(Original Post)

Posted at 11:39 AM ET, 11/30/2011

Buried in this big New York Times piece on the continuing war over the payroll tax cut extension is a telling detail:

    Senator Susan Collins, Republican of Maine, said Tuesday that she had suggested a tax increase on high earners that protected employers from that burden. “I don’t think we should be imposing additional taxes on working families at a time when the economy is so fragile,” she said.

    Senator Pat Roberts, Republican of Kansas, said his party’s plan could involve a small increase in taxes for some high-income people who meet certain criteria.

In other words, senators Collins and Roberts are looking for a way to support the millionaire surtax, or something like it.

Let’s not overstate this. There’s no chance that a significant number of Republicans will drop their opposition to the surtax. But the fact that these Senators are looking for ways around their party’s lockstep opposition to high end tax hikes could signal which way public opinion is heading. Note that Collins is adopting the Dem framing of the issue, acknowledging that not extending the payroll tax cut would constitute a tax hike on working people that would be harmful to the recovery.

Indeed, as Politico reports today, Republicans are worried that they’re losing the message war over jobs. In a striking admission, Senator John Cornyn said: “We’re trying to show some flexibility and good faith so that voters will see that we’re not being intransigent but that we’re trying to offer good ideas and come up with solutions.”

That’s basically a concession from the pragmatic wing of the party that Republicans have found themselves on the wrong side of the jobs debate.

Separately, this gives me a chance to highlight what’s at stake here in a new way — by looking at it through the lens of individual Senators.

For instance, if you look at the state by state breakdown of that Citizens for Tax Justice study, it turns out that the millionaire surtax would hit only 375 Maine taxpayers, each of whom would pay on average an additional 1/50th of their income in taxes.

By contrast, according to new Treasury Department figures, the payroll tax cut extension would benefit around 800,000 of Collins’ working constituents.

In Pat Roberts’ Kansas, some 1,345 wealthy taxpayers would be hit by the millionaire surtax, to the tune of 1/50th more on average of their income, while 1.6 million of his working consituents would benefit from the extension.

The Dem payroll tax cut push has created the starkest choice yet for individual Senators. Either a tiny group of their wealthy constituents pay more than they do now, or a huge number of their working constituents pay more than they do now. Does it get any clearer than this?

Joy Cardin Show on Wisconsin Public Radio - Big Question Segment

Program Page

November 30, 2011

After a busy Cyber Monday, a plan to collect sales tax on internet sales goes before a Congressional committee today. After seven, Joy Cardin asks her guests this week's Big Question: do you support the idea of an Internet sales tax?

Guests:
- Steve DelBianco, Executive Director, NetChoice
- Matthew Gardner, Executive Director, Institute on Taxation and Economic Policy

MP3 File Here

(Original Post)

Posted at 02:16 PM ET, 11/29/2011

By Greg Sargent

Okay, so here we are again. Senate Dems are set to hold a vote on extending the payroll tax cut, which independent experts say is necessary to prevent the recovery from stalling. Republicans oppose extending it, partly on the grounds that it would be paid for by a 3.25 percent surtax on income over $1 million.

The dispute is over how to fund the extension. As a spokesman for John Boehner put it, extending the tax cut is a “potential area for common ground,” but it’s a nonstarter if it’s coupled “with a job-killing tax hike on small businesses.”

So it’s time to check in again with the non-partisan Citizens for Tax Justice to determine exactly what this surtax would mean — how many people it would impact, and how much in additional taxes they would have to pay.

Here’s the answer, provided to me by the group: The surtax would impact around 345,000 taxpayers, roughly 0.2 percent of taxpayers, or one in 500 of them. Those people would pay on average an additional 2.1 percent of their overall income, or just over 1/50th of that overall income, in taxes.

In a majority of states, only one-tenth of one percent, or one in 1,000 taxpayers, would pay this surtax.

And how many people would benefit from the payroll tax cut? According to the group, around 113 million tax filing units — either single workers or families that include more than one worker — would see their payroll tax cut extended. That’s a lot of people — well over 113 million workers, in fact.

Here’s how this works. When Obama first proposed his American Jobs Act, to be paid for by a millionaire surtax, Citizens for Tax Justice produced an analysis determining that overall, 0.2 percent of taxpayers would be impacted by the surtax.

But that analysis looked at the entire American Jobs Act, which would have been paid for by a larger surtax (5.6 percent). I asked CTJ to update the numbers to reflect the new proposal, on just the payroll tax cut extension, which would be paid for by a smaller surtax of 3.25 percent.

Here’s where it gets tricky. Because that surtax only hits income over $1 million, the percentage of overall income it would amount to is actually less than 3.25 percent. That’s what I asked CTJ to calculate. And the bolded numbers above are the group’s answer.

The battle over the Dem payroll tax cut proposal is unique. Even putting aside the argument over whether extending the cut would have stimulative value — which some Republicans doubt — you’re still left with a clear cut case in which either one group (1/500th of taxpayers, all of whom are wealthy) or the other (more than 113 million workers) ends up paying more than they do now.

Republicans say the first group includes huge amounts of small businesses, and that taxing them will hurt the economy. But when Post fact checker Glenn Kessler took a close look at this claim, he found that it’s in some respects wanting, and turns heavily on how you define a small business.

Either way, the differences in size and wealth between the two groups that would be impacted here are vast. That’s why Dems are particularly eager to have this fight: They hope it illustrates in the starkest terms yet who is fighting on behalf of whom, and what the true priorities of the two parties really are.

******************************************

UPDATE: A version of this analysis in table form, which also brings you state by state numbers, is now up online. And an explanation of CTJ’s methodology is right here.

(Original Post)

By Pat Garofalo on Nov 29, 2011 at 4:35 pm

Senate Democrats yesterday introduced legislation — as they’ve been promising to — that would extend a soon-to-expire payroll tax cut, and pay for it by implementing a surtax on income above $1 million. Republicans, of course, are opposing the plan, reviving their false claims that taxing the very wealthiest Americans will hit small businesses and job creators.

In essence, the GOP is saying that it’s willing to allow higher taxes on middle- and lower-income Americans in order to prevent tax increases on the very wealthy. According to an analysis by Citizens for Tax Justice, provided to the Washington Post’s Greg Sargent, the surtax would affect exceedingly few taxpayers, while a payroll tax cut expiration would wallop more than 100 million households:

    The surtax would impact around 345,000 taxpayers, roughly 0.2 percent of taxpayers, or one in 500 of them. Those people would pay on average an additional 2.1 percent of their overall income, or just over 1/50th of that overall income, in taxes.

    In a majority of states, only one-tenth of one percent, or one in 1,000 taxpayers, would pay this surtax.

    And how many people would benefit from the payroll tax cut? According to the group, around 113 million tax filing units — either single workers or families that include more than one worker — would see their payroll tax cut extended. That’s a lot of people — well over 113 million workers, in fact.

Allowing the payroll tax cut to expire at the end of the year would hit middle-class families with a $1,000 tax increase, providing a substantial drag on the economy. In fact, according to Macroeconomic Advisers, allowing the payroll tax cut to lapse “would reduce GDP growth by 0.5 percent and cost the economy 400,000 jobs.” Other estimates are even worse, with Barclays’s estimating that a payroll tax increase could say 1.5 percent off of GDP growth.

The GOP has, time and again, blocked any legislation that would increase taxes by the slightest amount on the ultra-wealthy, even with tax revenue at a 60 year low, taxes on the rich the lowest they’ve been in a generation, and income inequality out of control. Instead, Republicans would prefer to raise taxes on the middle-class, knocking the economy where it can least afford it.

(Original Post)

Tue Nov 29, 2011 at 12:05 PM PST

Joan McCarter

The payroll tax cuts extension bill that Senate Democrats introduced yesterday would be funded by a 3.25 percent surtax on income over a million dollars. To find out what that would mean for American taxpayers, Greg Sargent asked the non-partisan Citizens for Tax Justice to crunch the numbers:

    The surtax would impact around 345,000 taxpayers, roughly 0.2 percent of taxpayers, or one in 500 of them. Those people would pay on average an additional 2.1 percent of their overall income, or just over 1/50th of that overall income, in taxes.

    In a majority of states, only one-tenth of one percent, or one in 1,000 taxpayers, would pay this surtax.

    And how many people would benefit from the payroll tax cut? According to the group, around 113 million tax filing units — either single workers or families that include more than one worker — would see their payroll tax cut extended. That’s a lot of people — well over 113 million workers, in fact.

The payroll tax cut extension isn't without problems, primarily in the threat it poses to Social Security's political footing. That threat isn't to its financial footing, since the payroll tax cut is being offset by general fund contributions to the program, but that very offset strengthens arguments about how Social Security is bankrupting the treasury. Although it's not, and has never contributed to the deficit, making the self-funding mechanism for the program weaker is dangerous in the long run for the program.

The problem is, in this continuing crappy and unstable economy, the middle class needs this tax break and the economy needs this tax break. There's nothing else out there doing much to stimulate the economy since those "job creators" the Republicans are protecting have decided they're not particularly interested in creating jobs. And the millionaires' surtax is a smart way to do this. As Sargent says, "you’re still left with a clear cut case in which either one group (1/500th of taxpayers, all of whom are wealthy) or the other (more than 113 million workers) ends up paying more than they do now."

Republicans have put themselves in the position of supporting a tax hike on the middle class in order to keep protecting the 1 percent. Will Grover Norquist be calling them out on that?

(Original Post)

Tuesday 29 November 2011
by: Rose Aguilar, Truthout | News Analysis

Patriot Millionaires for Fiscal Strength, a group of citizens who make more than $1 million a year, met with politicians from both parties on Wednesday, November 16, in Washington, DC, with a unified message: Let the Bush tax cuts expire once and for all, and return the top marginal tax rate back to the Clinton-era levels.

Guy Saperstein, a former civil rights attorney and member of the Patriot Millionaires, said the most "substantive and revealing" meeting took place with supercommittee member Sen. John Kerry (D-Massachusetts). The group spent 75 minutes repeatedly and sharply telling Senator Kerry that the Bush tax cuts should expire.

"He told us a number of things that I would put in a disturbing category," says Saperstein. "We told him the Bush tax cuts should not be restored. That's our main point. He tried to sell us on the idea of reducing the top tax rates from 35 percent down to 28 percent. He tried to make the argument that it could be made up by closing loopholes elsewhere. We were astonished by that."

According to facts on the Patriot Millionaires' web site, letting tax cuts for the top 2 percent expire as scheduled would pay down the debt by $700 billion over the next ten years. In 1963, millionaires had a top marginal tax rate of 91 percent; in 1976, millionaires had a top marginal tax rate of 70 percent; today, millionaires have a top marginal tax rate of 35 percent. Between 1979 and 2007, incomes for the wealthiest 1 percent of Americans rose by 281 percent.

According to the National Priorities Project and Citizens for Tax Justice, the first decade of the Bush tax cuts, from 2001 to 2010, cost $955 billion; the Obama extension, from 2011 - 2012, cost $229 billion; the proposed extension, from 2013 to 2021, would cost $2.02 trillion; the total cost is $3.2 trillion.

Patriot Millionaires for Fiscal Strength isn't the only group of wealthy individuals calling for more progressive tax policies and an end to the Bush tax cuts.

Members of Responsible Wealth, a network of over 700 wealthy individuals who advocate for fair taxes and corporate accountability, recently sent a letter to members of the supercommittee. It says:

    We support taxing capital gains and dividends at the same rate as ordinary income. We support progressive rates for the estate tax and a lower exemption. In addition, we support ensuring that large corporations pay their fair share by ending corporate tax loopholes and preventing use of offshore tax havens, and we support a financial transaction tax.

    The idea that business owners and wealthy individuals will not invest unless marginal income tax rates and capital gains rates are low is a myth, and should not be used to justify further extensions of tax cuts for the wealthy. We invest when there is a profit to be made, not because tax rates on our profits are low. History shows that when marginal tax rates and capital gains rates were much higher than today, including the 1950s and 1960s and as recently as the 1990s, the economy was strong, investments were made, businesses thrived and millions of jobs were created. Furthermore, if the members of the committee fail to reach agreement, we do not believe the economy or investment levels will be harmed.

    Like the majority of Americans, we believe that cutting Social Security, Medicare, Medicaid, unemployment insurance, education and research is completely unacceptable. We note that Social Security has no connection to our current deficit. We believe that a reduction in unnecessary military spending should be at least half of any spending cuts.

Because of the Occupy movement, these issues and facts are getting more media attention and the 99 percent are now in everyday conversations. So, who are the 1 percent?

The 1 percent bring in at least $350,000 a year and have at least $8 million in personal wealth, according to Christian Weller, senior fellow at the Center for American Progress, and associate professor in the department of Public Policy and Public Affairs at University of Massachusetts. On average, the 1 percent bring in $1 million a year in income and have $14 million in wealth. Approximately 1.5 million households are in the 1 percent.

In addition to raising awareness about tax policies, these groups also aim to counter the false "tax cuts create jobs" narrative we constantly hear in the national dialog.

"The main line that the other side has been pushing, and it's seductive, is that reductions in marginal tax rates lead to economic growth. If that were true, it would be a compelling argument. The problem is, it's not true," says Garrett Gruener, founder of Ask.com, co-founder of venture capital firm Alta Partners and member of the Patriotic Millionaires. "Relatively modest changes in the tax code, which have had massive effects on the budget have had no effect on entrepreneurs."

In a September 2010 Los Angeles Time op-ed called "I'm rich; tax me more," Gruener writes:

    Now that the Bush tax cuts are about to expire, Republicans are again arguing that taxes should remain low for the wealthy. The idea is that this will spur people like me to put more capital to work and start more ventures, which will create new jobs, power the economy and ultimately produce more tax revenues. It's a beguiling theory, but it's one that hasn't worked before and won't work now.

    Instead, Congress should let the Bush tax cuts expire for the wealthiest Americans and use the additional tax revenues that are generated to invest in infrastructure and research. "Invest" is the right word. Putting money into infrastructure - such as roads, bridges, broadband, the smart grid and public transit - as well as carefully chosen research initiatives provides a foundation for future growth. As important, it puts funds in the hands of those who will spend them, generating demand that will pull us out of our economic crisis and toward a new cycle of growth.

    No one particularly enjoys paying taxes, but one lesson we should have learned by now is that for the good of the country, we need to tax people like me more. At a minimum, we need to return to the tax rates of the Clinton era, when the economy performed far better. Simply taxing the wealthiest 2% of Americans at the same rates they were taxed before the Bush tax cuts could reduce the national deficit by $700 billion over the next 10 years. Remember, paying slightly more in personal income taxes won't change my investment choices at all, and I don't think a higher tax rate will change the investment decisions of most other high earners."

Resource Generation, an organization for young people with wealth who are committed to social change, is also calling on Congress to let the Bush tax cuts expire. "We stand with the 99 percent," says Burke Stansbury, a board member of Resource Generation. Stansbury inherited a little more than $1 million dollars and is expected to inherit even more. "It's all about taxes when you talk about unequal distribution of wealth in this country. The tax system has become more and more regressive."

Resource Generation started the blog We are the 1 percent: We stand with the 99 percent. The site says, "Tax me! I support proposals to raise taxes for wealthy households like my own. No budget cuts until we raise revenue from those of us who have benefited the most and have the greatest capacity to pay."

Anti-tax crusaders like Grover Norquist and conservative outlets like The Daily Caller say that if people like Saperstein and Stansbury want to pay more taxes, they should write a check to the Department of Treasury. That's obviously missing the larger point. Watch members of the Patriotic Millionaires respond to a Daily Caller reporter's request to have them write individual checks to the Department of Treasury.

"This is not charity," said Saperstein in response. "Taxes are not charity. They're not voluntary. They're something society commits to do together." Donating to the Department of Treasury individually would "have no impact whatsoever."

Anti-tax advocates also say the government shouldn't be providing social services; leave that to nonprofits and churches. Stansbury says philanthropy isn't the solution. "A handful of people with money donating it is all well and good, but that isn't going to bring about the broad based structural change that we need in this country," he says. "That's why standing up with a political voice and speaking as people with wealth who are in favor of higher taxes on the wealthy is a powerful way to support this movement."

(Original Post)

By Greg Sargent

Posted at 02:37 PM ET, 11/28/2011

A number of people are pointing to this scorching quote from Joe McQuaid, the publisher of the New Hampshire Union Leader, explaining the paper’s decision to endorse Newt Gingrich over Mitt Romney:

    “I think — and this is crazy, but so are we — that Gingrich is going to have a better time in the general election than Mitt Romney,” publisher Joe McQuaid told FOX News. “I think it’s going to be Obama’s 99% versus the 1%, and Romney sort of represents the 1%.”

Aside from the obvious humor value here, this actually gets at something serious: The possibility that Mitt Romney’s tax rates, and not just his corporate past and support for cutting taxes on the wealthy and corporations, amount to an unexplored vulnerability in a general election. Because he gets income from investments, Romney would have paid roughly 14 percent of his income in taxes in 2010, according to the Citizens for Tax Justice — lower than the rate paid by many middle class taxpayers.

Wait, there’s more. According to Bloomberg News, Romney is now benefitting from the fundraising of Stephen Schwarzman, the chairman of the world’s largest private equity firm, who is also soliciting help for Romney from colleagues. Bloomberg presents this as a sign that Romney is “closing the sale with Wall Street’s wealthiest donors.”

But there’s more to it than this. As Pat Garofalo notes, Schwarzman is also well known as a warrior against efforts to close loopholes that benefit private equity firms. Indeed, this new Romney supporter has even compared his battle against such efforts to World War Two:

    “It’s a war,” Schwarzman said of the struggle with the administration over increasing taxes on private-equity firms. “It’s like when Hitler invaded Poland in 1939.”

Obviously, people like Schwarzman will back the GOP nominee, whoever he is, and Dems will likely highlight this kind of thing to paint the eventual GOP nominee, whoever he is, as in the pocket of Wall Street. But the fact that Romney himself personally benefits from aspects of the tax code that Obama wants to change makes him a less-than-ideal messenger to deliver criticism of Obama's push for tax fairness, and will likely make Dem attacks along these lines more potent. After all, Dems can argue that not only do the Schwarzmans of the world prefer Romney’s policies, but on top of that, Romney himself is actually one of them. You can’t say that about Newt.

This general election vulnerability is being obscured right now, because for obvious reasons, it isn’t an issue in the GOP primary. But the Obama team has taken note of this weakness — and Obama surrogates are likely going to work very hard to exploit it — even if it isn’t getting much attention right now. It seems like Republicans who are evaluating Romney’s strengths and weaknesses as a general election candidate might want to consider how this will play next year, particularly if resurgent populism continues to help shape the political environment, as many expect it to do.

(Original Post)

"We have the second highest corporate tax rate among our trading partners."

Rob Portman on Friday, November 11th, 2011 in a Joint Select Committee on Deficit Reduction hearing

Tax reform was an issue addressed by the Joint Select Deficit Reduction Committee, aka the supercommittee, in its failed quest to reduce the federal budget deficit.

Partisans on both sides of the political aisle have complained for years about the way we are taxed.

Republicans and some Democrats claim business taxes are too high and stifle growth. They argue that instead of handing over a share of profits to the government, companies could use the money to expand and hire more workers. Others argue the money is more likely to be passed on to shareholders.

It’s a big debate among states. Those with higher corporate tax rates often complain they can’t fairly compete for investment with states that have lower rates.

And when multi-national companies decide where they want to build a factory or invest their capital, one of the things they consider is a country’s tax rate.

That’s the context for a recent statement by U.S. Sen. (and supercommittee member) Rob Portman of Ohio, who broached the subject of tax reform during a hearing Nov. 1.

"We have the second highest corporate tax rate among our trading partners," Portman said. "Japan’s is slightly higher, and they are intending to take theirs down."

Portman contends that corporate taxes need to be lowered to make the U.S. more attractive to investment, but that corporate deductions also should be reduced so as not to add to the deficit. Resulting growth would broaden the tax base and actually raise revenues. He also thinks multi-national corporations should be allowed to repatriate future profits to the United States without having to pay additional taxes on them here.

Because corporate taxes are such a hot-button issue, PolitiFact Ohio decided to review Portman’s statement.

Portman’s office said the senator based his comments on a report published in September by the Washington-based Tax Foundation called "U.S. Corporations Suffer High Effective Tax Rates by International Standards."

The first sentence in the report speaks directly to Portman’s claim.

"The United States currently lays claim to the second-highest statutory corporate income tax rate in the developed world. At 39.2 percent, the rate is only 0.35 percentage points behind OECD-leading Japan."

OECD stands for Organization for Economic Cooperation and Development and includes 34 countries. China, India and Brazil are not members but cooperate with OECD.

The 39.2 percent figure is correct when you combine the statutory federal rate of 35 percent with the average statutory rate among states. But the statutory rate is only part of the equation.

The statutory rate is what the tax code declares corporations must pay, but it’s much different from what corporations actually pay. That is called the effective tax rate, and it takes into account all the loopholes and preferences available to companies, such as depreciation of assets and deductions for things like research and development. Those can significantly lower taxable income and in some cases eliminate a corporation’s tax burden altogether.

We felt it was important to examine Portman’s statement in view of the effective tax rate as well. And there the story is different — not much different according to the Tax Foundation, but a great deal so if you pose the question to the conservative Tax Foundation’s more-liberal think-tank rivals.

The Tax Foundation report lists 13 recent studies that compare effective tax rates across countries. The United States ranks second in three of those studies, third in two of them, fourth in two, fifth in three, sixth in one, eighth in one and 23rd in one.

But when you look at only those studies involving OECD countries, the United States never falls out of the top five.

"Taken as a whole these studies indicate that the average effective tax rate for U.S. corporations — like the statutory rate — is one of the highest in the world," the Tax Foundation report states. "By every available measure, the U.S. imposes a very high tax burden on its corporate sector, in comparison to other nations, even after credits and deductions."

Will McBride, an economist with the Tax Foundation, equates the statutory rate with the sticker price of a car, and the effective rate with the actual sales price once the haggling is over. Both rates are important, he said, because they affect behavior.

But we’re not letting that be the last word.

The left-leaning, Washington-based Citizens for Tax Justice along with the Institute on Taxation and Economic Policy produced a report this month that sampled 280 of the Fortune 500 companies in the United States and found that they paid an average U.S. corporate tax of 18.5 percent.

