and Geithner want to keep the the overall amount corporations pay at the same level.

But Rep. Jim McDermott (D-Wash.) said it would be unfair for individuals to bear the burden of paying more taxes to close the nation’s deficit.

“If you’re then going to sit around and talk about how awful the deficit is, and not raise any additional money in this tax reform, it’s a little bit hard to understand what the game’s about except to reduce someone’s tax rates,” said McDermott, a member of the House Ways and Means Committee.

Capitol Hill aides said there are other basic questions, such as whether to tackle corporate tax policy on its own or in tandem with the individual code.

Rep. Dave Camp (R-Mich.), chairman of the Ways and Means Committee, has said that any reform effort should take on the entire federal tax code.

“This comprehensive approach to reform provides the greatest opportunity to transform today’s code to a code that promotes, rather than prevents job creation,” Camp spokeswoman Michelle Dimarob said.

The fight that would erupt over tax reform could torpedo any overhaul. The maze of tax subsidies in the tax code means that one industry’s gain would equal another’s loss. With lawmakers already looking for ways to cut the budget deficit, industries are wary of negotiating on specifics this early.

“It is perilous to be out there right now in this deficit environment to say you’re willing to give something up because you might lose something and get nothing in return,” said Ralph Hellman, senior vice president for government affairs at the Information Technology Industry Council.

‘You go first’

Even if the administration can get Congress to agree on the outlines of the debate, there is still the question of which companies have to give up their tax breaks. “Everybody’s gonna say, ‘I’m for this, but you go first,’ ” McDermott said.

Also on the table is how to handle the thorniest part of the corporate tax code: overseas profits. Republicans and business lobbyists want the country to adopt a “territorial” system that would tax only domestic profits. Many Democrats have resisted this idea, saying it would encourage companies to move jobs overseas.

President Obama has proposed raising more money from international corporate taxes in his budget, but these efforts have not been picked up by Congress. It’s estimated that $1 trillion worth of corporate profits are being held overseas.

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May 4, 2011

By Steve Hargreaves

NEW YORK (CNNMoney) -- Exxon Mobil wants to tell you something: It pays taxes. A lot of them.

In the first months of this year, Exxon (XOM, Fortune 500) says it paid $3.1 billion in taxes in the United States -- more than even the $2.6 billion in profit it made selling oil and gas.

To get to that number, the company includes the federal and state gasoline taxes that the company collects from drivers and passes on to government coffers. It also includes payroll taxes the company pays on behalf of its employees.

The company is highlighting its overall tax contributions to make a point: It wants Americans to see just how much the company and its activities add to the overall tax rolls.

"We are one of the largest taxpayers in the United States," said Alan Jeffers, an Exxon spokesman.

For Exxon -- and the oil industry overall -- the message is urgent.

Led by President Obama and key Democratic lawmakers, Congress is pushing to eliminate $4 billion a year in tax breaks enjoyed by the oil industry. With gas at $4 a gallon, it's not a popular time for politicians to defend oil industry subsidies. Even some top Republicans have recently suggested they might support eliminating the breaks.

Critics say Exxon Mobil and the industry is going too far in making its argument.
Big Oil's $38 billion defense

"They are counting taxes they don't pay," said Bob McIntyre, a director at Citizens for Tax Justice. "Payroll taxes are on the workers, sales taxes are on the consumers."

Throwing in those seemingly superfluous tax figures seems like an unnecessary move, especially considering that even without them the income tax the company pays is pretty high.

Exxon's average effective U.S. income tax rate over the last six years is about 29%, according to the firm's security filings and an interview with a top Exxon tax lawyer. It's one of the highest rates for any industry.

Jeffers said the company highlighted its overall tax contributions because it's important for people to see just how much the firm and its activities add to the overall tax rolls.

Exxon's income tax rate is below the 35% rate mandated by corporate tax law, but it's widely believed most U.S. companies don't pay that rate thanks to generous loopholes in the tax code.
0:00 /02:46'Age of cheap oil is over'

The loopholes are designed to let U.S. companies compete with their foreign counterparts, which often have a lower corporate tax rate.

