Original Post
Tuesday, July 5, 2011
By Bob Garvin (Democratic Party Leader)
Barack Obama called Ugland House on Hog Sty Bay in the Cayman Islands “either the biggest building in the world or the biggest tax scam in the world.” That’s because it would take the biggest building in the world to provide the bedrooms and bathrooms for the 19,000 “persons” who claim Ugland House to be their home. Could more residents than live in Boerne crowd into that single 5-story structure?
To figure out what’s going on, don’t forget that our conservative-dominated Supreme Court has decreed that: 1) Corporations are persons, just like you and me. 2) Corporations, being persons, have the right to freedom of speech, just like you and me. 3) Money is a form of speech, giving corporations the right to make political contributions, just like you and me.
The comparisons end there. Unlike you and me, businesses can use their donations to gain access to elected officials and influence policy. And so we get Ugland House, an ugly place that is not a home for 19,000 real persons but rather a haven—a tax haven—for 19,000 corporations that don’t have a single employee working there. The business “friendliness” of the tiny Canary Islands has attracted 45 of the top 50 banks and rendered it the fifth leading financial center in the world.
Why so many “persons” claimed the Canary Islands as their home was outlined in Senate testimony of Michael Brostek, Director of Strategic Issues for the Government Accounting Office (GAO). Key reasons include facilitating U.S.-foreign transactions and minimizing taxes, but also to illegally evade income taxes or hide such illegal activities as securities fraud or money laundering.
That not just tax avoidance but tax evasion is the name of the game in the Caymans is shameful. We are told constantly that “shared sacrifice” is required to solve our serious problems. The world of big business still complains about taxes even though the corporate share of tax revenue has fallen from nearly 30 percent in the 1950s to well under 10 percent today.
Wouldn’t shared sacrifice mean that some of the $14.2 billion of worldwide profits earned last year by General Electric, the nation’s largest company, should be collected in taxes? GE says no—-that it has billions in refunds coming.
General Electric runs its massive tax department as a profit center, which benefits from the $200 million in lobbying efforts with Congress over the last decade. Results include accelerated depreciation, renewable energy subsidies, and the use of transfer pricing to minimize profits in the U.S. GE’s creative accounting may be legal, but should it be?
Citizens for Tax Justice reports that GE and 11 other major corporations made $171 billion in pre-tax profits over the last three years. At the statutory tax rate of 35 percent, the Treasury could have received $60 billion to help reduce the deficit. Instead, loopholes, shelters subsidies and other tax breaks left the government owing $2.5 billion to Wells Fargo, Fedex, Verizon, Exxon-Mobil, Yahoo, GE and the others.
Conservative Bruce Bartlett points out that “Federal taxes are at their lowest level in more than 60 years” and that the average tax rate on the 400 richest Americans dropped from 26.4 percent in 1992 to 18.1 percent in 2008. He could have added that billionaire hedge fund managers, through a quirk, pay a tax rate of only 15 percent.
You might think that, in this time of crisis, the party known to be coziest with big business and that wraps itself in the mantle of patriotism would call on its friends to share in the sacrifice, to be patriotic, and to give up some of their unwarranted tax loopholes, as President Obama and the Democrats are proposing. But no, Tea Party Republicans are protecting their benefactors and throwing up roadblocks to any revenue increases. They want the burden to fall on the old (Medicare), the young (Head Start, college funding), the poor (Medicaid, food stamps).
About 75 percent of voters believe corporations have too much influence on policy and 66 percent believe the rich benefit most from the government. Ignoring this, the GOP charges President Obama with waging class warfare. Billionaire Warren Buffet rebuffed it: “There’s class warfare all right but it’s the rich class that’s making war and we’re winning.”