Of those 280 companies, 78 paid no federal taxes in at least one of the past three years.
One of the authors of that report, Rebecca Wilkins, senior counsel for federal tax policy at the Center for Tax Justice, argues that the Tax Foundation studies are misleading because they include both deferred and foreign taxes in their calculations.

Not to complicate things further, but Bruce Bartlett, a former Treasury official under the first President George Bush and now a New York Times blogger, argues that the broadest measure of a country’s corporate tax burden is to calculate corporate taxes as a share of gross domestic product. In that case, the United States is among the lowest in the OECD, he said, which begs the question; how can a country have such a high tax rate, but such a low tax burden? The answer: loopholes and deductions.

Furthermore, a more precise debate would factor in the taxing of corporate dividends to shareholders, which is done at a comparatively lower rate in the United States than in most other countries, he said.

Bartlett, who recently wrote a book on tax reform called "The Benefit and The Burden," thinks the whole exercise is somewhat irrelevant because cutting taxes won’t necessarily lead to more investment, especially in today’s stagnant economy when nobody is interested in expanding.

The upshot is that there are a lot of ways to slice the corporate tax apple, and the conclusion that can be drawn depends a lot on the question that is being asked.

So where does all this leave Portman’s claim?

The claim is irrefutable when looking at the statutory rate but arguable when considering effective rates.

So Portman’s statement is accurate, but requires some clarification, which on the Truth-O-Meter means a rating of Mostly True.

(Original Post)

By Pat Garofalo on Nov 28, 2011 at 10:35 am

Last summer, mega-investor and Blackstone CEO Stephen Schwarzman — who has a net worth of about $4.7 billion, according to Forbes — said Democratic efforts to close a pernicious tax provision known as the carried interest loophole was akin to Nazi invasions during World War II. “It’s a war,” Schwarzman said. “It’s like when Hitler invaded Poland in 1939.”

This particular loophole lets private equity executives and hedge fund managers, who are some of the wealthiest people on the planet, pay exceedingly low tax rates. As billionaire investor Warren Buffet explained, “Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as ‘carried interest,’ thereby getting a bargain 15 percent tax rate.”

And it seems that Schwarzman has found his man in the 2012 election: the former private equity executive Mitt Romney:

    Stephen Schwarzman, chairman of the world’s largest private-equity firm, will host a fundraiser for Mitt Romney at his Park Avenue apartment next month, a sign that Romney is closing the sale with Wall Street’s wealthiest donors.

    The event marks Schwarzman’s inaugural step to help Romney secure the Republican presidential nomination, according to a person familiar with Schwarzman’s plans who spoke on condition of anonymity. He will follow up with efforts to persuade colleagues in the financial industry to get behind Romney’s presidential bid, the person said.

Schwarzman, for the record, is so wealthy that his personal chef “often spends $3,000 for a weekend of food for Mr. Schwarzman and his wife, including stone crabs that cost $400, or $40 per claw.” Yet he has vociferously fought against equalizing the tax treatment of investors like himself and the working Americans whose income is taxed at normal income tax rates.

Romney, of course, has already come out against the “Buffett rule,” the Obama administration’s proposal to ensure that millionaires and billionaires can’t pay lower tax rates than middle-class families. Romney’s net worth is about $250 million and he won’t release his tax returns (despite having previously called on his opponents to do so). However, a Citizens for Tax Justice analysis estimated that Romney pays a tax rate of about 14 percent.

Even before grabbing Schwarzman’s endorsement, Romney had been hauling in Wall Street cash. But does Romney agree with Schwarzman that asking billionaires to pay their fair share is akin to Hitler invading Poland?

(Original Post)

Dave Helling
The Kansas City Star

It’s a standard line in Republican presidential candidate Michele Bachmann’s stump speech.

“We live in a world where only 53 percent of Americans pay federal income tax, 47 percent pay nothing,” the Minnesota congresswoman recently said in Iowa.

Bachmann’s figures are roughly correct: By most estimates, 46 percent of American households had no federal income tax liability this year, either because they didn’t make enough money or their credits, exemptions and deductions exceeded their tax bill. Some filers without an income tax bill even got refund checks from Uncle Sam.

Other Republicans and conservatives have echoed her concerns, suggesting tax reform that could include a required minimum payment from almost everyone.

“The poor need jobs, and they also need to share some of the responsibility,” Republican Sen. Orrin Hatch of Utah said last July.

Sen. Roy Blunt, a Missouri Republican, also insists it’s a mistake to allow some taxpayers to pay no federal income levy. “I do think you value what you pay for,” Blunt said. “Whether that’s a copay at the doctor’s office, or actually having a stake in the income tax system.”

But Democrats and some liberal groups contend the GOP’s federal income tax claims are misleading. Even Americans who don’t pay income taxes pay a bucketful of other taxes and fees, they point out.

“All Americans pay taxes,” Citizens for Tax Justice, a liberal public interest group, noted recently. “Everyone who works pays federal payroll taxes. Everyone who drives pays federal and state gas taxes. State sales taxes affect everyone who shops, and state and local property taxes affect everyone who owns or rents a home. … Most states have income taxes.”

The argument over the federal tax structure is expected to move to the center of the presidential campaign next year. It’s already part of the debate over the federal deficit, and GOP candidate Herman Cain rose in the polls after proposing major cuts in federal income taxes and a new national sales tax as part of his 9-9-9 proposal.

Republicans want to reform taxes for a variety of reasons, of course — lower tax rates, for example, would spur job creation, they say — but many also think requiring an income tax payment from everyone would make the system more fair.

But some who study the tax code are worried that major federal tax reform could upset the delicate balance among all the taxes Americans pay, potentially making the tax system less fair. That’s particularly true because states and cities also are discussing major changes in the way they collect the money needed to run their branches of government.

(Original Post)

Originally published: November 25, 2011 3:41 PM

Updated: November 28, 2011 12:01 AM

By MATTHEW GARDNER

Matthew Gardner is executive director of the Institute on Taxation and Economic Policy, a nonprofit, nonpartisan research organization in Washington.

With the holiday season now in full swing, why are so many Main Street retailers down in the dumps? The reason is Cyber Monday, and if this year follows recent trends, it will go down as the biggest online shopping day in the history of the Internet.

The Monday after Thanksgiving is the electronic equivalent of the Black Friday shopping bonanza -- minus the throngs of mall shoppers hunting for holiday bargains. And while online shoppers sitting at work at their desks don't draw news cameras like mayhem at the malls, the impact of online retail on our communities is a story worth telling.

Last year, Americans spent more than $1 billion shopping online on Cyber Monday. The National Retail Federation predicts this holiday season, 36 percent of all purchases will be made online. But too many of these purchases will be tax-free, due to an unfortunate loophole allowing e-retailers to shirk their role in helping states collect sales taxes -- which cost states $10 billion last year alone, according to researchers at the University of Tennessee.

More tax-free sales mean fewer tax dollars for states -- not to mention the consumer dollars that won't circulate in our local economies because the current system rewards online shopping with out-of-state businesses.

What is this loophole? In 1992, the Supreme Court ruled that states could not force a retailer to collect sales taxes unless that retailer had a store, warehouse or other "physical presence" within the state. At that time, it was a ruling about catalog and other "remote sellers" who, the court decided, shouldn't have to navigate the often complex tangle of state and local sales tax systems.

But technological changes since 1992 make the court's decision far more consequential than they could have imagined. Three years after this decision, Amazon.com opened for business and online shopping has exploded since then. At the same time, the court's fears about tax complexity are obsolete, since computer software now makes it easy for remote retailers to calculate and collect state sales taxes nationwide.

To be clear, the problem is not that e-retailers are dodging taxes, it's that they aren't collecting them from consumers. While every state legally requires shoppers to pay sales taxes directly to the government when retailers fail to collect it, these laws are hopelessly unenforceable as sales taxes were never intended to be paid by individuals.

Those uncollected taxes add up. The losses are growing every year and the cumulative results are staggering. New York is facing sales tax revenue losses in excess of $700 million in 2011. Every one of those uncollected sales tax dollars is a dollar not spent on public safety or education, and a dollar price advantage we are giving to online retailers but denying to businesses in our own towns.

In an effort to regain those lost dollars, individual states are beginning to strike ad hoc deals with some online retailers, but the process is burdensome to states and lets too many other companies off the hook.

The good news is that Congress is looking at legislation that would finally allow states to compel online retailers to comply with their sales tax collection laws, so long as those states simplify their sales tax systems and exempt very small businesses. The bad news is, the current Congress is about as gridlocked as the parking lot at your local shopping mall was on Black Friday.

But there is reason for hope. Traditional retailers with big pocketbooks, like Target and Home Depot, have finally grown tired of watching their online competitors exploit the no-tax loophole and are making their voices heard in Washington. If these brick and mortar titans succeed, they will, in the process, help level the playing field for small local business and restore the public resources we all depend on.

(Original Post)

By John Iacovelli (about the author)

Most U.S. citizens understand that through a variety of loopholes, U.S. based corporations have reduced their U.S corporate tax burdens tremendously over the last forty years. With a new study just published, we can gauge, comparatively, which specific industry categories are the worst offenders. This article documents this via rough extrapolation and provides a bar chart showing tax payments by industry category in 2009, and what they would have paid with a 25% corporate income tax, no loopholes. First the graph, then the explanation, and finally, the data table. For each industry, the bottom bar shows what they paid. The top bar shows how much more they would have paid at 25%:

This is strictly back-of-envelope math, because I'm comparing an incomplete data set (280 big companies) to a complete one (U.S. GDP), and a number of important classifications (such as defense, pharmaceuticals) in the CTJ table don't match one-to-one with the BEA classifications. But the results are eye opening. The bar for the fiancial sector is the part that caught my eye. The international nature of that industry enables the financial sector to move profits to other parts of the world easily, much of their profit is converted to personal salaries and bonuses, and their contributions have enabled them to write tax law with ease. The three other industry accounts mentioned in the Joe Romm article cited below, utilities and telecom, also appear as egregious offenders.

Now for the explanation and the data.

I read Joe Romm's very good article, "Over Half of All U.S. Tax Subsidies Go to Four Industries. Guess Which Ones?" the other week with great interest. The tables he reproduced, from Citizens for Tax Justice and the Institute on Taxation and Economic Policy's excellent study grouped 280 large corporations by industry, and reported their profit margins vs. what they paid in U.S. corporate taxes. Grouping these companies provided data points showing the tax rate per industry category. Since we know the sum of corporate taxes paid ($138 billion in 2009) as reported by the CBO, it enabled us to use the findings of the study to extrapolate tax payments by industry category for the entire U.S. gross domestic product. Note that the total payments of these 280 corporations was $71 billion for that year -- so the CTJ data is a large sample.

For our analysis, we started by comparing CTJ's industry categorizations to the Bureau of Economic Analysis' numbers on Gross-Domestic-Product-by-Industry Accounts. The BEA table gives us the actual production by category, so we could link the tax numbers to GDP numbers.

Knowing CTJ's total tax payment by industry category, we could then calculate the percentage that payment represented for all industries. For example, if all companies in the study paid a total $71.8 billion in taxes, and those in the telecommunications category paid $3.9 billion, we know that category paid 5.4% of all taxes paid in the study.

Because we know the total corporate tax receipts for that year from the CBO, we could then take that percentage, and looking at the BEA's numbers for that category, guess that all telecom companies, including the ones not studied, paid 5.4% of the $138 billion taxes as reported by the CBO. Undoubtedly not an exact guess, but if all we want is the comparative view by industry category, it's good enough.

Having a number for total tax paid for the category, and having CTJ's tax percentage for the categories in the 280 company study, we could calculate profit for all U.S. companies in the category. Again, other companies not in the CTJ report will differ, but the relations between categories are what we're after.

To calculate the shortfalls, I chose a straight corporate 25% tax rate for every company, for simplicity sake; in reality, had all loopholes been closed, many companies, particularly these 280, would have paid 35%.

The conclusion, once we arrived at the profit amounts for each category, then taxing those by a flat 25%, showed that corporate taxes would have increased by 52% in 2009, from $138 billion to $210 billion with such a flat tax (or had the effective tax rate for all corporations been 25%). Even assuming that not every company would have done as well as the 280 selected for the CTJ survey, it would still be a big chunk of change. Enough to pay for a war or two. Aside: yes, I advocate raising corporate taxes by 50%!.

I do want to point out a dramatic graph at the Tax Policy Center of the Brookings Institution, showing Corporate Income Tax as a Share of GDP, 1946-2009. It shows that current corporate tax receipts, as expressed as a percentage of GDP are one sixth of that of the 1950's.

Final note on this graph: BEA uses wholesale and retail trade as a sort of catchall; that's why that category is so big. I suspect (but haven't looked into) that much of Pharmaceuticals & medical products, for example, which CTJ broke out as a separate category, is lumped in there.

(Original Post)

By Frank Bass

Bloomberg News

Occupy Wall Street demonstrators march on the Upper East Side neighborhood, where individual tax collections are high. Protesters say the wealthy should pay their fair share of taxes.
Enlarge this photo

JIM LEE / BLOOMBERG

Occupy Wall Street demonstrators march on the Upper East Side neighborhood, where individual tax collections are high. Protesters say the wealthy should pay their fair share of taxes.
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quotes opps,, this article isn't very P.C.. accuracy is irrevelant to the whiners.. (November 27, 2011, by chapped) Read more
quotes Yep. Me too. Wish the big-C Conservatives would stop their PC whining about how put... (November 27, 2011, by R N Carter) Read more
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WASHINGTON — New York is where the 1 percent live — and they have the tax returns to prove it. Nine of the 10 most heavily taxed neighborhoods in the United States are in the city's metropolitan area, Internal Revenue Service data show.

The nine neighborhoods, which range from Manhattan to Fairfield County, Conn., accounted for 0.2 percent of all federal income-tax filers in 2008, the latest year for which data are available, according to IRS statistics compiled by Bloomberg News. They paid 1.6 percent of all individual income taxes, eight times their proportionate share of the filing population.

The $16.5 billion paid in the nine ZIP codes would be enough to buy a controlling interest in General Motors or match the combined economies of the Bahamas, Fiji and Tajikistan. The disproportionate amount also counters arguments by anti-Wall Street protesters who claim to represent "99 percent" of Americans and say the rich should be taxed more, said Mitchell Moss, an urban-policy professor at New York University's Wagner School.

"We're subsidizing the slackers in the rest of the country," Moss said. "This is the most productive part of the United States of America, in terms of taxes paid."

The only ZIP code outside the New York area to make the top 10 was a west Houston suburb that accounted for $1.5 billion in federal individual income taxes. The neighborhood includes the Houstonian Hotel, Club & Spa, which George H.W. Bush listed as his primary residence during his presidency.

Nationally, the IRS showed, 137.7 million U.S. households paid $987.4 billion in federal taxes in 2008. The nine New York-area ZIP codes reported $70.1 billion, or 0.9 percent, of the nation's total adjusted gross income of $7.98 trillion.

Individual income taxes are the federal government's largest source of tax revenue, accounting for 45 cents of every $1 raised. Payroll taxes, which are more regressive, make up 36 cents; corporate taxes another 12 cents; and other taxes account for 7 cents of every tax dollar raised by the government.

There's no doubt income inequality is growing. The Congressional Budget Office reported last month that after-tax income for the richest 1 percent of U.S. households grew 275 percent between 1979 and 2007. For the lowest 20 percent, after-tax income grew 18 percent over the same period. And the Occupy Wall Street protesters in Manhattan and elsewhere are pressing for more taxes on the highest earners, or the "1 percent," as one way to curb the growing income disparity.

The share of taxes paid in the New York neighborhoods "is irrelevant and a distortion of the fact that, as a percentage, wealthy people pay far less as a portion of their earnings," Karanja Gaguga, an Occupy Wall Street spokesman who identifies himself as a former Deutsche Bank analyst, said in an email.

The largest amount of individual tax collections came from the 10021 ZIP code on New York's Upper East Side. The IRS data show 29,820 individual returns were filed from residents there, with total income taxes of $2.85 billion, or an average tax bill of $95,489. More than 93 percent of taxes in the ZIP code came from households with adjusted gross income greater than $200,000, the IRS records show.

The ZIP code extends from the East River into Central Park, between 69th and 77th Streets. Property owners include Stephen Schwarzman, founder and chairman of Blackstone Group; David Koch, co-owner of Koch Industries Inc., one of the largest privately held U.S. companies; and John Thain, chairman and chief executive officer of CIT Group.

The $1.4 trillion economy of the New York metropolitan area is a "huge contributor" to the national treasury, said Kathryn Wylde, president and chief executive officer of the Partnership for New York City, a nonprofit coalition that includes more than 100 chief executives.

"Clearly, New York City is paying a disproportionate share of the tax burden," Wylde said. "It's the country's economic engine."

The individual income-tax figures don't take into account the burden of local property and sales taxes, as well as state income taxes that typically affect lower and middle-income households more than wealthy filers, said Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice, a nonprofit Washington, D.C.-based group that advocates a more-even distribution of taxes.

People in the lowest 20 percent of earners, or those who have an average cash income of $12,500 a year, pay 3.9 percent of their income in federal taxes and 12.3 percent in state and local taxes, Wilkins said. People in the highest 1 percent, who have an average cash income of almost $1.3 million annually, pay 22.1 percent in federal taxes and 7.9 percent in state and local taxes.

"The federal income tax is very progressive," she said. "It's the state and local taxes that are borne more by lower-income brackets."

(Original Post)

25 November 2011

By George E. Curry
NNPA Columnist

Although automatic cuts in defense spending and domestic programs are scheduled to go into effect as a result of the congressional supercommittee’s failure to reach a budget deal by Wednesday, those reductions are far better than what Republicans on the committee were proposing and Democrats were willing to accept.

According to the Congressional Budget Committee, defense spending will be slashed automatically by 10 percent in January 2013 while domestic programs will be reduced by 7.8 percent. Additionally, Medicare spending will be lowered by 2 percent. Exempted from the automatic cuts are Social Security, veteran benefits, Medicaid and certain low-income programs.

“No deficit deal is better than a bad deal, and a bad deal may be the only kind this committee can reach,” Orson Aguilar, executive director of the Greenlining Institute, said as it became clear the committee of six Democrats and six Republicans would not come to an agreement. “As we reported this summer in our study, ‘Corporate America Untaxed,’ nearly all of the deficit reduction goal can be achieved by closing down offshore corporate tax havens and making the richest companies pay their fair share. There is no need to devastate vital programs for the elderly and other vulnerable Americans.”

The goal of the supercommittee, formally known as the Joint Select Committee on Deficit Reduction, was to reduce the budget by $1.2 trillion over the next 10 years.

As an incentive to complete a deal, an automatic trigger was set go into effect if the committee failed to reach that goal, slashing an equal amount from military and domestic spending.

Under the most progressive GOP proposal, if it can be called that, Sen. Patrick J. Toomey (R-Pa.) offered $300 billion in new taxes, a far cry from an equal split between spending reductions and new tax revenue favored by Democrats.

What is more disturbing is that Democrats on the committee were willing to make concessions that would hurt their core constituents. They offered a proposal to reduce deficits by $3 trillion over 10 years that included $500 billion of savings in health care programs, higher Medicare premiums, and a new form of indexing inflation that would reduce cost-of-living adjustments for Social Security beneficiaries.

The compromise deficit proposals were to the right of the Simpson-Bowles plan of last year, with minimal revenues and as much as $600 billion in cuts to Medicare and Medicaid, the Greenlining Institute noted.

Greenlining, a multi-ethnic public policy and advocacy group, wrote to the committee in August stating that simply closing offshore tax havens could reduce the deficit by as much as $1 trillion. One of its studies showed that by using offshore tax havens, major companies such as Exxon and General Electric pay far less of their income in taxes than the average American, and in some cases no taxes at all.

Unlike Democrats, Republicans have been steadfast in supporting their base, which includes the wealthy and major corporations.

According to Citizens for Tax Justice, 52.5 percent of the Bush tax cuts go to the richest 5 percent of taxpayers. The Treasury Department reports that extending the Bush tax cuts to the top 2 percent of taxpayers will cost $678 billion over the next decade.

GOP leaders refuse to consider letting the Bush tax cuts expire. In a concession to Republicans last year, President Obama broke a campaign pledge by agreeing to extend the tax cuts beyond their original expiration date. He made that agreement in exchange for Republicans extending unemployment benefits and the payroll tax cuts.

There is broad public support for requiring the wealthy to shoulder a fairer share of the tax burden.

In an October Washington Post-ABC News poll, threequarters of Americans backed a tax hike on millionaires. A Washington Post-Bloomberg News poll that same month found that more than twothirds supported raising taxes on households earning at least $250,000.

The committee seemed doomed from inception, evenly divided with no member willing to break party ranks. The supercommittee’s inability to reach a deal marks the third high-profile budget failure over the past 12 months, following a bipartisan deficit commission and unsuccessful talks last summer between President Obama and House Speaker John Boehner.

The decision to invoke automatic spending cuts as part of raising the national debt limit in August was intended to pressure Congress into making tough budget cuts. But now that it didn’t happen both Republicans and Democrats are looking into ways to come up with another gimmick that will again postpone making tough decisions.

Republicans conveniently ignore that fact that the deficit problem was caused by a combination of two George W. Bush wars, a poor economy and two Bush tax cuts. When Bush assumed office, he had a $128 billion surplus. Bush, on the other, ran up deficits every year he was in office.

When Obama assumed office, the deficit was more than $11 trillion. An additional $4 trillion was added under Obama, some stemming from Bush’s 2009 budget. Overall, approximately 75 percent of the deficit was incurred while Bush was in office. Where were the Republican voices then?

Politicians being politicians, look for some more political shenanigans that will do everything except seriously tackle our fiscal problems.

George E. Curry, former editor- in-chief of Emerge magazine and the NNPA News Service, is a keynote speaker, moderator, and media coach. He can be reached through his Web site, www.georgecurry.com. You can also follow him at www.twitter.com/currygeorge

(Original Post)

By KAREN HUBE, The Fiscal Times
November 25, 2011

"It’s hard enough wading through the tax code to prepare your personal tax returns. But parsing the blizzard of proposals for tax hikes, tax cuts and tax reform offered by President Obama, lawmakers and GOP presidential candidates can be overwhelming."

"But few, if any, corporations actually pay the 35 percent rate thanks to numerous subsidies and tax breaks. Some corporations have years in which they owe zero tax, despite having earned profits. According to Citizens for Tax Justice, 30 companies, including General Electric, Verizon Communications and Wells Fargo, paid no income tax in 2008, 2009 and 2010 despite logging substantial profits."