Jeffers noted that Exxon's tax bill can fluctuate wildly from year to year. In 2008 the company paid over 35% of its profit to the government, while in 2009 it was near zero due to an overpayment from the year before. In 2010 it was about 18%.

Tax Justice Center's McIntyre said his own calculations show Exxon's tax rate over the last three years is a bit less than the company is claiming, although it's still in the same ball park.

Still, he said the industry has plenty of money and that what it pays in taxes is too low. McIntyre believes the oil industry should lose its $4 billion a year in tax breaks and that loopholes for companies in general should be closed.

"The oil industry is awash in tax subsidies, subsidies they obviously don't need," he said. "We have a budget deficit."

Jeffers said it's unfair to single out the oil industry and take away the tax breaks that other manufacturers enjoy. He noted that while the industry's profits seem large, its profit margins are about average and that it's only being singled out because gas prices are high.

If it's the deficit we're concerned about, Jeffers said opening up more areas to oil and gas drilling in this country would do more to add jobs and inject revenue into government coffers than simply upping the tax rate.

"Taxes don't create economic activity, they take from it," he said.

Jeffers and McIntyre might as well be proxies for the Republican House and Democrat-controlled Senate. In the next few weeks Democrats will push for an end to tax breaks and Republicans will call for more drilling.

Let the dogfight begin.

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Generous Breaks a Significant Plus for 30 Public Companies in the State

May 01, 2011

By Beth Healy, Globe Staff

They are high-tech companies, financial players, and manufacturers. What they all have in common: They paid no federal income taxes last year, despite making millions of dollars in profits.

Software company Novell Inc. and cellphone tower giant American Tower Corp. are just two of 30 public companies in Massachusetts that owed no federal income tax in 2010, generally because they lost money in prior years and were able to carry forward those losses to offset tax liabilities. In some cases, companies received refunds worth millions of dollars.

They are beneficiaries of longtime tax breaks for corporations, tax specialists say, coupled in some cases with shorter-term tax benefits that lawmakers introduced in the past three years to help companies during the recession. Indeed, more than one-quarter of 112 profitable, publicly traded companies in the Commonwealth did not write checks to Uncle Sam for the 2010 tax year, according to a Globe review of tax data filed with regulators and compiled by Standard & Poor’s Capital IQ.

That’s not necessarily what Congress had in mind, US Representative Barney Frank said in an interview. Lawmakers “have considered each individual tax credit on its merits with out understanding that people who were clever could accumulate a bunch of them and end up paying nothing,’’ the Newton Democrat said, referring to corporate tax lawyers. “We have to look at the cumulative effect of them.’’

While the US corporate tax rate is 35 percent, that’s hardly the typical rate companies pay. For example, Novell last year had an effective tax rate of less than zero, according to its annual report filed with the Securities and Exchange Commission. The result: the Waltham company made a $378 million profit for the year and received a $9.1 million federal income tax refund, mainly thanks to tax losses carried forward on companies it had acquired.

No Massachusetts company had a larger federal tax benefit last year than State Street Corp. The Boston financial services giant received an $885 million refund, after taking significant losses on its investment portfolio. State Street received a $2 billion taxpayer-funded bailout in 2008, which it has since repaid, and last year reported a $1.6 billion profit.

The company drew fire last month from labor groups, which decried its refund given its large profits and taxpayer bailout. State Street recently cut its head count by 5 percent, laying off 400 workers in the Boston area, and 1,000 more in other locations. State Street spokeswoman Arlene Roberts said the company “follows all applicable tax rules.’’

Jeff Crosby, president of the IUE-CWA Local 201, whose members make jet engines in Lynn for General Electric Co., said tax cuts to major companies often don’t create jobs or benefit workers. GE, the largest US company, has sparked national attention to corporate taxes because it paid no federal tax bill last year, even though it turned a $14.2 billion profit.