(For More See the Original Post)

(Original Post)

By DJ Pangburn Thursday, November 24, 2011

Being a U.S. corporation is a privileged position: responsibility counts for nothing and self-interest is elevated to a fine art. Here are five corporations who owe the American people thanks for bailouts and tax dodges.

Forming a corporation means never having to say you’re sorry. It’s very structure is built around the idea that no one is culpable for wrong action. However, since Citizens United vs. FEC dictated to every American citizen that corporations are people (in their totality), we think that like any good person, they should give thanks where required.

Here are five corporations and banks who were either bailed out in recent years or who pay next to nothing in federal taxes.

General Electric

In 2010, General Electric (GE) made $14.2 billion in revenue,  $5.1 billion of which came from its operations in the United States.

The corporate tax rate is 35% but GE’s rate does not even come close to that percentage. In fact, they pay nothing at all. The New York Times reported that GE’s tax burden is 7.4%. A conditional number. Conditional in that it is dependent on whether GE brings its overseas profits back to the United States, instead of hiding them in a labyrinth of tax shelters; which, of course, they won’t.

“[GE's] extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm,” writes NYT.

Even more absurd is that GE claimed a $3.2 billion tax benefit for 2010.

GE is the poster boy for tax dodging and is one of the prime examples of how these tactics place an inordinate burden on the middle class. For that, GE owes the American people thanks.

General Motors

General Motors should be viewed as the model for a government saving corporations from bankruptcy. The reality is that GM would not exist if not for taxpayer dollars.

The U.S. Treasury floated GM $49.5 billion to buoy the automaker through its 2009 bankruptcy reorganization, giving the U.S. government a 61% stake in the company. The Treasury made $11.8 billion by selling 75% of GM’s common shares in its November 18, 2010 initial public offering.

U.S. taxpayers are still out approximately $25.5 billion. Indeed, GM owes a debt of thanks to the American people—for everything.

AIG

AIG was right in the thick of the sub-prime mortgage and collateralized debt obligation (CDO) disaster of 2008.

In brief, various banks such as Goldman Sachs and Lehman Brothers sold sub-prime mortgages as securities, then bought insurance (credit default swaps) on those loans with AIG, essentially betting against the stocks they sold to investors. When homeowners started defaulting on their mortgages, banks came calling to AIG to receive their insurance money. This caused a liquidity crisis in AIG in which it couldn’t meet its obligations.

In order to funnel money to the banks who helped cause the crisis, the U.S. government and the Federal Reserve bailed out AIG.

According to Pro Publica, “the Treasury and the Fed have actually lent or invested a total of at least $140 billion to bail out AIG.” The Treasury committed $69.84 billion but AIG has only returned $18.22 billion. In March 2009, AIG announced that it was paying $165 million in executive bonuses with bailout money.

For the bailouts and executive bonuses, AIG owes the American people thanks on this Thanksgiving Day 2011.

Bank of America

On August 22, 2011, Bloomberg reported that the Federal Reserve had loaned $1.2 trillion in public money to Wall Street banks. Of that number, Bank of America received “$91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.”

Bank of America’s lust for money is legendary. The last year has been a study in the various ways in which BofA attempts to bleed its customers through fees and penalties, all in an effort to recoup revenues lost from the halcyon days of overdraft fees.

For the bailout money, Bank of America owes the American people gratitude. Of course, they will likely show it by implementing some new fee scheme.

Pepco Holdings

Pepco Holdings is an energy corporation that rivals General Electric in its corporate tax dodging prowess.

A report by Citizens for Tax Justice notes that Pepco Holdings was amongst 30 corporations that paid less than nothing in aggregate federal income taxes over the entire 2008-2010 period (which was studied for the report). Pepco Holdings tax rate? A nice -57.6%.

Pepco Holdings, no doubt, owes thanks to the American people for its inspirational degree of tax dodging.

(Original Post)

November 23, 2011 11:12 AM

By Erik Sherman

(MoneyWatch)

COMMENTARY Ah, the federal estate tax, the very ruination of our American way of life. Presidential candidate Newt Gingrich calls it unfair and uses the nickname "death tax." But then, so does Rick Perry, and Herman Cain. Mitt Romney and Michele Bachmann both want to get rid of it.

Given the constant drum of fear, you can understand how many people have become upset over estate taxes. After all, it means that bequests you make or receive won't carry their full weight, right? Not quite. According to a new analysis by the group "Citizens for Tax Justice" of IRS data, the percentage of estates that come under this federal tax is so small that it makes the top 1 percent of the wealthiest in the country look like a big crowd. So, if you've been fretting over what taxes will do to your estate, perhaps it's time to take another look.

Trickle-down dreadonomics
Railing against estate taxes has become a cottage industry. Some of the diehard estate tax opponents are capable of the most intriguing, if logically unsound, arguments. Economist and non-presidential candidate Steven Landsburg says that the estate tax actually hurts the poor:

    The death tax sends a powerful message to rich people: "You can't leave everything to your heirs, so spend now, before it's too late. Burn more fuel. Demand more timber for your mansions, more steel for your private planes, and more fiberglass for your yachts.'' Then all those resources -- the fuel and timber, the steel and fiberglass -- become unavailable to build factories, so the rest of us get worse jobs at lower wages. Those resources are unavailable to build farm equipment, so we all pay higher food prices. They're unavailable to build roads and schools and hospitals.

In Landsburg's world, there is apparently no connection between wealthy people consuming and businesses actually sustaining jobs to produce what the steel and timber are supposed to provide. Or perhaps he thinks that the Magic Yacht Stork directly carries finished vessels from Neverland and places them under particularly large cabbage plants.

And Landsburg didn't even consider some of the spin-off opportunities. Some participants in the anti-estate tax fight have secured full-time employment. The American Family Business Institute is a trade association that is about nothing other than the permanent elimination of estate taxes and which has the NoDeathTax.org domain. Who's on the board? Representatives of large family businesses, including Asplundh tree care, the Bush's baked beans people, and some big timber concerns, among others.

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The real count
Both the AFBI and Landsburg are happy to invoke the term family business. But the families really devoted to ending the estate tax are atypical. Estate taxes affect very few people. According to the CTJ study, IRS figures show taxes owed on estates of people who died the previous year. The number has dropped from 0.7 percent of all estates in 2007 and 2008 to 0.6 percent in 2009 and 0.3 percent last year.

That's 3 out of every 1,000. President Barack Obama has proposed to make the rules in effect during 2009 permanent -- that is, the 0.3 percent would become fixed. If you assume for a moment that the most wealthy 1 percent of Americans represent the same percentage of people that die every year, you can see that less than a third of even them end up liable under the estate tax.

The big reason is the per spouse exemption ($3.5 million back in 2009, $5 million now) and smart estate planning that can minimize what is actually owed. The top federal estate tax rate was 45 percent in 2009 and is now 35 percent. According to the CTJ analysis of the IRS rules, of taxable estates from 2009, the actual percentage that went to taxes were19.2 percent federal and 2.4 percent state. That's a total of 21.6 percent. Of the remaining 78.4 percent, 9.8 percent of the total went to charities and 68.6 percent went to heirs.

Money still circulates
That's a big block of money going to heirs who, according to the anti-tax ranks, presumably invest heavily in creating new businesses and expanding old ones. However, even with the rate dropping, do you notice an onrush of job creation? No more than corporate overseas profit repatriation tax holidays result in more jobs.

Companies don't hire additional people if managers think it's possible to get the work done with fewer. And, as Warren Buffett has noted, investors don't give up on putting money into opportunities just because they don't get as much as they would if there were no taxes. That's nothing compared to Andrew Carnegie's 19th century direct endorsement for a hefty estate tax.

If the people demanding an end to estate taxes truly believe that any levy on what a person leaves to others after death is wrong or misguided, then the tiny percentage of estates affected by federal taxes shouldn't deter their fervor. But there is something wrong in trying to raise the alarm and scare large portions of the population into thinking that their own estate planning is in jeopardy. It's called manipulating a crowd so they push for what is in your best interest.

(Original Post)

By Steve Wamhoff

Policy Analyst for ITEP and the Legislative Director of Citizens for Tax Justice

You're not going to believe this, but one of the most popular proposals in Washington would destroy millions of jobs during recessions. It would cause Congress to scale back efforts to boost the economy exactly when those efforts are most needed.

This proposal is the balanced budget amendment to the U.S. Constitution. Even though a majority of members of the House of Representatives voted for it recently, it's not going anywhere right now because two thirds of each chamber must approve a constitutional amendment before it can be sent to the states for ratification.

And it's a good thing it's not going anywhere. A report from Macroeconomic Advisers, one of the most respected economic forecasting firms, concluded that unemployment would double in 2012 if a balanced budget amendment were in effect.

Most economists agree that the federal government needs to spend more during economic downturns, even if this requires deficit spending in the short-term, to help offset all the layoffs and cutbacks by the private sector.

This federal spending happens automatically during recessions because more people collect benefits like unemployment insurance and Medicaid, even as revenue drops because there are fewer incomes and profits to tax. Congress can also respond by providing additional benefits to struggling families, who are likely to immediately spend any additional money they receive on necessities, which boosts demand for products and creates jobs.

But if Congress must balance the federal budget each year, lawmakers would have to slash public services like Medicaid and unemployment insurance to prevent deficits during recessions. Of course, Congress could always balance the budget by raising taxes on the rich, which seems to have little if any impact on the economy, but the recent gridlock in the Capitol has demonstrated that too many politicians have ideological aversions to raising taxes even on those who can easily afford to pay them.

We all agree that Congress should get the long-term budget deficit under control. It's one thing to run deficits during recessions, but failing to collect enough revenue during boom times is a problem. (And the tax cuts first enacted by the previous administration are a big part of that problem.) But a constitutional requirement for Congress to balance its budget, while seemingly simple and logical in the abstract, is not the solution.

(Original Post)

Posted: Wednesday, November 23, 2011 12:00 am | Updated: 2:31 pm, Tue Nov 22, 2011.

By Jamala Rogers | 0 comments

The Joint Select Committee on Deficit Reduction, aka the Supercommittee, came out of the Budget Control Act of 2011. Their main task was to come up with a proposal to cut $1.5 trillion in spending over the next 10 years that would put the federal deficit in check. The committee conceded to failure after months of gridlocked meetings. Their unsurprising impasse means that automatic cuts will begin in 2013.

A lot could happen between now and 2013, but it seems like the Congress is in dire need of help on this issue. I have two suggestions for increasing revenue and reducing the deficit. This is the way I see it.

As a 99 percenter, I favor taxing the 1 percenters who have been ducking and dodging their civic responsibility for much too long.

According to a new report by Citizens for Tax Justice, nearly 300 of the country’s most profitable corporations paid less than half of the corporate tax rate. Some of these tax-evading companies reported a negative income tax rate even when they made a profit. This allowed them to claim tax subsidies. Two thirds of U. S. companies don’t pay taxes.  If collected, that’s some revenue!

Let those Bush tax cuts expire in 2012. That’s more revenue.

Now to the cuts.

We have a defense budget that has tripled since 1997 for no good reason. In a post-Cold War era, the U.S. defense budget is more than those of the next 18 largest budgets of other nations combined. With such a huge chunk going towards the military, most of us don’t even know how it’s spent.

The military has a lot of folks sitting on their brass. An NYU study underscores that every level of management has increased since the Cold War. The number of armed forces has gone down while the number of generals, admirals and the like have gone up.

The Government Accounting Office (GAO) has told us about some unnecessary but costly weapon systems that could be cut. Cancelling projects like the over-budgeted, overrated V-22 Osprey aircraft could save $6 billion. Further, the GAO said the Pentagon could save $184.5 billion by 2015 if they stopped buying obsolete or never used military parts and equipment.

Even Defense Secretary Gates has questioned purchases, such as additional 100 fighter jets when the military already has over 3,000 of them. Building more multi-billion-dollar ships when the U.S. Navy is bigger than the next 13 navies combined is ridiculous, especially when 11 of those 13 are supposed to be allies. There’s a reason why $130 million are spent each year by lobbyists to ensure that unnecessary military hardware and other equipment is purchased to pad the pocketbooks of legislators and defense contractors.

Give me a chance to slice that defense budget and I’d also go after the musicians and accountants. There are more musicians in military marching bands than employees in the State Department’s Foreign Service and 10 times as many accountants as there are officers in that service.

I’d keep it going with cutting back on the thousands of service peoples stationed all over the world – in places where there’s no conflict. Propping up dictators in other countries also has an expensive price tag. There’s so much waste at the Pentagon, I’m confident I could reduce that budget by 2/3 and still keep the country safe.

This is a start and it’s not rocket science.

A Congress that seems like it has been unproductive for the last three years is pretty much the same Congress that helped to increase the spending and the deficit. It may be why it’s so difficult to make the tough decisions.

The majority of citizens don’t want to drown in churning waters created by a government that is too cozy with corporations at our expense. It’s past time to end corporate domination that is choking the life out of the economy.

Today we occupy parks and streets. Tomorrow we occupy our government.

(Original Post)

Kathleen Pender, Chronicle Columnist

Tuesday, November 22, 2011

Does Apple really pay its fair share of U.S. taxes?

In a Nov. 3 report, Citizens for Tax Justice estimated that Apple paid an average effective U.S. tax rate of 31 percent between 2008 and 2010. That is close to the ostensible corporate income tax rate of 35 percent. Out of 280 companies in the study, only 49 had a higher effective tax rate than Apple.

Various bloggers and columnists seized on the report to put Apple on another pedestal, praising it as one of the few tech giants paying its fair share of U.S. taxes.

But in an overlooked report published in the journal Tax Notes in August, economist Martin Sullivan said Apple is no better than other multinationals that have been "painted as corporate tax dodgers by major media outlets."

He said that "despite outward appearances, Apple enjoys enormous foreign tax benefits, just as GE and Google do. By taking advantage of lax U.S. and foreign tax laws, Apple has been able to book a large share of its foreign profits in low-tax jurisdictions and greatly reduce its tax liability in the United States and other major countries where it conducts most of its real business activity."

He estimated that by shifting profits overseas, Apple is costing the U.S. government more than $1 billion a year.

Can both of these reports be right? The answer is yes and no.

Remember that companies keep one set of books for shareholders and another for the Internal Revenue Service. The books can be quite different and only the shareholder reports are made public.

The Citizens for Tax Justice report looked only at Apple's U.S. tax rate, which it had to estimate because Apple does not break it out. It only reports a worldwide effective rate, which was 24.4 percent in 2010.

CTJ took Apple's current federal income tax expense, made a couple of adjustments for items such as employee stock option expenses, and divided that number by what Apple reported as its U.S. profits. The result was the lofty-sounding 31 percent average U.S. tax rate.

Sullivan says that number is misleading because Apple books a relatively small percentage of its worldwide profits in the United States, even though most of its profit-making operations take place here.

Like many multinationals, it takes advantage of lax transfer pricing rules to book a disproportionately large and growing portion of its profits overseas. Most of these overseas profits are booked not in the foreign countries where Apple has major operations but in countries with ultra-low or no corporate taxes.

Even if its effective U.S. tax rate is high, it is applied to a disproportionately small percentage of Apple's worldwide income. "If Apple paid 50 percent U.S. tax on 1 percent of its worldwide profit, that does not make it a good corporate citizen," Sullivan says.

The numbers are not that dramatic; Sullivan is trying to illustrate his point.
Shifting profits

In reality, Apple booked 70 percent of its worldwide profits overseas in 2010, even though 75 percent of its retail stores, 44 percent of its sales and 86 percent of its long-term assets (such as property, plants and equipment) were in the United States, Sullivan said in his report. (It also booked 70 percent of its profit overseas in 2011, according to its recently filed annual report.)

More importantly, Sullivan notes that most of Apple's intellectual property - the real source of its profits - is created in the United States. Apple does not break out research and development by country. Sullivan based this assertion on several outside sources. He noted, for example, that in late July, 86 percent of the job openings for hardware engineers on Apple's website were in the United States.

Sullivan argues that if most of Apple's product development takes place in the United States, it ought to book a lot more than 30 percent of its profits in the United States and pay tax on it here.

He adds that Apple is not booking most of its overseas profits in foreign countries where it has a large physical presence. Its European headquarters are in Ireland and its Asian headquarters are in Singapore, where the corporate tax rates are 12.5 percent and 17 percent, respectively. But he calculates that Apple's foreign effective tax rate was only 1.2 percent in 2010 and 2.5 percent in 2011.

Apple does not disclose its foreign income and taxes by country, but this low number has to mean Apple is booking most of its overseas profits in countries with zero or near-zero corporate tax rates.

Sullivan stresses that Apple is not doing anything illegal. "It demonstrates how messed up the transfer pricing rules are," he says.
Transfer pricing tricks

These rules give companies a lot of leeway in allocating profits across borders. Most multinationals have armies of accountants and lawyers figuring out how they can legally shift profits from high-tax to low-tax countries.

One way a company can do this is by placing its intellectual property - such as patents, trademarks and trade names - in a subsidiary in a tax haven country. When the company's U.S. subsidiary makes a sale, it pays a royalty to the subsidiary in the tax haven. The tax haven subsidiary reports the royalty payment as income, but it is taxed very lightly or not at all. Meanwhile the U.S. subsidiary deducts the payment as an expense, which reduces its U.S. tax.

CTJ knew this when it wrote its report. It said it omitted some companies, such as Google and Microsoft, because almost all of their pretax profits were reported as foreign, even though most of their revenue and assets were in the United States. It called such geographic allocations ridiculous.

CTJ said in a footnote that it included, "with grave reservations," some companies that also seemed to be shifting a disproportionate share of their profits overseas, including Apple, Amgen, Gilead Sciences and EMC. "We urge our readers to treat these companies' true 'effective U.S. income tax rates' as possibly much lower than what we reluctantly report," it said.

CTJ President Robert McIntyre told me he agrees with Sullivan's analysis and regrets keeping Apple in the report. "I shouldn't have reported it," he said. "I stand by almost all the report except for Apple, EMC, Amgen, etc."
Apple's foreign tax

Sullivan's report focused on Apple's worldwide effective tax rate, which is also inflated because Apple does something almost no other U.S. multinational does - it recognizes a deferred U.S. tax expense on some of the profits it has parked overseas.

This is a hot issue as Congress debates pleas from U.S. companies to give them another giant tax break on repatriated profits, like it did in 2004.

U.S. companies are required to pay U.S. tax on all of their worldwide profits, not just those generated here, although they can deduct from U.S. taxes any foreign taxes paid. For example, if a firm pays 12.5 percent on a dollar earned in Ireland, it typically owes 22.5 percent in U.S. tax on that dollar (that's the U.S. rate of 35 percent minus 12.5 percent).

Companies don't actually have to pay this 22.5 percent tax until they repatriate the profit or bring it back to the United States. But they generally must deduct it as a deferred tax expense on the financial statements they provide shareholders.

Companies can avoid recognizing this deferred U.S. tax expense if they declare that their foreign earnings are permanently invested overseas. In this case, "they only book the foreign tax, not the additional U.S. tax," Sullivan says.

Virtually all companies take advantage of this loophole because it makes their shareholder-reported profits bigger.

Apple is one of the few companies that recognizes a deferred tax expense on some of the profits it has sitting overseas. "What makes them unique is that they are booking more expense than they are paying," Sullivan says.

Nobody is quite sure why Apple does this. This accounting treatment is conservative in the sense that it reduces reported profits. But it also makes it look as though Apple is paying a higher worldwide effective tax rate than it really is, which could help its image with people who buy its products.

"If Apple followed usual reporting practices, its reported worldwide effective tax rate would have been 15 instead of 24 percent," in 2011, Sullivan estimates.

Apple declined to comment on its taxes.

If Congress lets companies repatriate profits at a very low or zero rate, Apple might be able to reverse a deferred tax expense taken at a higher rate, thereby increasing its shareholder-reported profits.

Or Apple could one day change its mind and decide that its foreign profits are all permanently invested overseas and reverse the deferred tax expense it has taken, thereby boosting its shareholder-reported earnings, Sullivan says.

Taking the expense now, when Apple is awash in profits, could give it more flexibility if times get tough.

Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at kpender@sfchronicle.com.

(Original Post)

Chris Hannay

Globe and Mail Blog
Posted on Tuesday, November 22, 2011 9:21AM EST

If you were a 17th-century European, you probably feared witches. They hid among your townspeople, flew on brooms, used magic powder and poisoned your livestock -- or so you believed.

The ensuing hunt for witches is a useful proxy for historical France’s ability to enforce a consistent, federal law, say two economists.

This is important because a state’s ability to enforce laws and collect taxes are key to economic prosperity, according to a recent paper from Noel Johnson and Mark Koyama of George Mason University.

At the end of the 16th century, the economists write, France was a patchwork of territories with no centralized legal or tax system. The French monarch made concessions to different local interests to buy their loyalties, with some provincial nobles reigning without much oversight from central authorities.

Witch trials thrived in villages with little judicial oversight. Trying a witch, after all, isn’t easy if you follow the letter of the law. Local prosecutors had a tough time proving an accused had conversations with demons and confessions were often extracted through torture. This prosecution was made harder if the state looked over your shoulder.

The trials were expensive, and there were dangers of a feedback loop as more trials led to a greater fear of witchcraft, which led to more trials. State officials therefore had a strong economic incentive to stamp out these supernatural prosecutions. (Although, the authors note, this had nothing to do with a reduction in the belief of witchcraft.)

As the state began fiscal consolidation in the 17th century, it cracked down on local courts and enforced tax collection. More revenue was raised and fewer witches were tried.

“Centralized legal institutions led to less judicial discretion, improved standards of evidence, and increasingly standardized law enforcement, and thus had the inadvertent effect of reducing the number of witches tried,” the economists write.

They found a statistically strong link between the rise of tax receipts and the fall of witch trials. They used France as it is the only country they found to have the necessary data on both witch trials and tax collection at the regional level during this critical time of development.

Tax enforcement is still an issue centuries later, even if the fear of sorcery is way down. The commissioner for the Internal Revenue Service warned the U.S. government in October that threatened budget cuts would have severe consequences. A reduction of $600-million would lead to billions in lost tax revenue, the commissioner predicted in a letter to Congress.

Some large corporations avoid paying taxes the legal way -- financial wizardry and loopholes. General Electric paid no corporate income tax in the United States from 2008 to 2010, despite more than $10-billion in profit, according to a recent report from American non-profit group Citizens for Tax Justice. Many in the Occupy Wall Street camp call that accounting a kind of magic.

There is one distressing implication of the research. If Mr. Johnson and Mr. Koyama are right, it wasn’t the scientific revolution of Galileo and Copernicus that inspired Europeans to get smarter and ditch superstition. It was fear of the tax man.

(Original Post)

By Frank Bass - Nov 22, 2011 12:00 AM ET

New York is where the 1 percent live -- and they have the tax returns to prove it. Nine of the 10 most heavily taxed neighborhoods in the U.S. are in the city’s metropolitan area, Internal Revenue Service data show.

The nine neighborhoods, which range from Manhattan to Fairfield County, Connecticut, accounted for 0.2 percent of all federal income-tax filers in 2008, the latest year for which data are available, according to IRS statistics compiled by Bloomberg. They paid 1.6 percent of all individual income taxes, eight times their proportionate share of the filing population.

The $16.5 billion paid in the nine zip codes would be enough to buy a controlling interest in General Motors Co. (GM) or match the combined economies of the Bahamas, Fiji and Tajikistan. The disproportionate amount also counters arguments by anti-Wall Street protesters who claim to represent “99 percent” of Americans and say the rich should be taxed more, said Mitchell L. Moss, an urban policy professor at New York University’s Wagner School.

“We’re subsidizing the slackers in the rest of the country,” Moss said. “This is the most productive part of the United States of America, in terms of taxes paid.”

The only zip code outside the New York area to make the top 10 was a west Houston suburb that accounted for $1.5 billion in federal individual income taxes. The neighborhood includes the Houstonian Hotel, Club & Spa, which George H.W. Bush listed as his primary residence during his presidency.
Largest Revenue Source

Nationally, the IRS showed, 137.7 million U.S. households paid $987.4 billion in federal taxes in 2008. The nine New York- area zip codes reported $70.1 billion, or 0.9 percent, of the nation’s total adjusted gross income of $7.98 trillion.

Individual income taxes are the federal government’s largest source of tax revenue, accounting for 45 cents of every $1 raised. Payroll taxes, which are more regressive, make up 36 cents; corporate taxes another 12 cents; and other taxes account for 7 cents of every tax dollar raised by the government.

There’s no doubt that income inequality is growing. The Congressional Budget Office reported last month that after-tax income for the richest 1 percent of U.S. households grew 275 percent between 1979 and 2007. For the lowest 20 percent, after- tax income grew 18 percent over the same period. And the Occupy Wall Street protesters in Manhattan and elsewhere are pressing for more taxes on the highest earners, or the “1 percent,” as one way to curb the growing income disparity.

The share of taxes paid in the New York neighborhoods “is irrelevant and a distortion of the fact that as a percentage, wealthy people pay far less as a portion of their earnings,” Karanja Gaçuça, an Occupy Wall Street spokesman who identifies himself as a former Deutsche Bank AG analyst, said in an e-mail.

No. 1 Zip Code

The largest amount of individual tax collections came from the 10021 zip code on New York’s Upper East Side. The IRS data show 29,820 individual returns were filed from residents there, with total income taxes of $2.85 billion, or an average tax bill of $95,489. More than 93 percent of taxes in the zip code came from households with adjusted gross income greater than $200,000, the IRS records show.

The zip code extends from the East River into Central Park, between 69th and 77th Streets. Property owners include Stephen Schwarzman, founder and chairman of Blackstone Group LP (BX); David Koch, co-owner of Koch Industries Inc., one of the largest privately held U.S. companies; and John Thain, chairman and chief executive officer of CIT Group Inc. (CIT)
Immelt, Blankfein

Households in the 10021, 10023, 10128, 10022, 10024 and 10028 zip codes, which represent the most heavily taxed neighborhoods in the nation, paid $12.3 billion in individual income taxes during 2008. Residents of the suburban Scarsdale zip code of 10583 paid another $1.5 billion in taxes, and households in two Fairfield County zip codes, 06830 and 06831, handed over $2.65 billion to the federal government.

General Electric Co. Chairman and CEO Jeffrey Immelt owns a condominium in the 10022 zip code, which covers the East 50s in Manhattan. Goldman Sachs Group Inc. Chairman and CEO Lloyd Blankfein lives in zip code 10023, which covers part of the Upper West Side. Citigroup Inc. CEO Vikram Pandit owns an apartment across from the Museum of Natural History in zip code 10024.

Jeff T. Blau, president of real estate developer the Related Cos. owns a residence in 10028, which also was the residence of the late Jacqueline Kennedy Onassis, across from the Metropolitan Museum of Art.
A National Treasure

The $1.4 trillion economy of the New York metropolitan area is a “huge contributor” to the national treasury, said Kathryn Wylde, president and chief executive officer of the Partnership for New York City, a nonprofit coalition that includes more than 100 chief executives.

“Clearly, New York City is paying a disproportionate share of the tax burden,” Wylde said in a telephone interview. “It’s the country’s economic engine.”

The average tax burden -- or the average amount paid per filer in each zip code -- also was highest in New York zip codes.

The IRS reported 527 individual income tax returns were filed from the 10274 zip code, which corresponds to a downtown post office. It’s about a three-minute walk from the Charging Bull sculpture near Wall Street and less than half a mile from Zuccotti Park, the scene of anti-Wall Street protests for the past two months. The average filer in the zip code paid $1.48 million in income taxes, for a total of $778.5 million.
Beyond Income Taxes

The individual income tax figures don’t take into account the burden of local property and sales taxes, as well as state income taxes that typically affect lower and middle-income households more than wealthy filers, said Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice, a nonprofit Washington-based group that advocates a more even distribution of taxes.

People in the lowest 20 percent of earners, or those who have an average cash income of $12,500 a year, pay 3.9 percent of their income in federal taxes and 12.3 percent in state and local taxes, Wilkins said. People in the highest 1 percent, who have an average cash income of almost $1.3 million annually, pay 22.1 percent in federal taxes and 7.9 percent in state and local taxes.

“The federal income tax is very progressive,” she said. “It’s the state and local taxes that are borne more by lower- income brackets.”

Other high per-capita federal areas included the 33109 zip code in Fisher Island, Florida, where Oprah Winfrey, Julia Roberts and Andre Agassi have owned property. The IRS data showed 275 people there had an average tax bill of $268,156. The Oklahoma City zip code of 73154 had 368 households filing an average $246,758 tax bill, and the 90067 zip code in Century City, California, on the periphery of Beverly Hills, reported 3,606 households claiming an average $187,188 in taxes due.

To contact the reporter on this story: Frank Bass in Washington at fbass1@bloomberg.net

To contact the editor responsible for this story: Mark McQuillan in Washington at mmcquillan@bloomberg.net

(Original Post)

Jillian Berman First Posted: 11/21/11 10:47 AM ET Updated: 11/21/11 10:47 AM ET

As large as the income gap between rich and everyone else is today, one area of the economy has an even wider gulf to bridge.

The top 0.1 percent of earners are netting half of all capital gains -- or gains on the sale of shares or property -- according to Forbes. That means that 315,000 Americans are benefiting disproportionately from the financial transaction, which accounts for 60 percent of the income of the Forbes 400.

(Read the entires Forbes piece here)

Capital gains have been featured prominently in the debate over how best to overhaul the tax code and reduce the budget deficit. That's because capital gains, which largely benefit the wealthy, are taxed at a rate of about 15 percent -- lower than the 26.5 percent top effective tax rate paid by households making less than $100,000 in 2006.

The discrepancy in tax rates exacerbates the widening wealth gap. After accounting for taxes, the top one percent of earners saw their incomes grow by 275 percent between 1979 and 2007, according to the Congressional Budget Office, while the bottom fifth of earners saw their incomes grow by just 20 percent during the same period. In addition, the richest 10 percent of Americans control two-thirds of the country's net worth, Mother Jones reports.

Billionaire investor Warren Buffett noted in August the argument of some that raising taxes on capital gains would discourage the super wealthy from investing. Buffett took issue with that claim though, writing that he hasn't seen anyone shy away from a smart investment because of the tax on the potential gain -- even when the capital gains tax rate was nearly 40 percent in the late 1970s.

Many of the super-rich manage to avoid paying taxes on much of their income through means other than a lower capital gains tax rate. Many U.S. billionaires use complicated transactions to get cash from stocks without paying any taxes, according to a Bloomberg report. The effective tax rate of the top 400 U.S. taxpayers was 18 percent in 2008, down from 30 percent in 1995, according to IRS data cited by Bloomberg.

It's not only super-rich households that have managed to lower their tax rate. Thirty of America's most profitable companies paid less than zero in income taxes in the last three years, according to a study released earlier this month by the Citizens for Tax Justice. The companies use loopholes such as the "active financing exception" -- which allows corporations to sidestep taxes on overseas profits if those profits were made through "actively financing a sale or deal" -- to lower their tax burden.

Still, some super rich households say they believe they should be paying more in taxes. A band of millionaires went to Capitol Hill last week to lobby Congress to raise their taxes, and they seem to be backed by other rich Americans. Sixty-eight percent of millionaires support raising taxes on households earning $1 million or more, according to survey released last month by the Spectrem Group.

(Original Post)

Washington, D.C. (November 21, 2011)

By Michael Cohn, Accounting Today

A senior member of the tax-writing House Ways and Means Committee has introduced legislation to roll back the estate tax rates to pre-Bush tax cut levels.

Rep. Jim McDermott, D-Wash., introduced the bill, known as the Sensible Estate Tax Act of 2011, on Thursday. The bill would bring the estate tax rates back to their pre-2001 levels of up to 55 percent, with a $1 million exemption for individuals, or $2 million for married couples. Both levels, however, would be indexed for inflation beginning in 2000. Under current law, the maximum rate is 35 percent, with a $5 million exemption, allowing over 99 percent of estates to escape taxes. According to a new study from the advocacy group Citizens for Tax Justice, only 0.3 percent of deaths in 2009 resulted in a federal estate tax liability in 2010.

“The U.S. economy and the American people are struggling through one of the worst recessions in our history,” McDermott said in a statement. “Now is the time to ensure our tax policy is fair and equitable for all Americans, and the estate tax bill that I am introducing today embodies these values.”

In addition to the tax rate changes, the legislation also includes a number of other estate tax reforms and provisions. The bill would re-unify and make permanent the portability for spouses of the gift and estate tax exclusions; restore the credit for state transfer taxes paid; close loopholes in the asset valuation and minority discount rules; provide for consistent basis reporting between estates and beneficiaries; require a minimum 10-year period for grantor retained annuity trusts; and provide meaningful limits to the generation skipping transfer tax exemption.

Bill Gates, Sr., father of the Microsoft chairman, expressed his support for the bill. “I welcome the introduction of this legislation, and I commend Congressman McDermott on his leadership in continuing the conversation for a fair and equitable estate tax,” said Gates. “I have long believed that individual wealth is only possible through the significant investment America makes in the lives of its citizens. An estate tax ensures that those who have benefited the most from this great country reinvest in the very promise of wealth and opportunity America provided them.”

Former investment banker Eric Schoenberg, a member of the advocacy group Responsible Wealth, also expressed his support, as did Responsible Wealth and another advocacy group, United for a Fair Economy.

“As a patriotic American who will be subject to the estate tax, I wholeheartedly support Congressman McDermott’s proposed bill to return estate tax rates to those that existed through 2000,” he said in a statement. “Given the obvious need for significant steps to get the United States' fiscal house in order, I think it is perfectly reasonable to ask the wealthiest Americans to be the first to sacrifice, and particularly fitting that we should contribute to the public welfare at the same time that we are contributing to the private welfare of our heirs.”

(Original Post)

Posted: Monday, November 21, 2011 5:05 pm | Updated: 4:56 pm, Mon Nov 21, 2011.

By George E. Curry, NNPA Columnist | 0 comments

Although automatic cuts in defense spending and domestic programs are scheduled to go into effect as a result of the congressional supercommittee's failure to reach a budget deal by Wednesday, those reductions are far better than what Republicans on the committee were proposing and Democrats were willing to accept.

According to the Congressional Budget Committee, defense spending will be slashed automatically by 10 percent in January 2013 while domestic programs will be reduced by 7.8 percent. Additionally, Medicare spending will be lowered by 2 percent. Exempted from the automatic cuts are Social Security, veteran benefits, Medicaid and certain low-income programs.

"No deficit deal is better than a bad deal, and a bad deal may be the only kind this committee can reach," Orson Aguilar, executive director of the Greenlining Institute, said as it became clear the committee of six Democrats and six Republicans would not come to an agreement. "As we reported this summer in our study, ‘Corporate America Untaxed,' nearly all of the deficit reduction goal can be achieved by closing down offshore corporate tax havens and making the richest companies pay their fair share. There is no need to devastate vital programs for the elderly and other vulnerable Americans."

The goal of the supercommittee, formally known as the Joint Select Committee on Deficit Reduction, was to reduce the budget by $1.2 trillion over the next 10 years. As an incentive to complete a deal, an automatic trigger was set go into effect if the committee failed to reach that goal, slashing an equal amount from military and domestic spending.

Under the most progressive GOP proposal, if it can be called that, Sen. Patrick J. Toomey (R-Pa.) offered $300 billion in new taxes, a far cry from an equal split between spending reductions and new tax revenue favored by Democrats.

What is more disturbing is that Democrats on the committee were willing to make concessions that would hurt their core constituents. They offered a proposal to reduce deficits by $3 trillion over 10 years that included $500 billion of savings in health care programs, higher Medicare premiums, and a new form of indexing inflation that would reduce cost-of-living adjustments for Social Security beneficiaries.

The compromise deficit proposals were to the right of the Simpson-Bowles plan of last year, with minimal revenues and as much as $600 billion in cuts to Medicare and Medicaid, the Greenlining Institute noted.

Greenlining, a multi-ethnic public policy and advocacy group, wrote to the committee in August stating that simply closing offshore tax havens could reduce the deficit by as much as $1 trillion. One of its studies showed that by using offshore tax havens, major companies such as Exxon and General Electric pay far less of their income in taxes than the average American, and in some cases no taxes at all.

Unlike Democrats, Republicans have been steadfast in supporting their base, which includes the wealthy and major corporations.

According to Citizens for Tax Justice, 52.5 percent of the Bush tax cuts go to the richest 5 percent of taxpayers. The Treasury Department reports that extending the Bush tax cuts to the top 2 percent of taxpayers will cost $678 billion over the next decade.

GOP leaders refuse to consider letting the Bush tax cuts expire. In a concession to Republicans last year, President Obama broke a campaign pledge by agreeing to extend the tax cuts beyond their original expiration date. He made that agreement in exchange for Republicans extending unemployment benefits and the payroll tax cuts.

There is broad public support for requiring the wealthy to shoulder a fairer share of the tax burden.

In an October Washington Post-ABC News poll, three-quarters of Americans backed a tax hike on millionaires. A Washington Post-Bloomberg News poll that same month found that more than two-thirds supported raising taxes on households earning at least $250,000.

The committee seemed doomed from inception, evenly divided with no member willing to break party ranks. The supercommittee's inability to reach a deal marks the third high-profile budget failure over the past 12 months, following a bipartisan deficit commission and unsuccessful talks last summer between President Obama and House Speaker John Boehner.

The decision to invoke automatic spending cuts as part of raising the national debt limit in August was intended to pressure Congress into making tough budget cuts. But now that it didn't happen both Republicans and Democrats are looking into ways to come up with another gimmick that will again postpone making tough decisions.

Republicans conveniently ignore that fact that the deficit problem was caused by a combination of two George W. Bush wars, a poor economy and two Bush tax cuts. When Bush assumed office, he had a $128 billion surplus. Bush, on the other, ran up deficits every year he was in office.

When Obama assumed office, the deficit was more than $11 trillion. An additional $4 trillion was added under Obama, some stemming from Bush's 2009 budget. Overall, approximately 75 percent of the deficit was incurred while Bush was in office. Where were the Republican voices then?

Politicians being politicians, look for some more political shenanigans that will do everything except seriously tackle our fiscal problems.

(Original Post)

Written by: Andy Worthington
November 21, 2011

As was revealed in summer, when Tea Party Republicans were prepared to see America’s credit rating downgradedfrom AAA for the first time in its history rather than reaching a budget agreement with the administration (an act that ought to have counted as economic treason), the possibility of a bipartisan group reaching an agreement to reduce America’ s deficit has to be regarded as something close to impossible.

That, however, is what the deficit super committee, which has been meeting in August, is supposed to do by Wednesday, although, as the Guardian reported on Sunday, the committee, tasked with cutting $1.2 trillion from America’s $15 trillion budget deficit “looks close to admitting defeat as its deadline looms,” even though failure “will trigger automatic cuts to defence and social welfare programmes starting in 2013.” And today, as this article was published, the prognosis was no less gloomy. “‘Super-committee’ on brink of US deficit failure,” the BBC reported at 10 am Eastern time.

As the Guardian also noted yesterday, “Economists warned on Friday that failure by the ‘super committee’ could have dire consequences for the US and lead to another downgrade of its credit rating,” but, typically, Republicans are “refusing to budge on Bush-era cuts that provide tax breaks for wealthier Americans and expire in 2012,” which they want to extend, Democrats are “refusing to budge on cuts to ‘entitlement’ social welfare programs.”

While I side with the Democrats in this particular struggle, the problem, is that, when it comes to the bigger picture of how to rethink America’s economy for the benefit of as many people as possible, the Democrats also have no clue, and as a result, I was delighted, last week, to be notified by the activist Kevin Zeese, part of the October2011.org movement in Washington, DC that has renamed itself Occupy Washington, DC, that a group of activists and experts had come up with a detailed report explaining how the super committee could “not only reduce the deficit but close the wealth divide, create millions of jobs, strengthen the safety net and develop a democratized economy.”

I’m cross-posting the introduction and the full report below, as the conclusions are genuinely inspiring, and I’m also delighted to do so as this is a powerful document produced by people participating in the “Occupy” movement that began just two months ago with Occupy Wall Street, and which has seized people’s imaginations to such an extent that it has spread across America and around the world. While the Occupy Washington DC organizers conceived their occupation before Occupy Wall Street came into existence, and their report has come about through their specific experience and perspectives as long-term activists and radical thinkers, it is, I believe, an important signpost for the way forward, as the energy of the ‘Occupy” movement begins to work out how to move forward and to come up with specific policies to effectively tackle the inequalities in wealth between the 1 percent and the 99 percent.

And if you like the report, please sign the petition in support of the “99% Deficit Proposal.”
Introduction: The 99% Deficit Proposal Published
By Occupy Washington DC

Washington, DC: The Occupation of Washington, DC published “The 99%’s Deficit Proposal: How to create jobs, reduce the wealth divide and control spending” detailing plans to not only reduce the deficit but close the wealth divide, create millions of jobs, strengthen the safety net and develop a democratized economy. This report has been provided to the twelve members of the Congressional Super Committee.

After holding an Occupy Super Committee Hearing on November 9, Occupy Washington, DC published an evidence-based report that:

    Raises $600 billion in annual revenues thereby achieving the deficit reduction goals in two years; shrinks the wealth divide by taxing wealth more and labor less; restores a progressive tax system; taxes speculation by investors and taxes wealth held overseas.
    Cuts hundreds of billions in annual spending through reducing the bloated military budget and ending the wars, stopping corporate welfare and  negotiating better pharmaceutical drug prices.
    Creates millions of jobs by solving the housing crisis, creates public sector jobs for much-needed work on infrastructure, transit, education and other areas, creates health care jobs as part of improving Medicare and expanding it to cover everyone in the United States, invests in the more efficient civilian economy rather than the expensive military economy and stimulates the economy by erasing student loan debt.
    Saves and strengthens the safety net by restoring the amount of income covered by Social Security to 90% of all income as was always intended, ends poverty retirement by expanding Social Security, reduces spending on health care by expanding Medicare to cover everyone in the United States.
    Presents steps to creating a democratized economy, the already developing new economy that will replace the failed finance, corporate capitalism.

The report points out why the Congressional Super Committee will be unable to put in place these obvious evidence-based solutions by detailing the campaign donations received by the twelve members of the Super Committee. The report describes the committee as being occupied by monied interests that prevent them from confronting the extreme wealth divide. This corruption by concentrated wealth makes the committee dysfunctional.

The report concludes that the American people will see “corruption reign supreme” and that economic and political elites should expect to see this historic American revolt of the 99% grow larger and stronger in its resolve to create a just and sustainable future.
The 99%’s Deficit Proposal: How to create jobs, reduce the wealth divide and control spending
Prepared by Occupy Washington, DC, Freedom Plaza, November 2011

The disconnect between Congress and the people is vast. For decades, Congress has been passing laws that benefit the 1%, their campaign donors and big business interests, rather than creating a fair economy that serves all U.S. citizens. With this report Occupy Washington, DC shows that Congress is out of touch with evidence-based solutions, supported by the majority of Americans that can revive the economy, reduce the deficit and wealth divide while create millions of jobs.

OccupyWashingtonDC.org seeks a major transformation to a participatory democracy in the economy as well as in government. For forty years, concentrated corporate interests have acted with intent to take over government and other institutions. We seek an end to the rule of concentrated wealth and corporate power by shifting control, wealth and ownership to the people.

This report puts forward evidence-based solutions that will re-start the economy and avoid placing financial burdens on future generations. For the most part these ideas are not new. They are well accepted by economists and are consistent with the views of super majorities of Americans on key issues. Further, more than three-quarters of U.S. citizens say the country’s economic structure is out of balance and “favors a very small proportion of the rich over the rest of the country.” They are right. The solutions to our economic crisis are evident but they are blocked by those who profit from the status quo and control elected officials through the corrupt U.S. political system and its money-based elections.

The elites in Washington, DC seek to erase deficits that were caused by increases in war and military spending, tax breaks for the wealthy and corporations, the increased cost of health care, as well as bank bailouts, and increased costs and lost revenue from the economic collapse. The bi-partisan elites seek to cut $1.2 trillion in deficits even though there is no outcry for such cuts or evidence in the economy that they are urgently needed.  They are proposing cuts in services to seniors, students, the poor and middle-working class households who did not cause the crash but already suffer from its consequences. This report shows that we can get the economy moving, reduce the wealth divide and control government spending while helping the 99%.