“That’s billions we’re spending subsidizing rich companies,’’ Crosby said. “If tax cuts created jobs, we’d have full employment.’’

State Street and many other Bay State companies are simply taking advantage of longstanding, legal tax deductions. But Congress and the Obama administration have extended about $48 billion more in short-term tax breaks to large corporations since 2009, according to the US Treasury Department, aimed at fueling growth and protecting jobs.

One deduction allowed companies to apply their losses toward five years of past profits, instead of two. Another, which was meant to encourage spending on machinery and equipment, allowed companies to speed up how quickly they could deduct those investments. A number of these deductions expire within a year or two.

Douglas Stransky, a tax partner at the Boston law firm Sullivan & Worcester, said, “The government specifically made the use of losses a more favorable opportunity’’ because so many companies were struggling in the bad economy. “Theoretically, a company could offset 100 percent of its taxable income with losses from prior years and therefore owe no taxes.’’

American Tower is a prime example of how this works. The company earned $373 million last year but paid zero federal taxes. That’s because it’s rolling over large past losses, $1.2 billion worth. In fact, the sum is so large, American Tower said in its securities filing that it may not be able to use all the losses within the allowed 20 years. It’s considering changing its status to a real estate investment trust, a more advantageous tax status.

A large slice of American Tower’s losses comes from $300 million in expenses for employee stock options, another longtime deduction. Companies get to deduct stock options as a form of compensation, and in an ironic twist, the more the stock price goes up, the more they get to write off. For example, if an employee exercises stock options valued initially at $10 a share, and if the stock rises to $20, the company writes off the $10 difference as a “loss.’’ If the stock surges to $50, the company gets to write off $40.

Corporate tax lawyers say the system is fair; it lets companies take credit for stock compensation in the same way that they would otherwise deduct employee salaries. But it’s also another way in which taxpayers are subsidizing companies, said Robert McIntyre of Citizens for Tax Justice, a Washington group that advocates for American workers on taxes.

“Our swashbuckling capitalists couldn’t live without the government subsidizing them,’’ McIntyre said.

Genzyme Corp., a Cambridge biotechnology company, uses many strategies to lower its tax bill, from manufacturing credits to deductions for research and development and the cost of executive stock compensation. The company posted a net profit of $422 million in 2010, and reported that the federal government owed it $24.4 million on its continuing operations.

Company executives explained that Genzyme actually paid about $150 million in federal taxes, including the results of a money-losing genetics unit it sold last year. John Lacey, a spokesman for Genzyme, said that after paying about a half-billion dollars in federal income taxes in 2008 and 2009 combined, the company’s latest tax bill was lower because of performance — namely losses related to a virus at its Allston plant.

To be sure, many Bay State companies did pay taxes last year. Computer storage giant EMC Corp. earned $1.9 billion and paid $518 million in federal income taxes, more than any other public company in the state, according to Capital IQ.

The second biggest federal income taxpayer on the list was retailer TJX Cos., which paid $510 million and had $1.3 billion in profits.

Some Massachusetts companies pay little or nothing in federal taxes because they are doing most of their business overseas. Take Cabot Corp., an industrial manufacturer with 600 workers spread across its Boston headquarters, engineering center in Billerica, and a Haverhill plant. The company paid $53 million in foreign taxes, while the US government owed it $8 million, partly because some tax audits resolved in Cabot’s favor. Eighty percent of Cabot’s sales were reaped outside the United States, in Asia and Europe.

Teradyne Inc., a North Reading company that makes testing equipment for the semiconductor industry, earns only 15 percent of its revenues in the United States. It got back nearly $2 million in federal taxes after posting a $380 million profit in 2010. Not only did the company take advantage of carrying forward losses from several years over the past decade, but it also benefited from tax breaks related to research and development credits.

Andy Blanchard, a spokesman for Teradyne, said: “We, like a lot of the tech companies, had a tough decade. In 2010 things started improving.’’