This report should not be considered the demand of the Occupy Movement. It was prepared (1) by one Occupation, Freedom Plaza in Washington, DC and it does not reflect even that Occupation’s full demands.  Most of this report provides solutions to the deficit questions the Congressional Super Committee is attempting to address while also re-starting the economy.  The difference between the Occupied Super Committee report and the Congressional Super Committee report will be stark and further demonstrate the corruption and dysfunction of government. While this report’s recommendations would benefit the 99%, the report that will come out of the congressional Super Committee will benefit the 1%.

Creating a Fair Tax System That Shrinks the Wealth Divide

The United States does not have a lack of financial resources; it has an intentionally unfair distribution of resources. The federal income tax has become less progressive and the rate paid by the wealthiest has been cut dramatically in recent decades. From 1944 through 1951, the highest marginal tax rate for individuals was 91%, increasing to 92% for 1952 and 1953, and reverting to 91% for tax years 1954 through 1963. In 1964, the top marginal tax rate for individuals was 77%. From 1965 through 1981 the top rate was 70%. The top marginal tax rate was lowered to 50% for tax years 1982 through 1986 and today it is just 35%.

The tax on investment income, capital gains, has also been dramatically reduced. The maximum statutory rate on long-term capital gains was 28% in 1991, 20% in 1997 and has been merely 15% since 2003.

The wealth divide has become extreme over the past three decades and tax policies have exacerbated this trend; much of the tax code exemplifies policies for the 1% at the expense of the 99%. The wealth divide is one of the foundational reasons why the economy no longer works and is in steady decline for most people in the United States. The tax code inadequately funds government, but that is the result of unfair tax cuts, not because America is broke (it isn’t). As Andrew Fieldhouse of the Economic Policy Institute testified: “Income per capita has jumped 66% over the past 30 years, and is projected to grow another 60% over the next 30 years.” The country needs to put in place policies that reduce the wealth divide and share wealth fairly so that when the economy grows it benefits all citizens, not just the 1%.

The recommendations below begin to correct the unfair policies of the last three decades, but these are only first steps to the transformational changes that are needed.

    Tax the highest income households: From 1960 to 2004, the top 0.1 percent of U.S. taxpayers — the wealthiest one in one thousand — have seen the share of their income paid in total federal taxes drop from 60% to 24.3%. America’s highest income-earners — the top 400 people who have wealth equal to 154 million Americans — have seen their federal income tax drop from 51.2% in 1955 to 18.1% in 2008. If the top 400 paid as much of their incomes in personal income tax as the top 400 of 1955, the federal treasury would have collected $50 billion more in revenue from just those 400 taxpayers. If the top 0.1% of taxpayers — Americans with incomes that averaged $4.4 million — had paid total federal taxes at the same rate as the top 0.1% paid these taxes in 1960, the federal treasury would have collected an additional $250 billion in revenue.
    Merely not extending the Bush tax cuts would add nearly $500 billion each year in tax revenue. Thus in just over two years the goal of the deficit committee would be met. This would be insufficient to correct the wealth divide and does not go as far as Occupy Washington, DC advocates.
    A tax of a half of a percent or less on Wall Street speculation could raise over $800 billion in a decade. The Speculation Tax on the purchase of stocks, bonds and derivatives would be a tiny tax with a big impact. People in the U.S. pay much higher taxes on purchases of food and clothing; it is only fair that the wealthy pay taxes on purchasing wealth instruments.
    A fair tax on capital gains, treating it as ordinary income would raise $1 trillion over a decade. Wealth-based income and work-based income should be treated equally under the law as it used to be. Warren Buffet has received a great deal of attention for pointing out that he pays a lower tax rate than his secretary or anyone who works for him. The reason for this is that investment income is taxed at a much lower rate than income from labor. The United States needs to tax wealth more and work less.
    Congress should enact a “pure worldwide” tax system, in which all profits of U.S. corporations, whether they are generated in the U.S. or abroad, would be taxed by the U.S. This would end “deferral,” i.e. where taxes are deferred until money is brought back into the United States. U.S. corporations would continue to receive a credit against any taxes they pay to a foreign government (the foreign tax credit) so that profits are not double-taxed. Under a pure worldwide tax system, corporations would have little or no tax incentive to move jobs offshore because the U.S. would tax profits of corporations no matter where they are generated. The Treasury estimates that deferral of U.S. taxes on offshore corporate profits costs close to $50 billion each year, and many experts think this estimate is substantially understated.
    Ending deferral does not even address the hundreds of billions lost through tax havens. Tax havens should be shut down through the passage of the Stop Tax Haven Abuse Act. In fact, the U.S. Treasury estimates this costs $100 billion each year. In 2006 the U.S. Senate Permanent Subcommittee on Investigations reported that Americans now have more than $1 trillion in assets offshore and illegally evade between $40 and $70 billion in U.S. taxes each year through the use of offshore tax schemes.
    Closing corporate tax loopholes would return the fair share of taxes paid by corporations to the funding of government. Declining corporate taxation is another prime factor in increasing deficits. Corporate income taxes have fallen from roughly 4.8% of GDP in the 1950s to only 1.8% of GDP over the past decade. Ending just two large breaks, deferral of overseas revenue and accelerated depreciation would raise about $114 billion over a decade. The Treasury Department lists $365 billion in corporate tax breaks being gifted annually — that’s $3.65 trillion over the next 10 years. Due to tax loopholes, corporations pay record low tax rates — they actually pay 21% on average. Indeed, a recent report by Citizens for Tax Justice found that Wells Fargo received $18 billion in tax breaks, while both Verizon and General Electric paid negative taxes. Earlier Citizens for Tax Justice reported that 12 major companies which together made $171 billion in profits from 2008-2010 paid a negative $2.5 billion in taxes, thanks to $62 billion in tax subsidies.

The taxes described above would generate at least $600 billion annually. The goal of the Joint Deficit Committee of $1.2 trillion over ten years could be met in two years. The United States has more than enough wealth to meet the needs of its people.

Cutting Spending for Economic Security

    Military spending, found in the Department of Defense and other departments, has increased dramatically during each year that George W. Bush and Barack Obama have been president, roughly doubling during the past decade both as measured in real dollars and as a percentage share of discretionary spending.  Military and related “security” spending is now at over $1 trillion per year and comprises well over half of federal discretionary spending.  It is also very nearly equal to the military spending of all other nations on earth combined. Ending our two most costly wars in Iraq and Afghanistan before the 2013 fiscal year budget would save $1.8 trillion, as compared with ending those wars on the currently planned schedule, with savings of $108 billion per year.
    The U.S. should only spend what it needs to defend itself. The military budget can be cut significantly by replacing private contractors, closing some of the more than 1,100 foreign military bases and outposts and eliminating weapons systems many of which the Pentagon says it does not need.
    The Sustainable Defense Task Force recommended modest cuts of $1 trillion over the next decade, not counting savings from ending the current wars. U.S. military spending could be cut by 80% and still be comfortably well ahead of any other nation’s military spending. See Creating Jobs and Restarting the Economy below on how these funds could be used to create jobs, restart the economy and provide much-needed services and infrastructure to the country.
    Corporate tax subsidies through tax breaks and giveaways are a form of spending that needs to be cut. (2) The U.S. needs to end corporate tax subsidies and repatriate overseas funds. According to Citizens for Tax Justice, the 280 most profitable U.S. corporations received tax subsidies amounting to $222.7 billion from 2008-2010. These companies sheltered half their profit from taxes. The result: 30 companies paid less than 0 taxes despite $160 billion in pre-tax profits; 78 of the 280 companies enjoyed at least one year in which their federal income tax was zero or less; weapons maker’s paid a mere 10.6 percent rate in 2010; financial services received the largest share (16.8 percent) of all federal tax subsidies over the last three years.
    Negotiating better prices with Big Pharma would save more than $200 billion over ten years in pharmaceutical costs. Reforms of Medicare could offer much larger savings. Expanding to an improved Medicare for all system would control the cost of health care spending while covering all in the United States reducing significant financial burdens often resulting in bankruptcy and foreclosure.

Creating Jobs and Restarting the Economy

One in six people who would like a full-time job are unable to find one. The unemployment rate of 9% greatly underestimates unemployment. If the pre-1994 measures were used, e.g. including discouraged workers who want jobs, as well as part-time workers who want full time jobs the underemployment and unemployment rate would be 23%.  The measures listed below would effectively create jobs and restart the economy. Job loss means less tax revenue and more expenditure by the government. A critical ingredient to reducing the deficit is job creation.

    One million jobs could be created annually by writing down all underwater mortgages to market value. Correcting housing mortgages to the real value of homes would inject $71 billion per year into the economy and save families $6,500 per year on mortgage payments. This would also fix the housing crisis which is an anchor holding back any recovery, according to a new report by The New Bottom Line. One in five mortgage holders owe more on their mortgage than their home is actually worth. Banks should not continue to be able to profit from housing bubble prices – a bubble they created with their poor and unethical lending practices. Adjusting mortgages to the real value of homes is a fair way to fix the housing market.
    Failure to stop the foreclosure crisis will ensure a stalled economy. It is an essential step to economic repair. This could be done without Congress as Fannie and Freddie together hold $1.5 trillion in housing loans or mortgage-backed securities which could be directed to fix the mortgages. The Federal Reserve has just under a trillion and could unilaterally correct loans to reflect real value. And, the banks could be pressured. Last year, the nation’s top six banks paid out more than twice the cost of re-writing mortgages to make them fair ($71billion per year) in bonuses and compensation alone ($146 billion in 2010). The nation’s banks are sitting on a historically high level of cash reserves of $1.64 trillion.
    A fundamental reason for job stagnation is relying on the private sector to create jobs and refusing to engage in direct government job creation in the public sector. According to Business Week, “Since the end of the recession, government employment — including federal, state, and local jobs — has fallen by roughly 600,000. State and local governments have particularly felt the pain, according to a report released this week by the Census Bureau, which shows that there were over 200,000 fewer state and local government jobs in 2010 than in 2009.” The most recent jobs report shows a continued downward trend in government jobs. State deficits and federal inaction ensure these job losses will continue.
    In addition to our need to rebuild the nation’s physical infrastructure, there is an even more urgent need to rebuild its human infrastructure. The drastic rise in inequality and joblessness has torn apart the social fabric, destroying countless individual lives, families, urban neighborhoods, and rural communities across our country. For more than a generation, the major “growth industry” in impoverished communities has been the illegal drug industry. Persistent, trans-generational poverty is directly responsible for the fact that the U.S. now leads the world in imprisoning its own people: 2.5 million, by the latest count, with more than 5 million more under some form of court supervision. (China, with its 2.5 billion people, runs a poor second.) Although most of the prison population is white, people of color are disproportionately represented, leading many analysts to declare that the mass incarceration of African-Americans and Latinos has created a new caste of unemployable “untouchables.” Only a massive public works, community development, and job training program can end the destruction of American communities and stop the shameful criminalization of poverty.
    As public sector jobs are created, the country must also strengthen the public sector in ways that will require new democratic reforms to put publicly owned or financed enterprises under popular control. A long-term goal should be to democratize the economy so the people of the United States share in wealth and ownership as well as influence over the economy. See below Democratizing the Economy, Shifting Economic Power, Wealth and Ownership to all in the United States. There is a desperate need for a mass public works program, not only to create jobs, but also to meet the urgent needs of the country.
    The American Society of Civil Engineers estimated that failure to fix the nation’s infrastructure has created serious damage so extensive that $2.2 trillion will be required by 2014 just to meet current demands. The ASCE gave the nation’s infrastructure an overall grade of “D.” Its report cited cracking levees, a quarter of the nation’s existing bridges sagging, leaking pipes losing billions of gallons of drinking water per day, aging sewers releasing human waste into rivers and lakes, horrendous traffic congestion and air and water pollution. This is not “make work” but urgently needed work. A public works program modeled after the depression era Works Progress Administration would create 15 million jobs and build the infrastructure needed to create a sustainable economy.
    Spending on the military is a drag on the economy, not just because it makes up 55% of federal discretionary spending, but because more jobs would be created by spending on education, infrastructure, green energy, or even on tax cuts for non-billionaires. Converting a fraction of current military spending to other industries and tax cuts could produce 29 million new jobs, one for every unemployed or underemployed person in the United States, even after finding new employment for everyone displaced during the conversion.
    Putting in place improved Medicare for all would provide a major stimulus for the U.S. economy not only by controlling the cost of health care and reducing deficits but by creating 2.6 million new jobs, and infusing $317 billion in new business and public revenues, with another $100 billion in wages into the U.S. economy.
    Erasing student loan debt would have an immediate stimulating effect on the economy. As Mychal Smith writes: “[C]onsider the potential impact on the economy if all of a sudden 35 million people were able to add to their monthly budget anywhere between $400 and $1000 that they no longer needed to satisfy exorbitant student loan repayments … Debt free degree holders would allow for more risk taking and innovation.” As Robert Applebaum, an advocate of forgiving student loans writes: “the ‘educated poor’ are not buying homes, not starting businesses or families, not inventing, investing or innovating and otherwise engaging in economically productive activities.”  And, as Cryn Johannsen of All Education Matters points out, this would be a long term stimulus because college debts are multi-decade in length. Johannsen describes a “crisis that is affecting millions of educated Americans. We are indebted for life. Most of us will never be able to pay off our loans for college.” Education is a critical building block for the economy and going forward the United States must develop a system of higher education that does not require students to go into debt just to receive an education. Rather than a loan-based system the U.S. needs a system based on grants, scholarships and public funding.

These recommendations would create millions of jobs and get the economy moving again.  As the economy develops and expands, programs need to be put in place so that new wealth is shared more fairly; workers have greater control over their work through employee ownership and protections for collective bargaining; and so some of the profits created by public investment (i.e. by tax dollars) are shared among all U.S. taxpayers. See below, Democratizing the Economy, Shifting Economic Power, Wealth and Ownership to all U.S. Citizens.

Protecting and Improving Social Security

Saving Social Security is not a traditional left-right battle. Polls consistently show that people across the political spectrum overwhelmingly support Social Security and do not want to see it cut. Even the vast majority of Tea Party Republicans support these programs. Cutting Social Security is a Wall Street agenda of the 1% that opposes the interests of the rest of us. As Dean Baker writes: “There is a bipartisan consensus among the elites that these programs should be cut. The guiding philosophy of this drive is that public money that goes to programs for middle income and poor people is money that could be in the pockets of the wealthy.”

Social Security does not contribute to the deficit. Social Security is financed by a designated Social Security tax and there is more than $2.5 trillion in the Social Security trust fund. The efforts to cut Social Security to fix the deficit are a fraud designed to enrich Wall Street financiers by forcing people into the private retirement market.

The temporary payroll tax cut will create some jobs, but not enough to get the economy moving and is not the most effective tax cut stimulus. Further, it unnecessarily puts Social Security in jeopardy by reducing taxes designated for Social Security. The Congressional Budget Office estimates the cut will reduce federal revenues by $112 billion over the next two years. The government will have to borrow to fill that hole in the Social Security trust fund, giving opponents of Social Security another argument against the program.

Social Security faces no immediate threat of insolvency. The Congressional Budget Office just released new projections showing that the Social Security trust fund is fully solvent through the year 2038. Even after that date, the program would have enough money to pay 81% of scheduled benefits for the rest of the century. Below are recommendations that would strengthen social security:

    The funding of Social Security is easy to fix. Currently, the tax on wages subject to the tax is capped at $107,000. The upward redistribution of income over the last three decades has caused a large share of wage income to escape taxation. If all wage income were subject to the tax, then it would leave Social Security fully solvent for its 75-year planning period.
    The Social Security tax has not kept up with the wealth divide. In 1983, the Social Security tax ceiling was set so the tax would hit 90% of all wages covered by Social Security. That 90% figure was built into the 1983 Greenspan Commission’s fix of Social Security. Requiring the ceiling to rise with inflation was expected to result in the Social Security tax continuing to hit 90% of total income. But, in 1983 no one predicted the extreme wealth divide that exists today. The richest 1% of Americans got 11.6% of total income in 1983. Today the top 1% takes in more than 20% of total income and as a result the Social Security payroll tax hits only about 83% of their total income. The tax should go back to covering 90% of income. That would mean the ceiling on income subject to the Social Security tax would need to be raised to $180,000.
    Social Security should be strengthened in ways that increase the retirement security of people in middle-and working-class. Particular attention should be paid to improving the living standards in retirement of workers in poorly compensated jobs, who typically have little or no retirement savings outside of Social Security. The average Social Security benefit of $14,000 is only about 30% above the poverty line. Indeed, 21% of Social Security beneficiaries receive Social Security benefits that fall below the poverty line. In 2011, the Commission to Modernize Social Security proposed increasing benefits for all retirees by a uniform amount equal to 5% of the average benefit, about a $700 annual increase for beneficiaries today; that workers who have worked at least 30 years should receive benefits equal to 125% of the poverty threshold when they retire at the full retirement; providing at least five years of dependent care credits through Social Security as women (and some men) spend part of their working years caring for children and elderly parents; reinstating the post-secondary student benefit that existed until 1983 and allowed students who were receiving Social Security due to a parent’s death, disability, or retirement to continue until they were 22 years old if they were in college; and increasing the survivor’s benefit for widowed spouses to ensure that they receive at least 75% of the benefit amount they received when their spouse was still alive.

Improving Medicare and Expanding it to Provide Health Care to All in the United States

    Former Labor Secretary Robert Reich writes: “Medicare isn’t the nation’s budgetary problems. It’s the solution. The real problem is the soaring costs of health care that lie beneath Medicare. They’re costs all of us are bearing in the form of soaring premiums, co-payments, and deductibles. Medicare offers a means of reducing these costs.”
    Medicare bears the burdens of existing within an insurance-based health care that fails to control costs and creates tremendous bureaucracy. While there are short-term fixes to Medicare, what is needed is an end to the current insurance-based approach. The United States spends the most per capita per year on health care yet a third of the population is either uninsured or underinsured so that they face financial ruin if a serious accident or illness occurs. Health care spending in the U.S. is rising 2.5% faster than GDP.
    Expanding and improving Medicare so it covers all in the United States is a key component to controlling health care costs and government spending; as well as ending the deficit problem of state and federal budgets. Estimates of how much would be saved on administrative costs alone by extending Medicare to cover the entire population range up to $400 billion a year. This savings plus the inherent cost-controls of a single payer health system would offset the cost of providing everyone in the United States with access to lifelong, comprehensive, quality health care. Controlling health care costs would sharply reduce the long-term budget crisis, as well as foreclosures and bankruptcy.
    Even without improving and expanding Medicare to cover all, the program is not in crisis. The Medicare Trustees say that the program faces a modest shortfall over its 75-year planning horizon. The projected shortfall is around 0.3% of GDP or less than one-fifth of the amount that annual military spending was increased since September 11th, 2000.
    Economist Jack Rasmus points out that all it takes to cover the Medicare shortfall is a mere 0.25% increase in the Medicare share of the payroll tax for the next ten years and another 0.25% starting in the eleventh year. The Medicare tax rate is currently 2.9% for the employee and the employer. These tiny tax increases would make Medicare secure.
    In fact, the Congressional Budget Office (CBO) calculates that the Medicare system in its current form is far more efficient than the privatized system advocated by a bi-partisan consensus of political elites. CBO’s projections show that switching from Medicare to a privatized system would add $34 trillion to the cost of buying Medicare equivalent policies over the program’s 75-year planning period.
    Medicare provides efficiency. Reich reports: “Medicare’s administrative costs are in the range of 3%. That’s well below the 5% to 10% costs borne by large companies that self-insure. It’s even further below the administrative costs of companies in the small-group market (amounting to 25% to 27% of premiums). And it’s way, way lower than the administrative costs of individual insurance (40%). It’s even far below the 11% costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.”

Democratizing the Economy, Shifting Economic Power, Wealth and Ownership to all Citizens in the United States

Big finance corporate capitalism is failing. It is concentrating ownership and wealth as well as domination of the economy in the wealthiest Americans. New approaches are needed to share wealth, ownership and economic power more fairly. The grass roots protests, whether from the Occupy Movement or the anger from the conservative Tea Party, are based on the same realities: economic insecurity and economic unfairness. A full discussion of these issues is beyond the scope of this report but it is time for the people of the United States to be asking critical questions:

    What is the next evolution of the economy?
    What can be done to reduce economic insecurity and economic unfairness?
    How can it be reshaped so that people gain greater control of their lives and greater influence over the economy?
    What new forms of ownership can be developed to shift economic power to the people?

The answers to these questions lie in the conflict of our era — participatory democracy vs. concentrated wealth. There is growing evidence and experience that shows a democratized economy is the fairest, most sustainable and effective approach which results in a shared prosperity.

Democratizing the economy would move the United States away from concentrated corporate capitalism and create an economy in which wealth is more equitably shared. This change is already happening under the radar of U.S. media coverage. A democratized economy already has a foothold in the United States.

There is a lot of experimentation going on regarding worker ownership, democracy in the work place and sharing in the profits of corporations; with communities working together to control development through non-profit land trusts; with public banking, democratizing money and community banks; with public utilities and democratizing energy; and with participatory budgeting. These are a few examples of the democratization of the economy that is building a new economic model of more widespread ownership of assets and participation and wealth.  As one of the witnesses of the Occupied Super Committee, Gar Alperovitz writes:

    Over the last three decades, for instance, more workers have become owners of their own companies than are members of unions in the private sector; indeed, 5 million more. Simultaneously, there has been increasing experimentation with unions within such firms, and with new ways to increase participation and control. There are also more than 4,500 nonprofit community development corporations that operate affordable housing and other neighborhood programs. Approximately 130 million Americans are members of co-ops. In Cleveland, an innovative group of linked cooperatives has set new standards for community-building economic change. ‘Social enterprises’ are developing in communities throughout the nation that transform the ownership of capital into businesses, the sole purpose of which is to provide community services.

    One form of new ownership is cooperatives. There are 130 million Americans who are members of some types of co-ops, most commonly credit unions. Another widely shared experience is joint-ownership is Employee Stock Ownership Plans (ESOPs) which give employees ownership of companies through stocks, while these do not usually include management by employees they do provide a share of the profit.  There are more than 13 million people who are part of ESOPs — meaning there are more employee stock owners than there are members of private unions. Worker-owned co-ops go further and give workers a say in the management of the company. Worker owned co-ops are at the cutting edge of democratizing the economy and provide some of what we need to transform the economy.

At a national level, despite comments of some in the corporate media and some elected officials who speak for big business interests, the truth is that national programs like Social Security and Medicare have worked well. As described in previous sections of this report, these programs can be improved and expanded but they are also models on which to create programs that respond to national needs. Further, the bail out of the automobile industry, which included some public ownership, has succeeded in saving that industry and returning it to profit.

However, more could have been done to serve the public good by continuing public representation on the boards of automobile companies, requiring taxpayers share in the profit as investors and directing those industries to build mass transit and create jobs.

The Occupy Movement seeks a radical transformation to a new economy and political system. A close examination of what is happening in the United States shows that this transformation is already underway.

The Lessons of the Super Committee: Corruption Rules Dysfunctional Government

The proposals in this report show that it would not be difficult for the so-called “Super Committee” to achieve the requirement of at least $1.2 trillion in savings over the next decade. And, that it can be done in a way that corrects wealth disparity and re-starts the economy. But, in many ways, the super committee is “occupied” by corporate interests and cannot act for the people. The make-up of the committee and the tens of millions of dollars members have received from entrenched corporate interests ensure that the committee will exemplify the corruption in Congress — which is why people are occupying public spaces across the country.

The Occupation of Washington, DC at Freedom Plaza expects the commission’s recommendations, if they are able to make recommendations, to reflect the interests of their donors. We urge the public and the media to review their recommendations with these political donations in mind.

The twelve Members of the Joint Committee on Deficit Reduction have received $41 million from the financial sector during their time in Congress, according to a report by Public Campaign and National People’s Action, “Wall Street and the Supercommittee: The $41 Million Question.” At least 27 current or former aides for the “super committee” members have lobbied on behalf of financial firms:

    The 12 members of the super committee have received at least $41 million from the finance, insurance, and real estate (FIRE) sector during their time in Congress.
    They have received nearly $900,000 from three of the top U.S. banks — JPMorgan Chase, Bank of America, and Wells Fargo.
    Since 2000, the industry has spent over $4 billion lobbying elected officials.
    Nearly 30 former aides to the 12 members work as lobbyists for financial industry interests.

The ten biggest contributors to the super committee members include:

    Club for Growth $990,066
    Microsoft Corp. $810,100
    University of California $629,495
    Goldman Sachs $592,684
    EMILY’s List $586,835
    Citigroup Inc. $561,081
    JPMorgan Chase & Co. $494,316
    Bank of America $349,566
    Skadden, Arps, et al. $347,356
    General Electric $340,935

The largest donor, the Club for Growth, opposes any new taxes on the wealthiest in the United States. As a result, despite the abhorrent wealth divide, the committee is unlikely to recommend the obvious, fair taxes on the wealthiest people who fund their campaigns.

The members of the committee received more than $3 million total during the past five years in donations from political committees with ties to weapons contractors, health care providers and labor unions. They received more than $1 million overall in contributions from the health care industry and at least $700,000 from weapons companies. This presents a problem for the super committee because if they fail to find $1.2 trillion in savings over the next decade it will result to mandatory cuts that will impact health care and weapons makers. This means the committee is likely to make a bad deal for the United States, in order to avoid cuts to their major donors.

Throughout the time when the committee has been meeting they have been holding fundraisers across the country. This open money-taking while making decisions that affect those who are giving money is the kind of open corruption that has led to a loss of faith in government.

It is not only donations that will impact the committee, but a major lobbying onslaught by 400 groups who report lobbying the Super Committee. About 30% of these organizations — 118 groups in total – were from the health sector. The finance insurance and real estate sector ranked third, with 40 companies within that sector reporting lobbying activity during the third quarter that targeted the super committee. And 39 groups in the energy sector reported lobbying the super committee. Both the communications and electronics sector and the general business sector saw 26 companies and organizations explicitly mention the super committee in their third-quarter lobbying reports. These are many of the same concentrated corporate interests that have funded the campaigns of super committee members.

Conclusion: Revolt against Economics for the 1%

Once again, the people of the United States will see corruption reign supreme. Despite evident solutions to the deficit and the economic collapse, the Congress will show its corruption and dysfunction and be unable to put forward real solutions.

We issue this report to alert everyone — the political system is broken. It is corrupted by the power of concentrated wealth, campaign donations and corporate power.  The job of the occupations across the country is to build an independent nonviolent movement that replaces this corrupt system with one in which the people rule. The battle between concentrated wealth and participatory democracy will be heightened by the evident corruption of the Super Committee which will not challenge the unfair policies of the 1% while requiring austerity for the 99%.

The economic and political elite should expect protests to grow. We are at the beginning of what will be seen as a historic revolt against status quo elites that will transform this economy as well as how the United States is governed.

Footnotes

(1) The evidence-based solutions in this report come from people who are experts in the fields addressed as well as the views of people affected by the policies. We relied on a range of sources and have provided links to those sources in the on-line version of this report.  In addition, Occupy Washington, DC held a public hearing on Wednesday, November 9th. You can see the public hearing at: CSPAN Coverage of Occupied Super Committee Hearings.  Participants included: Kevin Zeese, an organizer of Occupy Washington, DC and co-director of It’s Our Economy and co-chair of Come Home America; Andrew Fieldhouse of the Economic Policy Institute; Carl Conetta of the Project on Defense Alternatives; Kenneth Peres, an economist with the Communications Workers of America; Dean Baker of the Center for Economic and Policy Research; Margaret Flowers, an organizer of Occupy Washington DC and congressional fellow for Physicians for National Health Program; Gar Alperovitz, a founding principal of the Democracy Collaborative and with the National Center for Economic and Security Alternatives.

(2) This is commonly known as corporate welfare. All corporate welfare should be stopped until the Congress passes laws transforming corporate welfare into taxpayer investment. There are reasons for government to invest in building the economy, for example there is a need to invest in a new energy economy, but the profits from these investments should not only go to the 1% who own energy companies, they should be treated as taxpayer investment and all taxpayers should share in the profit from the investment. Such a system could be modeled after the Alaska Permanent Trust which has existed for oil exploration on state lands in Alaska since 1980. Such a system could develop into a guaranteed national income that would lift people out of poverty and provide a safety net to all. This is a critical part of a democratized economy. See: Agenda for a Democratized Economy.

(Original Post)

Sun Nov 20, 2011 5:9PM GMT

The top 400 earners in the U.S. pay an average tax rate of 18 percent, according to a Bloomberg TV report.

Though that's a far lower rate than the 26.5 percent that many families making less than $100,000 pay annually in taxes, some of America's super-rich have been able to whittle their tax bill down even more, paying a tax rate as low as one percent, according to Bloomberg.

Many of the super rich take advantage of a variety of tax loopholes to lower their tax burden. For some of America's rich, most of their wealth comes from stock appreciation, according to Bloomberg, which some billionaires don't end up defining as taxable income.

These findings echo earlier reports, which suggest that the super rich may not be paying their full share in taxes. More than 1,400 millionaires paid no U.S. income taxes in 2009, according to an August report from the Internal Revenue Service.

In addition, 25 percent of all millionaires pay a smaller percentage of their income taxes than millions of middle class households.

But billionaires aren't the only ones that use loopholes to pay lower taxes. Thirty of America's most profitable corporations used rules like the "active financing exception" -- allowing corporations to sidestep paying taxes on overseas profits if they were derived by "actively financing" some activity or deal -- to pay less than zero in income taxes, according to a recent report from the Center for Tax Justice. Huffington Post

FACTS & FIGURES

The U.S. debt deal reached in August did not include a tax increase on the rich due to the opposition of Republicans in Congress. Reuters

280 most profitable U.S. corporations sheltered half their profits from taxes between 2008 and 2010. Citizens for Tax Justice

The U.S. Congress and President Barack Obama approved an $858 billion tax deal in December 2010 that critics say would add to the budget deficit. Obama Stimulus Benefits

The tax law extended tax rates for all income groups, including the wealthiest top 2 percent. Reuters

ARA/KA/DB

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By MICHELLE HIRSCH, The Fiscal Times
November 18, 2011

A group of moderate Democrats released a white paper Thursday endorsing lower corporate tax rates, elimination of tax breaks for U.S. companies, and incentives  to encourage multinational companies to move manufacturing jobs back into the United States.

“By lowering corporate rates to a competitive level internationally, we can also reduce or remove tax benefits that add further complexity and encourage multinational companies to keep their money abroad or defer paying U.S. taxes,” the paper said....

“They say they want to simplify the tax code, yet they spend the rest of the paper explaining how they want to add new loopholes. They say they want more tax breaks for businesses to invest outside of the United States. They want no tax increases on anybody, and they have no way to pay for any of this,” said Bob McIntyre, executive director of Citizens for Tax Justice, a liberal advocacy group.  “It’s a document at war with itself.”

READ THE REST HERE.

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By Dan Freed 11/18/11 - 04:15 PM EST

EW YORK (TheStreet) -- General Electric(GE_) says it advocates closing all tax loopholes, an event that would almost certainly result in the company paying more taxes, according to a pair of tax experts.

General Electric has a reputation as one of the most effective U.S. companies at minimizing its tax bill. The company's tax strategies attracted widespread attention in March, when they became the subject of a front page story in The New York Times that, among other highlights, pointed out that GE paid no federal taxes in 2010 despite earning $14.2 billion, including $5.1 billion in the U.S. In fact, the story notes, GE got a tax benefit of $3.2 billion last year.

That now-notorious GE tax return is back in the news thanks to Rep. Paul Ryan, who told attendees at a recent townhall meeting that, if printed out, it would total some 57,000 pages.

Ryan called attention to the size of the return to underscore the need for corporate tax reform, as a bipartisan 12-member Congressional "super-committee" charged with addressing the deficit nears a deadline next week. If they fail to reach a deal before the deadline, a series of drastic cuts are set to kick in.

Asked about Ryan's comments, a General Electric spokesman sent a statement to TheStreet that read: "We agree with Congressman Ryan that the U.S. tax system needs to be reformed and all loopholes should be closed. Furthermore, Congress needs to lower the corporate rate and provide the US a territorial system like every other major country in the world."

Under a territorial system, U.S. companies operating abroad would only be taxed on foreign profits in the countries where those profits were booked. Currently, U.S. companies also pay U.S. taxes on foreign profits, though they receive credits on taxes they paid to other governments.

Rebecca Wilkins, senior counsel with the nonprofit Citizens for Tax Justice, regarded GE's statement with suspicion.

"You've got to wonder why GE would want the system to be changed. I mean how much more negative would they like their rate to go? They are hugely benefitting from the current system," she says.

Lowering the corporate tax rate but eliminating a lot of the special deductions exemptions and credits "absolutely means GE's tax rate would go up," according to Wilkins. "I mean there's no place for it to go but up. GE might publicly say that it's all for tax reform but will they actually support it when it goes through Congress? I suspect they won't. I bet they'll have an army of lobbyists in there trying to fight the tax reform."
More on GE

Robert Willens, tax consultant with Robert Willens LLC agreed with Wilkins that "if we eliminated loopholes and went to a territorial system GE would probably be paying more taxes than it is today."

However, he isn't convinced GE is being disingenuous when it says it want to close loopholes.

"Maybe they do feel that way. That if things were simplified and the rates were lower and we were territorial, there wouldn't be nearly as much need on their part to manage their tax position. They could get on with the business of doing other things," Willens says.

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By Samuel Weigley: Subscribe to Samuel's RSS feed

November 17, 2011 4:22 PM EST

A little over three months after more than 45,000 landline workers for Verizon went on a nationwide strike, the company and the unions representing the employees have yet to resolve critical differences.

Three months after 45,000 workers in Verizon's landline division went on strike, employees have yet to receive a new contract.

The negotiations are ongoing as the union and the company work through issues such as job security, healthcare and retirement benefits, Communication Workers of America Spokeswoman Candice Johnson told IBTimes. The CWA represents 35,000 workers while another 10,000 members are supported by The International Brotherhood of Electrical Workers.  

Verizon Spokesman Rich Young echoed Johnson's comments and said there have been a lot of proposals and counterproposals put forward by all parties.

"The negotiations have gone back and forth, and we look at that as making progress," Young told IBTimes.

No timetable has been given on the negotiation, although Young said Verizon hopes to have an agreement "as soon as possible."

The strike began after the New York-based company asked for contributions of at least $100 a month to health insurance premiums once workers entered a new contract. Furthermore, the firm wanted to freeze pensions, tie pay raises to performance and make it less burdensome to fire employees for cause.  

The company pushed for union concessions because of waning profitability in the landline business. However, the union claims company success in the wireless division has more than made up for troubles in the landline unit. Wireless employees aren't unionized.

While Verizon's landline division earned only $768 million in 2010, the wireless division earned $18.7 billion. Verizon has a 55 percent stake in Verizon Wireless, while London-based Vodafone owns 45 percent.

The strike eventually turned nasty as Verizon won multiple injunctions against picketers. The company claimed it had suffered multiple incidents of sabotage, including cut fiber optic lines, harassment of workers to replace those on strike and vandalism.

But in just two weeks after the strike began, the workers ended their strike without a new contract. Verizon promised to have employees work under the old contract terms until new terms were negotiated.

The lag period hasn't ended union criticism of the company. This week, the CWA and other grassroots organizations publicly criticized Verizon over its tax payments. A report for Citizens for Tax Justice calculated that over the last three years, Verizon has paid a federal tax rate of -2.9 percent. Verizon disputed those figures, saying the company has paid more than $7.5 billion in federal and state taxes over the last year alone.

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By David Schultz | Thursday, Nov. 17, 2011

Occupy Wall Street is a cacophony of voices speaking a simple message about the structural economic and political inequalities in America and perhaps around the world. Sharing affinities to the 1999 World Trade Organization protests against globalization, OWS looks to the growing power of global financial institutions and their stranglehold on governments around the world.

OWS points to how the Bush and the Obama administrations loaned or credited trillions to banks and the too-big-to-fails to bail them out after they gambled on Wall Street, only to see homeowners face record losses in their houses and illegal foreclosures by these institutions. Tax breaks and loans are provided to the big auto companies but little is done to help the unemployed. The banks of Europe are recapitalized by the International Monetary Fund and the European Central Bank, but Greece and Italy are compelled to take haircuts. Democracy has taken a backseat to saving capitalism. This is one message of OWS.

While Rome and the rest of the world burn, Nero fiddles. At least in this case, the fiddling is done by the Republican presidential candidates, who assert that all that ails the economy can be cured by more tax cuts and free markets. But while the GOP fiddles, a host of interesting studies have come out recently documenting and criticizing the ideology of Herman Cain, Michele Bachmann and company, as well as offering some insights into the state of the American economy. These reports are worth noting since they have received scant notice in the mainstream media.

    The rich are getting richer, the poor poorer, no matter how you examine it.

In October a Congressional Budget Office report documented the growth in income in the United States from 1979 to 2007. For those in the top 1 percent bracket, their income increased by 275 percent. For those in the top 20 percent, it increased by 65 percent, for the middle incomes it was a 40 percent increase, and for those in the bottom 20 percent it was measly 18 percent. In 2010 the Census reported the richest 5 percent of the population accounted for 21 percent of the income, with the top 20 percent receiving over 50 percent of the total income in the country.

Moreover, the latest Census figures point to a poverty rate in 2010 of 15.1 percent, representing a record 46 million people in poverty. But earlier this month the Census Bureau issued a new report recalculating what constitutes poverty — noting that current estimates are based on an outdated methodology from 1960s. This measure for calculating poverty did not include government transfers (welfare) or tax cuts when making estimates, and it also did not reflect the current spending patterns of Americans. Using new measurement tools, which the Census Bureau calls the Supplemental Measure of Poverty, the study concluded that the poverty rate is actually 16 percent — higher than the old estimate — constituting more than 49 million individuals in poverty. So much for welfare queens getting rich on the system.

    The rich and poor live in separate worlds.

There is a geographic basis to poverty. Generally the assumption is that poverty is concentrated to the urban cores of major cities. One way to measure the spatial dimension to poverty is to use Census data. Census tracts where 25 percent or more of the households live in poverty are referred to as high-poverty neighborhoods, and those with 40 percent or more of the households in poverty are referred to as extreme-poverty neighborhoods. Concentrated poverty is a problem because of the issues surrounding low economic opportunity, high government social service costs, and crime.

Looking at concentrated poverty across the United States, the Brookings Institution recently concluded that 10.5 percent of all individuals lived in extreme-poverty neighborhoods, up from 9.1 percent in 2000. Estimates are that more than 15 percent overall live in concentrated-poverty neighborhoods, with the most rapid growth occurring in the suburbs. The Twin Cities metro region is not immune, with 9.4 percent of the population living in concentrated poverty neighborhoods that include some suburbs but mostly the Minneapolis-St Paul urban cores. These trends parallel 2000 Census data demonstrating  the gravitation of poverty from the cities to the inner ring suburbs, creating really a two-tiered metro region marked by affluence and poverty.

Similarly, in the just released Stanford University/Russell Sage Foundation’s “Growth in the Residential Segregation of Families by Income, 1970-2009,” [PDF] researchers found that America was becoming increasingly segregated by income. In 1970 only 15 percent of families were living in affluent or poor neighborhoods, but in 2007 it was 31 percent. They researchers also found that high-income households were less likely to be found in mixed-income neighborhoods than the rest of the population. In general the percentage of Americans dwelling in middle-income neighborhoods was dwindling and, in fact, these types of residential neighborhoods were shrinking.

Overall the study noted the increased economic and racial segregation in this country, with individuals of different classes less and less likely to come into contact with those from other social-economic backgrounds. America has become a tale of two cities.

    Taxes really are not job killers.

To hear the Republican contender talk, high taxes are killing the economy and forcing companies out of business. Three reports again reject this contention.

The Bureau of Labor Statistics compiles data on reasons for mass layoffs. In its most recently survey, which covers 2010 and 2011, factors such as cancellation of a contract or order for goods, insufficient demand for products and increased automation account for the vast majority of layoffs. High taxes do not even appear on the list as a reason.

Second, the National Federation of Independent Business (NFIB) recently completed a survey asking small businesses to identify the single biggest problem they face. Taxes came in third, with poor sales listed as the biggest issue.

Third, the Citizens for Tax Justice recently released a report, “Corporate Taxpayers & Corporate Tax Dodgers,” documenting the biggest businesses that have failed to pay their fair share of taxes. Among the worst offenders, corporations such as GE, DuPont, Boeing and Wells Fargo paid no income taxes from 2008-2010, let alone the theoretical 35 percent statutory corporate rate. The Citizens for Tax Justice report documents scores of blue-chip American companies that failed to pay any taxes during these three years, questioning the claim that high taxes are depressing employment and their economic growth.

Moreover, in addressing the arguments made by Herman Cain and others that high corporate tax rates discourage American companies from repatriating $1.2 trillion in money being held overseas, the Corporate Taxpayers study points out that corporate tax rates in other countries are often significantly higher. Additionally, if there is a tax advantage to off-shoring jobs it comes only because American law allows for a permanent deferral on foreign profits. The solution is simple: repeal the deferral and do not allow corporations to use the tax code as an incentive to out-source. Overall, the United States government is facilitating this problem by adopting policies that encourage evasion.

The message from all these studies point to a nation increasingly divided by income, region and class. They point to a country where the rich pay little taxes or better yet, are able to use the tax code to their advantage — and to a world where in reality, unemployment and slow economic growth are not due to high taxes but to other factors.

Occupy Wall Street is about highlighting these facts, seeking to reintroduce the simple concept that capitalism is meant to facilitate democracy and not vice versa.

David Schultz is a professor at Hamline University School of Business, where he teaches classes on privatization and public, private and nonprofit partnerships. He is the editor of the Journal of Public Affairs Education (JPAE). Schultz blogs at Schultz's Take.

(Original Post)

Jack Temple

A new report from the Citizens for Tax Justice confirms what Occupy Wall Street protestors and progressives more generally have been saying for a while now: economic inequality is neither an accident nor an inevitable outcome of the free market-- it is, to a large extent, the product of government policy.

The report gives us new, hard numbers that reveal just how wastefully corporate tax loopholes redistribute wealth from working Americans to the most profitable businesses in the United States. From 2008-2010, the wealthiest 280 corporations made on average over $48.3 billion per year and paid an average effective tax rate of 17.1 percent -- by comparison, the average household in the U.S. earns approximately $52,673 per year yet pays a tax rate of 20.4 percent (according to 2007 CBO and Census figures). In 1955 the federal government raised 27 percent of its revenues from corporate taxes; now it raises under 10 percent.

What makes this new report particularly important, however, is not so much the figures that it cites but the emphasis its places on specific loopholes that are often left out of the popular discussion on corporate welfare. Rather than commonly-noted loopholes like offshore tax shelters, this report places front and center the biggest loophole on the books: the accelerated depreciation exemption.

This exemption allows companies to deduct from their taxable income the value of a capital investment at a faster rate than the capital actually depreciates. So, if wear and tear gradually causes the value of a new machine to deteriorate over the course of, say, 7 years, the accelerated depreciation deduction allows companies to deduct the total value of that investment from their taxable income by the end of the first 2 or 3 years after its purchase, "accelerating" the rate at which the company benefits from the deduction.

Here's the problem: the Joint Committee on Taxation estimates that this deduction costs the federal government between $500 and $600 billion over 10 years. That's a massive sum -- basically half of the total amount that Congress is frantically trying to figure out how to cut from the budget right now -- and we're handing it over to corporations that are making record-level profits.

But the nonsense doesn't stop there. Not only do corporations not need the special handout in order to turn a profit -- it's also not clear that capital investment is the most important part of the economy to be supporting right now.

The owners of capital are doing extraordinarily well these days. They are sitting on $2 trillion in cash and grabbing an ever larger share of the national income. In 1990, about 63 percent of national income went to labor compensation. In 2005, the total share dropped to 61 percent. By the middle of this year, labor was taking home only 58 percent of national income.

Given all this, why should capital be getting such a big helping hand from the taxpayers? Wouldn't it make more sense to take the $500 billion that's currently going to accelerated depreciation deductions and spend it instead on support for America's workers who are increasingly getting left in the dust?

In fact, providing support for labor force expansion is precisely what President Obama is proposing right now: the next piece of his jobs plan, to be considered by Congress early next month, is a payroll tax deduction. The CBO's most recent analysis of Obama's jobs proposal demonstrates unequivocally that, dollar for dollar, hiring incentives like a payroll tax deduction would provide a substantially greater degree of support for job creation than incentives for capital investment.

But cutting back on wasted tax dollars is not the only matter at stake here. There's also a matter of principle: How can the U.S. seriously claim to be an inclusive democracy when the tax code caters to the powerful owners of capital at the expense of everyone else?

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MIKE IVEY | The Capital Times | Posted: Wednesday, November 16, 2011

Something is definitely out of whack when a lowly newspaper reporter in Madison, Wis., can rightfully complain:

"I pay more federal income taxes than General Electric, Boeing, DuPont, Wells Fargo and Verizon put together."

No wonder small-business owners feel like the cards are stacked against them.

But that's the sad state of affairs -- and something Americans on both the left and right increasingly agree is messed up. Even Herman Cain gets it.

In this excellent new study, the non-partisan Citizens for Tax Justice found that many of the largest corporations paid no federal income tax from 2008 to 2010. It's not just the well-publicized case of GE

Dozens of leading companies have managed to avoid paying income taxes despite booking hefty profits. The list includes two state-based electric utilities -- Wisconsin Electric of Milwaukee and Integrys Energy, formerly Wisconsin Public Service, of Green Bay.

It also includes Mattel, parent company of Middleton-based American Girl, which counted over $1 billion in profits from 2008-2010 and still somehow managed to grab a $9 million refund from the IRS.

Other state companies have been enjoying similar tax holidays as noted by the Institute for Wisconsin's Future.

The CTJ report, meanwhile, found that while U.S. corporations are supposed to be taxed at 35 percent, the 280 largest firms surveyed paid on average closer to 10 percent.

Twenty-five years ago, the report notes, President Ronald Reagan was horrified by a similar epidemic of corporate tax dodging. He pushed through the Tax Reform Act of 1986, working to close the loopholes and make everyone pay their fair share.

But things have reversed over the past decade, led, ironically, by the very politicians who claim to oppose government subsidies that interfere with the free market.

"It's been 25 years since the last big tax reform legislation, which cut the corporate rate to 34% from 46% and eliminated a lot of deductions and tax breaks. But a quarter-century of pushing by businesses -- of which GE has been among the most aggressive -- has left us with both the lower tax rate (now 35%) and lots more deductions and shelters and other tax-reducing tactics than the 1986 legislation envisioned," notes Forbes columnist Allan Sloan.

The inequity is enough to make Cain's 9-9-9 flat tax plan sound reasonable.

Of course, the little guys sure can't get away with much. Witness the woman from LaFayette County who just got jail time for falsely collecting $7,979 from Wisconsin and $12,165 from the IRS. Meanwhile, the Wall Street crowd goes unpunished for their misdeeds.

(Original Post)

Jessica Bosari, Contributor

Anyone with access to a news broadcast can see the middle class is suffering from bearing the brunt of the tax burden. In an ideal situation, people and business would pay taxes proportional to their earnings and tax bracket. The scales however, are not balanced in the country’s tax practices.

No wonder the middle class is shrinking. At the same time more people are falling into the ranks of the poor, painful budget cuts make life harder for those in need. One budget cut took $375 million from jobs under the Senior Community Service Employment Program (SCSEP). Another took $425 million from  low income housing under the Section 202 Supportive Housing for the Elderly program. There simply isn’t enough federal revenue to help all of the people in need.

The Corporate Tax Rate

As of today the corporate tax rate is between 15 and 39 percent, which sound like fair enough figures. Close studies by Citizens for Tax Justice and the Institute on Taxation and Economic Policy however, show that of 280 of the nation’s biggest companies have slithered their way around the corporate tax rate. They really pay only about 18.5 percent. These studies confirm what many long suspected;  that the tax code benefits corporate taxpayers through loopholes often influenced by special interests.

The 280-business study consisted of only Fortune 500 companies and they were all profitable between the economic crash of 2008 and 2010. The number crunching revealed that 111 of those companies paid less than 17.5 percent of their taxes, 98 of them paid between 17.5 and 30 percent, 71 paid over 30 percent, but 30 companies paid nothing at all.

Another 2008 study, this from the Government Accountability Office, showed that 55 percent of US companies found a way to avoid paying taxes altogether in at least one out of seven years examined.

How Do They Get Away with It?

The system of inverted incentives allows some corporations to walkway from taxes. Corporations hire lobbyists to go out and lobby for special tax benefits for the companies they represent. When successful, these breaks become part of the tax code. It’s legal and it works.

Reagan did a lot to stop this madness, but it was since undone. During Reagan’s administration, he cut special tax breaks at all for businesses. Those breaks have since slowly crept back in, infecting the entire tax system, resulting in the middle class footing the bill. The corporate contribution to taxes has dropped from 30 percent in the 1950's to 6.6 percent by 2009.  The New York Times reports that, “Targeted tax preferences, which Congress created to intentionally benefit specific companies or industries, cost an estimated $100 billion more a year.”

The Corporate Perspective

To be fair, you can’t blame big business alone for the problem.  After all, if you could write off all the things that can go wrong in your life, you certainly would. Corporations are simply fulfilling their   obligations to shareholders by maximizing profits. The law lets them do it. They can show one set of books outlining enormous profits to investors and another set of books that makes them look destitute to the IRS. The greatest blame falls on the lawmakers who gave favors, often in exchange for political donation, which thanks to the Supreme Court, don’t require disclosure.

So what kind of breaks have our generous lawmakers bestowed? NASCAR racetrack owners write off what they pay to install and maintain those racetracks every year. Puerto Rican rum companies get a great tax break as well.
"How Wall Street Occupied America" Robert Lenzner Robert Lenzner Forbes Staff

The biggest tax breaks go to businesses that write off failed investments and work-related equipment that did not have time to depreciate. Many companies are extra lucky enough to be in industries that allow them to write off even more. Oil and gas companies can write off a portion of their drilling costs. These breaks can all stack on top of each other and eliminate the tax burden. There have even been cases were the tax debt went lower than zero and into the negative, providing an offer on future taxes. Companies like General Electric and Pepco Holdings wrote off their entire tax burdens and earned future offsets.

GE Intelligent Platforms

General Electric earned almost $10.4 billion over the course of three years and has a negative tax burden of 45.3 percent. Pepco brought in $882 million in that same period and was able to write itself down to a tax rate of negative 57.6 percent. Pepco makes no apologies for itself, stating that everything it does during tax time is legal and that the company is audited on a yearly basis. General Electric took issue with the study and called it distorted.

Many Problems, Few Solutions

Most lawmakers in Washington admit that the tax system is in need of reform. President Obama cited tax reform during his State of the Union address and many politicians of both parties agree. Candidates for the 2012 election are throwing out tax reform ideas left and right.

In theory, it should be simple to remove loopholes and tax breaks. But with so many politicians involved, so much for them to gain, and an uncooperative political climate makes it is almost impossible to achieve.

(Original Post)

Posted: 11/16/11 03:41 PM ET

The fact that America's biggest companies paid no federal taxes may come as no surprise to Washington. The report released earlier this month by nonprofit groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy shows that 30 of the top 300 companies paid no taxes at all or used loopholes to end up with negative tax rates. Washington's own utility company -- Pepco Holdings -- paid the lowest, at nearly minus 58 percent, with GE coming close second at 45 percent.

The significance of this study is not lost on any of the Occupying protesters nor should it be lost on any of the Super Committee members in Congress as they deliberate on deficit reduction tactics that may include a reform of the tax code.

It's time for a more distributive tax system. The fact that companies are paying no taxes when America's working families are still struggling to winter what Fed Reserve Chairman Ben Bernanke continues to recognize as a failed or failing recovery is a prime example of what is exacerbating income inequality in America.

Income inequality is the hot topic of late and rightly so. Three reports in recent days show this issue isn't going away anytime soon. The UN Human Development Report shows that while the United States remains the fourth best country in the world to live, after adjusting for internal income inequality it drops it into 23rd place. And the report by the Congressional Budget Office showed that in the last 30 years US government policy failed to equally distribute wealth, enabling the richest in America to grow their income 15 times faster than the poor and shifting more than 80 percent of all US income wealth to the top 20 percent of earners. Additionally, a report by the US Census office showed pervasive income inequality throughout the US, with Washington, D.C. and NY State and City ranking the highest in the gap between the rich and the poor.

No one is under the illusion that the majority of America is doing well. In fact, Americans have recently learned they have the highest poverty rate since World War II (one in six Americans living below the poverty line) and the highest youth poverty rate (one in five young people, with Hispanic youth suffering most). This summer also concluded multiple "Made in America" tours by the congressional black and progressive caucuses who were responding to the cry of the unemployed, which is only getting louder and more desperate. More recently, the Warren Buffet-inspired tax debate, regarding whether millionaires should pay at least the same tax rate as the common worker, has surfaced fractiously, pitting President Obama and Democrats against most Republicans. Underlying these recent trends, the US still maintains one the highest income inequality rates among all wealthy countries.

How vexing it is to witness America's inability to push for policies that could ensure more economic equality. Paradoxically enough, many Americans believe they are already in the middle-upper tier of income earners or will eventually end up there. This inspires a reluctance to enact policies that would more equitably balance economic burden sharing. America's increasing poverty rates may finally change this dynamic as two-thirds of Americans support raising taxes on the rich according to a NYT/CBS poll.

America's past penchant for income inequality, however, is not financially sustainable, let alone morally excusable or philosophically justifiable by capitalists who claim this to be inherent in the system. This is where UK economists Richard Wilkinson and Kate Pickett's data from the British bestseller, The Spirit Level: Why Greater Equality Makes Societies Stronger, is useful.

It shows that with income inequality comes with a host of health and social problems. The higher a country's income inequality, the higher its infant mortality rates, obesity rates, homicide rates, illiteracy rates, mental illness rates, teenage births, incarceration rates, drug addiction rates, social immobility and lower life expectancy. In other words, the bigger the gap between a nation's rich and poor populations, the greater dysfunction in that nation's society.

It may come as no surprise to some that America has the highest income inequality among the entire rich world. The gap was developed largely in the last 30 years, exacerbated by tax policies that benefited the rich at the expense of the poor. It became increasingly difficult for Americans to get ahead, get insured, get educated and get a job, all of which helps with getting respect. Consequently, the bulk of America's economic growth over the last 30 years has gone to the top one-hundredth of 1 percent, who make $27 million annually per household, leaving 90 percent of American households to subsist on roughly $30,000 a year.

Name a rich country and our inequality rates beat them by a long shot -- though it's hardly something to brag about. We also have the highest rates of homicide, infant mortality, teenage births, drug addiction, mental illness, incarceration, social immobility and illiteracy. Name the social ill and we excel at it.

These health and social problems wreak financial havoc on our society -- not only in terms of lost productivity and potential, but also in terms of costs associated with containing the violence, healing the sick and fixing the dysfunction. With each homicide, for example, the Centers for Disease Control and Prevention calculate that the economy loses $1.65 million in medical costs, loss of lifelong employment and economic productivity costs. With each prisoner, the US spends on average $35,000 per year for a total of $80 billion annually for its correctional system. Add to this the total cost of lost productivity of the incarcerated, which is another $97.7 billion. And don't forget violent crime, which cost America $94 billion in 2009.

Given these enormous costs to America's economy, advocates of income equality must have a seat at the congressional budget Super Committee's table, as it continues to convene on cost cutting, and must push for policies that promote equal opportunity, health, education and poverty alleviation. Reduce income inequality and you reduce the rates of every kind of social malaise that are draining our federal, state and local budgets and services. Eradicate both and you have a certain moneymaker for America -- a wise and worthwhile move for a country that just raised its debt ceiling.

(Original Post)

By Allan Sloan, Published: November 16

It was enough to make anyone from a big company want to crawl under his chair. At a recent performance at New York City’s Beacon Theatre, David Crosby of the folk-rock group Crosby, Stills and Nash was holding forth not about war or poverty, but about General Electric. “Can you believe that some big corporations paid no income tax?” he declaimed. “In fact, GE paid no taxes last year.” Then Graham Nash chimed in, “Not only that, GE got a $3.5 billion giveback.” Someone from the audience, in which 1 percenters were amply represented — who else could afford those tickets? — shouted, “Play music!” The group promptly launched into a new song: “They WANT it all, they want it now.” You can figure out who “they” is.

Talk to big companies about the sentiment expressed by CS&N, and they whine, feel aggrieved and carry on about “class warfare.” But as we’ll soon see, they won’t do anything to help themselves.

In fact, Crosby’s rant about GE (which declined comment) is based on a March New York Times article that’s inaccurate; the paper has since printed material that contradicts that piece but has never owned up to doing so (see www.fortune.com/ sloan for details). Many public policy analysts make the same mistake the Times did, conflating the “current tax” number that companies use to calculate earnings with how much they owe in tax; however, the tax-incurred number isn’t the same as “current tax” and isn’t public.

All these mistaken numbers have taken on a life of their own. But do you know whose fault it is for these mistakes continuing to resonate? It’s the companies’ fault for being stubborn and prideful, and refusing to provide information to disprove what they say are false allegations.

Earlier this year, Ed Outslay, a professor at Michigan State University and a leading tax expert, generated no fewer than 16 tax metrics for a GE story that I was pursuing in partnership with Jeff Gerth of ProPublica. However, despite having all these numbers, Outslay couldn’t tell us how much federal income tax GE incurred in any given year or over any given period. Neither can Robert McIntyre of Citizens for Tax Justice, one of Washington’s most respected tax mavens. In a recent study, McIntyre — who is way too astute to conflate the “current tax” number with “taxes incurred” — went through the agonies of the damned to calculate how much tax 280 big companies have paid over the past three years. He paid special attention to GE and thinks he’s got the numbers right. But there’s no way to know.

During the past few months, I’ve repeatedly asked three big companies in the tax-wars crosshairs — GE, Verizon and Exxon Mobil — to voluntarily disclose information that would refute allegations that they incurred no U.S. federal income tax for 2010. All have refused, saying they won’t disclose anything not legally required. They still manage to complain about the allegations, however. I suspect that if I called the rest of the Fortune 500, I’d get 497 similar responses.

As a society, we need the “taxes incurred” information to inform our “current tax” debate. Investors, too, would benefit; knowing the tax that companies incur would be a useful analytical tool.

The solution, as I’ve said before, is for the Financial Accounting Standards Board to require companies to disclose information on Lines 31 and 32 of their tax returns for the most recent available year and the nine years before that. This would take at most one person-hour a year per company to provide. Adding a 17th tax metric to the 16 available hardly seems like an invasion of corporate privacy.

FASB told me in September that it doesn’t require “taxes incurred” information because it has not been asked to require it. Bloomberg View has since joined me in asking informally, and McIntyre says he’ll submit a formal request soon.

If companies are truly getting a bum rap, as they claim, disclosing this information will save them from themselves. And from Crosby, Stills and Nash, too.

(Original Post)

By Hannah Dreier
Contra Costa Times
Posted: 11/16/2011 06:15:49 PM PST
Updated: 11/17/2011 09:17:07 PM PST

In solidarity with Occupy Wall Street, Richmond is exploring divestment from corporations that do not pay income tax.

Council members took inspiration from a report on corporate tax dodgers.

The report found that 30 large corporations, including Verizon, Boeing, Wells Fargo and PG&E, paid nothing in aggregate federal income taxes from 2008 to 2010.

Richmond's divestment decision could touch off a national movement, Councilman Jeff Ritterman said this week.

"We can stand up as a city and say, 'Hey, Wells Fargo, you have $300,000 in our account, and we can move it to Mechanics Bank -- a Richmond company -- and next year think about paying income tax,' " he said to loud applause Tuesday. "And maybe every city council in the country will do it."

Richmond keeps most of its money in bonds and treasuries but is invested with at least one of the corporations singled out by the report issued by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, according to City Manager Bill Lindsay and the Finance Department.

Wells Fargo spokesman Ruben Pulido said that the corporation did not pay income taxes from 2008 to 2010 because of its losses in acquiring Wachovia.

"What that report is doing is it's taking data out of context to advance an agenda," he said.

The resolution asking city staffers to look into a divestment policy passed, with council members Corky Booze and Nat Bates voting no.

Bates charged that the council's ideological resolutions are leading Richmond to eclipse Berkeley "as the No. 1 socialist city in the Bay Area." He said that the council should focus on local issues such as potholes and crime.

"These are the areas where elected officials locally are directly responsible," he said. "We're not going to take care of all the ills in the world."

Mayor Gayle McLaughlin cut Bates off, telling him he was off topic. She said that the resolution was a way to communicate support for those demonstrating for economic justice.

"This movement is asking something of us as public officials," she said. "This item is a place where we can say, 'We represent the many.' "

(Original Post)

Posted November 17, 2011

 November 16th, 2011 › Clean Energy, Climate Action, High Risk Energy › John D. Wilson ›

Bob Inglis’ call to “simultaneously eliminat[e] all subsidies” for energy is another way that he believes we can use the “power of free markets” to make better choices about energy use. Although “subsidies” are often discussed, it is a concept that is hard to pin down. The World Trade Organization definition of a subsidy amounts to, “a financial contribution by a government, or agent of a government, that confers a benefit on its recipients.”

I hate writing that starts out with a definition in the first paragraph. But I felt it was necessary just this one time because it is too darn easy to think of subsidies as being direct cash grants and their easy-to-recognize siblings.

There are so many other ways that government “confers” financial benefits on energy businesses: tax breaks and market protection are two of the reasons that energy companies are so profitable. It is not hard to conclude that many parts of the energy market are not truly “free markets.” As David Roberts of Grist puts it, “when it comes to energy, saying ‘let markets decide’ is, more often than not, tantamount to saying ‘leave the status quo as it is.’”
Research & development subsidies are well-established
Is government support essential to the development of new energy resources? History suggests it is.

Is government support essential to the development of new energy resources? History suggests it is.

Energy subsidies are viewed by many as essential to energy resource development. For some, the evidence suggests that government support is nearly always a key factor in fostering innovation. For others, government is the risk-taker that can find a technology miracle. And a sympathetic economist might accept that a free market does a great job at finding the right price and quantity for goods, but markets don’t provide enough incentive to drive highly-speculative research.

For these reasons, R&D support has been carefully studied in energy and other sectors. Overall, research suggests that federal R&D support is an essential component of the collaborative approach that is the engine of U.S. leadership in innovation.

When it comes to federal R&D in the energy sector, no industry has benefited more than nuclear power. Since 1978, nuclear power has averaged well over $1 billion per year in federal R&D support, more than double the amount invested in renewable energy. Even in 2010, spending on nuclear R&D outpaced that of renewable sources of electricity such as wind and solar.

High levels of federal subsidy for renewable energy and energy efficiency are a recent phenomenon. With an influx of stimulus funds from the 2009 American Recovery and Reinvestment Act, overall subsidies (including R&D as well as other types of support) to the renewable energy sector spiked to temporarily reach 55% of federal support for electricity technologies. Recovery Act support has advanced key technologies from demonstration to market.

Tennessee and other Southeastern states have effectively used conventional economic development strategies to expand the region’s clean energy industrial base.

Bob Inglis’ opposition to energy subsidies have been echoed recently by others, although most of the new voices have focused on renewable energy, and the bankruptcy of Solyndra has been a rallying cry for rollbacks in federal energy policy.

But is Bob Inglis really aiming to eliminate all subsidies? Even with the long history of federal financial support for nuclear power, eliminating subsidies for nuclear power would have an enormous impact on its viability. Exelon CEO John Rowe “likes” nuclear but doesn’t think nuclear plants will be built without federal loan guarantees because “they simply cost too much and they are too risky.” He went on to say, “will you see anyone build a merchant nuclear plant? I don’t think so.”

Even so, the nuclear energy industry is trying to distance itself from the attacks on renewable energy loan guarantees, emphasizing that its loan guarantees are different - they will go to companies that are large and well-run. It seems that the nuclear energy industry is saying, “Loan guarantees are needed, but they won’t be necessary.”

Bob Inglis seems to think that free markets would deliver nuclear power plants better than the system of federal subsidies does today. But considering that nuclear power has received more federal subsidies than any other energy resources, that seems improbable at best. The problems with today’s subsidies for nuclear power are too numerous to discuss here, but if they are such a good deal for taxpayers, then why are government agencies and utilities collaborating to keep the basic facts secret?

While we can’t depend on energy subsidies to give us certain reductions in greenhouse gas emissions, support for research and development is essential to the development of new energy technologies which expand flexibility in meeting emission reduction goals. Building an economic development strategy around clean, renewable energy resources also makes a lot of sense. Propping up nuclear power to flood the electricity market with power that may not be needed, not so smart.
Less obvious subsides are harder to end
Citizens for Tax Justice analyzed financial reports from 280 corporations. Compared to the $12 billion taxes that Southeastern utilities would have paid if their tax rate were 35%, they paid less than $4 billion over three years.

Citizens for Tax Justice analyzed financial reports from 280 corporations. Compared to the $12 billion taxes that Southeastern utilities would have paid if their tax rate were 35%, they paid less than $4 billion over three years.

A recent report suggests that energy sector companies are among the largest beneficiaries of “tax subsidies.” According to Citizens for Tax Justice, major US companies paid $223 billion less in actual taxes than they would have at the statutory rate. Some Southeastern utilities appear to be avoiding taxes most successfully (sic).

While tax subsidies are easy to identify, the financial benefits conferred by regulators on monopoly utilities are less familiar to most members of the public. In the Southeast and some other parts of the country, monopoly utilities operate in a competition-free market. Regulators guarantee a reliable customer base, but restrict utilities’ profitability. It is a complex relationship with implications that aren’t immediately apparent.

One such benefit to electric utilities occurs when regulators require utility customers pay for power plants that are not being used. The concept of “stranded costs” was heavily deliberated in the 1990s during the push for retail competition in the electric utility industry, also know as deregulation. For example, the staff of the Virginia State Corporation Commission’s Draft Working Model for Restructuring the Electric Utility Industry (November 1997) offers a comprehensive discussion of stranded costs.

The justification for requiring utility customers to pay utilities stranded costs is based on the premise that the rules are being changed in midstream. Stranded costs, the argument goes, are “sunk investments which the utility made to fulfill its legal obligation to provide adequate and reliable service … To allow the consumer to abandon the financial support of investments legally required on behalf of that transfer … is simply unfair.”

Those who reject this perspective argue that the legal obligation of the utility to serve customers was in exchange for an exclusive service area franchise. Consumers never had an obligation to buy power, and the utility was never guaranteed the sale of electricity.
Georgia Power has proposed to shut down several coal-fired power plants.

Georgia Power has proposed to shut down several coal-fired power plants.

For example, Georgia Power Company (GPC) has applied to the Georgia Public Service Commission for permission to shut down several coal-fired power plants. In its application, it requests permission to “reclassif[y] the remaining net book values” of the coal plants “to regulatory asset accounts” and “amortiz[e] such regulatory asset accounts … over a period equal to the respective unit’s remaining useful life.” Included in the “regulatory asset accounts” would not only be the value of the power plants themselves, but also the “remaining, unusable material and supplies (“M&S”) inventory balance.” What this means is that when customers are paying for power, part of their rates will be used to pay GPC for the value of these shut-down power plants.

So what would it mean to “eliminate all subsidies” for energy? Would that mean mandatory deregulation for the monopoly utilities of the Southeast? Would it mean reshaping the entire free-market system to end the invisible and enormous institutions that favor fossil fuels in the market?
Clean Line Energy Partners is proposing to build transmission from Oklahoma to Tennessee to deliver wind energy resources to the Southeast.

Clean Line Energy Partners is proposing to build transmission from Oklahoma to Tennessee to deliver wind energy resources to the Southeast.

There are companies that are seeking to compete in the Southeastern power “market” today. Companies like Recycled Energy Development, who offer cleaner, cheaper energy resources to industry. Companies like Clean Line Energy Partners, which is showing how it can use high-voltage DC transmission to bring consistent, cheap energy from wind turbines on the Great Plains to the Southeast.

But not only do they have to be cleaner and cheaper than the operating costs of the existing power plants, but for every kilowatt of power sold to the utility, the new electricity product will be priced to help the utility pay for its out-of-service power plants. That’s a pretty hefty tax to pay for innovation.
How necessary is it to get rid of subsidies?

While there is a rich history of solutions to circumstances where price signals don’t work, the simple idea of “eliminating all subsidies” will be tedious to untangle. While the goal of a “free market” for energy may be appealing, in the context of a response to climate change, it is hard to see that it is needed to provide either certainty in reducing greenhouse gas emissions or flexibility in meeting those goals.

In fact, history suggests that it would be unwise to abandon R&D support for innovation in the energy sector; to do so would probably lock in existing resources until they run out, at which point we would have no ready alternatives.

And while an energy economist may be vexed by energy subsidies, perhaps it is the political economist who is more troubled by their effects. In tomorrow’s conclusion to this series, I’ll suggest an unconventional way in which energy subsidies can help point the way to a political solution.

(Original Post)

By Samuel Weigley | November 15, 2011 3:19 PM EST

While Verizon is enjoying booming profits, some groups say the company isn't paying its fair share of taxes.

In a joint report released Tuesday by grassroots organization Citizens for Tax Justice and Good Jobs First, the groups noted that if Verizon had paid the standard 35 percent federal tax rate on its profits between 2008 and 2010, the company would have paid $11.4 billion in federal taxes (based on 33.4 billion in pre-tax U.S. operating income).

Verizon is taking heat from the largest telecommunications union in the United States and other interest groups over the company's tax payments.

However, the report said the company received $12.3 billion in federal tax subsidies during that time, "most of which is from accelerated tax write-offs of property, plant, and equipment that the federal corporate tax code provides."  According to this calculation, Verizon's federal tax rate over this time was -2.9 percent.

"We think that Verizon's behavior ...shows that this is a corporation that refuses to pay its fair share of taxes," Phillip Mattera, research director for Good Jobs First, said in conference call with Citizens for Tax Justice and the Communication Workers of America.

In 2010, Verizon reported a profit of $10.2 billion on revenue of $106.6 billion. The year before, the company earned $11.6 billion on revenue of $107.8 billion.  

The report also noted that Verizon reduced its tax burden through transactions known as "Reverse Morris Trusts." These transactions involve a parent company spinning off a subsidiary still owned by company shareholders. The company then merges with an external company and issues shares to the shareholders of the parent company. The Internal Revenue service allows this transfer of assets to take place tax free.

Verizon used the transaction when it sold assets to FairPoint Communications in 2008 and to Frontier Communication in 2010. The report estimated Verizon avoided over $1.5 billion in federal and state taxes with the move.

Verizon also received generous state and local subsidies as well, Mattera pointed out. For example, in a ten-year time frame, Verizon received $113 million to build call facilities in New Jersey.

But Mattera said many of the jobs provided were low-paying, with starting salaries hovering around the $25,000 range.

"Verizon takes advantage of state and local government's desire to boost job creation," he said.

In order to rectify the situation, George Cole, senior director for legislation and policy for the CWA, said on the call that the federal government needs to close the "Reverse Morris Trusts" loophole, and that companies should have to pay an "effective corporate minimum tax."

Verizon has repeatedly defended themself against criticism over its taxes. Spokesman Bob Varettoni told the International Business Times that the company obeys all tax laws. Furthermore, he said Verizon has paid more than $7.5 billion over the past five years in state and federal income taxes alone.

"This is a rehash of the same inaccurate and politically motivated statements that union-orchestrated front groups like the CTJ have been making for some time," Varettoni said.

The fight over these taxes comes in the midst of recent tension between Verizon and its employees over worker contracts. In August, about 45,000 Verizon landline employees went on strike after the company requested that landline employees contribute a portion of their income to their health care premiums.

Verizon argued that the concessions from employees were necessary because of its dwindling landline business, which has been on a downward spiral since 2003 as people opt to use their mobile devices as their primary telephone. In 2010, the number of Verizon's landline subscribers fell 8 percent to 26 million customers.  

Unions such as the CWA argued that Verizon's strengthening wireless business more than made up for the declining revenue in the landline division. While the wireline division only earned $768 million in 2010, the company earned $18.7 billion in the wireless division.

The employees ended their strike two weeks after it began, but are now working without a new contract.

To report problems or to leave feedback about this article, e-mail: s.weigley@ibtimes.com

To contact the editor, e-mail: editor@ibtimes.com

(Original Post)

By Brendan Sasso - 11/15/11 01:35 PM ET

The Communications Workers of America (CWA) accused Verizon on Tuesday of not paying its fair share of federal taxes.

Verizon paid no federal taxes between 2008 and 2010, and actually received a $1 billion rebate from the U.S. Treasury, according to a report prepared by the Citizens for Tax Justice and released by the CWA on Tuesday.

Robert McIntyre, the report’s lead author, said that tax rebates to companies like Verizon are simply “wasted dollars, that could have gone to protect Medicare, create jobs and cut the deficit. Too many corporations are gaming the system at the expense of the rest of us.”

Edward McFadden, a spokesman for Verizon, said that counting both state and federal taxes, Verizon actually paid $1.79 billion in taxes between 2008 and 2010. Additionally, its federal rate was lower in those years because of deferred taxes that it will pay later, he said.

"This is a rehash of the same inaccurate and politically motivated statements that union-orchestrated front groups like the [Citizens for Tax Justice] have been making for some time," McFadden said in an email. "The fact is, Verizon fully complies with all tax laws and pays its fair share of taxes."

But Ron Collins, chief of staff for CWA, said the telecom company is taking advantage of loopholes. "The 99 percent are picking up Verizon’s tax tab," he said, using the rallying cry of the Occupy Wall Street movement that argues the ultra-wealthy are exploiting the other 99 percent of the population.

On a conference call with reporters on Tuesday, the CWA said Verizon has taken advantage of the "Reverse Morris Trust" rule, which allows companies to not pay taxes on assets it sells off.

The labor leaders said they are urging the congressional supercommittee on deficit reduction to end the Reverse Morris Trust rule to help the government collect more revenue.

The CWA said the report is timely because Congress is trying to find ways to close the nation's budget deficit, but McFadden suggested a different motive for the report's timing.

"Isn't it interesting that this report comes out while we're in the midst of negotiations," McFadden said, referring to ongoing contract negotiations between Verizon and its workers.

The workers went on strike for two weeks in August but are still negotiating a new labor contract.

(Original Post)

By Matthew Miller | November 15, 2011, 9:41am PST

Summary: At a time when the job market is tough and the US economy is struggling, news of Verizon gaming the system and seeking to maximize profits at the expense of contributing to society is unfortunate.

I received multiple emails this morning linking to a new report (PDF link) from the Citizens for Tax Justice and Good Jobs First organizations that shows Verizon paid an effective tax rate of -2.9 percent between 2008 and 2010. Our tax system needs a major overhaul when corporations can play the loophole and subsidy game to avoid helping contribute to our society. Verizon is the most expensive wireless carrier in the U.S. and with Occupy Wall Street (and other areas) protesters and events going on this is not good news for Verizon.

We haven’t yet seen an official response to this report from Verizon, but the report is quite detailed and used publicly available financial data to report its findings.

    Verizon doesn’t use its tax avoidance gains to keep up its copper network or extend its fiber optic technology to cities like Boston, Baltimore, Buffalo or other communities or create quality jobs. It isn’t negotiating a fair contract with the workers who have made this company so successful but instead is demanding nearly $1 billion in givebacks and making sure that its top executives stay in the top 1 percent of Americans. That’s why we say ‘the 99 percent’ are picking up Verizon’s tax tab,” Collins said.

It appears that the real problem for Verizon is that they are not necessarily using these tax savings to help customers afford service or provide additional benefits for employees. While the report is pretty clear Verizon is playing the tax game to the best of its abilities, the US government needs to change the system too so that these types of games cannot take place.

I worked hard growing up with a single mom and currently work two jobs to support my family and succeed so I don’t appreciate when games like this are played at my expense. I pay a fair share of taxes and expect all in the U.S. to do so as well. I am quite pleased with my new iPhone 4S on Verizon and am not going to drop their service due to this report, but it does cross my mind that this is a strategy I may follow through with in the future.

(Original Post)

In response, Verizon says it complies with laws, has deferred some taxes
By Matt Hamblen
November 15, 2011 12:47 PM ET

Computerworld - Verizon Communications was singled out as one of the nation's biggest tax dodgers by two citizen action groups and the Communication Workers of America (CWA) union on Tuesday.

CWA Chief of Staff Ron Collins joined representatives from Citizens for Tax Justice (CTJ) and Good Jobs First in a telecast to detail how Verizon has used the Reverse Morris Trust tax loophole to avoid $1.5 billion in taxes on the sale of landlines and other assets.

A Verizon spokesman later called the criticism "inaccurate and politically motivated" and said Verizon "fully complies with all the tax laws and pays its fair share of taxes."

Verizon has paid more than $7.5 billion over the past five years in state and federal income taxes alone, not including property taxes, payroll taxes and fees for rights-of-way, the spokesman added.

CTJ and the Institute on Taxation and Economic Policy released a report earlier this month noting that 78 of 280 U.S. corporations paid no federal taxes in at least one of the three years from 2008-2010.

Today, the groups said in a statement: "Verizon has proven itself to be one of the worst offenders, manipulating state revenue rules, seeking economic development subsidies and structuring its business and tax affairs to produce a negative income tax rate. Verizon has received state and local tax subsidies in at least 13 states."

The groups said that Verizon effectively paid a negative tax rate between 2008 and 2010, and was given a tax rebate of $1 billion from the U.S. Treasury. They put the negative tax rate at -2.9%.

But Verizon's spokesman, Bob Varettoni, said Verizon actually paid out $1.79 billion in taxes between 2008 and 2010 on earnings of $5.25 billion. Verizon has annually invested $16.5 billion in technology infrastructure, creating and sustaining jobs, he said.

"U.S. economic development policy allows for the payment of some taxes to be deferred," Varettoni added. "The CTJ treats deferred taxes as non-existent, [and] it does not account for the $1.79 billion in taxes Verizon paid out over the past three years despite deferrals."

Verizon also faulted the CTJ for an incorrect calculation on earnings for Verizon by including income that belongs to Vodafone, Verizon's partner in Verizon Wireless.

However, CWA's Collins said the concerns about Verizon are timely since the Congressional "Super Committee" is meeting on budget and tax issues. "Verizon doesn't use its tax avoidance gains to keep up its copper network or extend its fiber optic technology to cities like Boston, Baltimore, Buffalo or other communities, or create quality jobs," Collins said.

"It isn't negotiating a fair contract with the workers who have made this company so successful, but instead is demanding nearly $1 billion in givebacks and making sure that its top executives stay in the top 1% of Americans," Collins added. "That's why we say the [other] 99% are picking up Verizon's tax tab."

CWA joined another union in a strike against Verizon in August.

Notably, CWA also has endorsed the AT&T merger with T-Mobile USA on the grounds it will create 96,000 new U.S. jobs. That estimate has been criticized by Sprint and others who oppose the merger.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at Twitter @matthamblen or subscribe to Hamblen RSSMatt's RSS feed. His e-mail address is mhamblen@computerworld.com.

(Original Post)

November 15, 2011 — 11:44am ET | By Sean Buckley

Verizon (NYSE: VZ) is once again facing another debacle with the Communications Workers of America (CWA), which has accused the telco of not paying its taxes over the past three years.

The CWA's statement is part of a new report called "Unpaid Bills: How Verizon Shortchanges Government Through Tax Dodging and Subsidies," which the union will unveil during a joint press conference it is holding today with Citizens for Tax Justice and Good Jobs First.

CWA is basing its argument on a new report released by the Citizens for Tax Justice and Good Jobs First, which found that 78 out of 280 corporations analyzed did not pay federal taxes in at least one of the past three years.

"Verizon has proven itself to be one of the worst offenders, manipulating state revenue rules, seeking economic development subsidies, and structuring its business and tax affairs to produce a negative federal income tax rate," said the CWA in a media advisory. "Verizon has received state and local tax subsidies in at least 13 states."

In addition, the reports cite Verizon's use of Reverse Morris Trusts to offload its rural wireline assets to other telcos including Frontier (NYSE: FTR) and FairPoint Communications (Nasdaq: FRP). FairPoint was driven into bankruptcy over its inability to handle the debt load and customer issues it gained from purchasing Verizon's New England wireline assets.  

Of course, Verizon refutes the tax dodging claims in a statement.

"Verizon paid out $1.79 billion in taxes over 2008-2010, and reported earnings of $5.25 billion over this same period. In addition, Verizon has annually invested $16.5 billion in technology infrastructure. This investment has created and sustained jobs, so U.S. economic development policy allows for the payment of some taxes to be deferred. The CTJ treats deferred taxes as non-existent, it does not account for the $1.79 billion in taxes Verizon paid out over the past three years despite deferrals, and it incorrectly calculates earnings for Verizon to include income belonging to Vodafone, Verizon's partner in Verizon Wireless."

This battle between the CWA and Verizon comes as the telco has asked its unions for a number of concessions over healthcare and sick time. After neither side could come to an agreement, the service provider's 45,000 union workers went on strike in early August.

Although union employees returned to work in late August, the unions and Verizon have yet to finalize a new labor contract.

For more:
- here's the CTJ statement

(Original Post)

WASHINGTON, Nov 15, 2011 (BUSINESS WIRE) -- A new report released today reveals how Verizon Communications achieves a negative federal tax rate to avoid paying its fair share of taxes, and aggressively uses tax loopholes and subsidies to cut its tax bills even more.

"Unpaid Bills: How Verizon Shortchanges Government Through Tax Dodging and Subsidies," ( http://cwa-union.org/vzunpaidbills ) was produced by Citizens for Tax Justice and Good Jobs First, and released by the two organizations and the Communications Workers of America. The report shows that Verizon, a $100 billion dollar corporation, paid an effective federal tax rate of --2.9 percent between 2008 and 2010. For the year 2010 alone, Verizon's federal tax rate was -5.7 percent. While most Americans are struggling to make ends meet and pay their fair share of taxes, Verizon actually received a federal tax rebate of nearly $1 billion rebate from the United States Treasury.

The report is especially timely as the congressional "super committee" meets on budget and tax issues. Verizon has put the "Reverse Morris Trust" tax loophole to extensive use, avoiding $1.5 billion in taxes on the sale of its landlines and other assets, said CWA chief of staff Ron Collins.

"Verizon doesn't use its tax avoidance gains to keep up its copper network or extend its fiber optic technology to cities like Boston, Baltimore, Buffalo or other communities or create quality jobs. It isn't negotiating a fair contract with the workers who have made this company so successful but instead is demanding nearly $1 billion in givebacks and making sure that its top executives stay in the top 1 percent of Americans. That's why we say 'the 99 percent' are picking up Verizon's tax tab," Collins said.

Earlier this month, CTJ placed Verizon as one of the nation's top tax avoidance offenders, manipulating state revenue rules, seeking economic development subsidies, and structuring its business and tax affairs to produce a negative federal income tax rate. Verizon has received state and local tax subsidies in at least 13 states.

Robert McIntyre, director of CTJ and the report's lead author, said the billions of dollars that companies like Verizon receive are simply "wasted dollars, that could have gone to protect Medicare, create jobs and cut the deficit. Too many corporations are gaming the system at the expense of the rest of us."

Philip Mattera, research director of Good Jobs First, said Verizon and other tax dodgers "aren't using these tax givebacks to create good jobs or invest in their companies in ways that would improve our communities. Ordinary Americans are struggling to pay their own taxes and are picking up the tab for these corporations as well. It's a system out of control."

The Communications Workers of America represents 700,000 workers in telecommunications, media, airlines, manufacturing, public service and health care, including 35,000 members at Verizon East. www.cwa-union.org

Citizens for Tax Justice (CTJ), founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation. www.ctj.org .

Good Jobs First is a national policy resource center for grassroots groups and public officials, promoting corporate and government accountability in economic development and smart growth for working families. www.Goodjobsfirst.org

SOURCE: Communications Workers of America

(Original Post)

By Josh Long

Verizon Communications is continuing to face allegations that it's not paying its fair share of taxes despite ranking as one of the largest and most profitable companies in America.

A report released today – and prepared by Citizens for Tax Justice and Good Jobs First – claims that Verizon received federal tax subsidies of $12.3 billion between 2008 and 2011 and paid an effective federal tax rate of negative 2.9 percent.

"All in all, Verizon is one of the country's most aggressive corporate tax dodgers," claims the report, "Unpaid Bills: How Verizon Shortchanges Government Through Tax Dodging and Subsidies."

New York-based Verizon asserts the report like a similar one released earlier this month is a gross misrepresentation of the facts.

"This is a rehash of the same inaccurate and politically motivated statements that union-orchestrated front groups like the CTJ have been making for some time. The fact is, Verizon fully complies with all tax laws and pays its fair share of taxes," Robert Varettoni, a Verizon spokesman, told us. "As stated in our 10Ks, Verizon has paid more than $7.5 billion over the past five years in state and federal income taxes alone. This amount does not include other taxes, such as property taxes, taxes on gross receipts, payroll taxes and right-of-way fees."

A Biased Agenda?

Representatives of Verizon also reiterate the company has paid $1.79 billion in taxes on earnings of $5.25 billion over the 2008-2010 period. And in a letter this summer addressed to AFL-CIO President Richard Trumka, Verizon Chief Communications Officer Peter Thonis wrote that the company had a federal tax liability of $2.2 billion last year and "paid $430 million in state and federal taxes, net of refunds."

"Deferred taxes – resulting from the bonus depreciation provision enacted by President Bush in 2008 and extended by President Obama through 2012 – are a main reason for the timing difference between our federal tax obligations and our federal tax payments," Thonis explained.

Verizon reps also maintain that the recent tax reports are clearly biased at a time when Verizon is negotiating with the unions – the Communications Workers of America and International Brotherhood of Electrical Workers – over a new contract that would cover about 45,000 employees and replace an agreement that expired over the summer. Eight of the 13 board members with Citizens for Tax Justice are executives in national unions, said Varettoni, including CWA President Larry Cohen.

Verizon Dodging Taxes?

But the CTJ and Good Jobs First report portrays the telecommunications giant as a master in the art of dodging state and federal taxes and comes on the heels of an earlier report this month that claims Verizon paid no federal income taxes in 2009 and 2010.

November 14, 2011

Chief Business Correspondent Rick Newman

For the last couple of years, many business leaders have complained about President Obama bad-mouthing their efforts and creating an anti-business climate. But lately, corporate America hasn't needed many critics, because it's become its own worst enemy.

Even though it hasn't been the source of many new jobs recently, big business remains extremely important to the U.S. economy. Firms with more than 1,000 workers employ about 40 million Americans, nearly one-third of the U.S. labor force. Big companies are the vanguard of the U.S. presence in overseas markets, which is essential if America as a whole is to benefit from globalization. Strong corporate profits have been one of the few bright spots in a stagnant economy, and robust spending by business has helped offset a downturn in consumer spending that seems likely to persist for years.

[See 12 ways to thrive in a stagnant economy.]

Yet America's big companies increasingly seem to represent a kind of distant elite that's at odds with mainstream America--even though many middle-class families earn their livelihoods from those same companies. The Occupy Wall Street protests, and the broader "99 percent" movement that's developing online, are fueled at least in part by anti-corporate sentiment. Polls show that trust in big companies has been consistently falling and is at or near record lows. In one Gallup survey, confidence in big business is second-lowest among 15 institutions, ahead of only Congress. Confidence in banks is the worst in the modern era. And these numbers could go lower, thanks to recent developments, such as:

The MF Global fiasco. The mid-sized brokerage firm declared bankruptcy recently after a months-long battle with regulators who wanted to rein in risky trades on things such as volatile European debt. The firm and its once-influential CEO, Jon Corzine, apparently persuaded regulators to back off—then promptly ran out of money. The victims include some smart-money investors who should have known what they were doing, but also some farmers and food-industry businesses that used the firm to hedge against fluctuations in commodity prices. Fishy handling of some of the money in customer accounts—which is supposed to be protected—suggests a startling lack of accountability.

[See why a growing economy is leaving many behind.]

This comes, of course, on the heels of the worst financial meltdown since the Great Depression and a series of gargantuan taxpayer bailouts for the financial sector. The Dodd-Frank regulations passed in 2010 were meant to fix the problems that caused the crisis. Yet Wall Street and big-business groups like the U.S. Chamber of Commerce have complained vociferously about being shackled by the new rules, while seeking to water down the regulations through their Washington lobbyists. MF Global, apparently, was just an irrelevant outlier.

Tax avoidance. Business leaders regularly kvetch about the U.S. corporate tax rate, which, at 35 percent, is in fact one of the highest in the developed world. But hardly any company pays taxes at that rate. A recent study by Citizens for Tax Justice found that after deductions and exemptions, the effective federal tax rate on 280 big companies between 2008 and 2010 was 18.5 percent—barely half the official rate. Some companies paid no tax, even though they were profitable. Most companies still fork over payroll taxes, plus various state or local levies. And it's hard to blame companies for taking advantage of tax loopholes that they're legally entitled to exploit. But the huge gap between the tax rate that's on the books and the one that applies in reality clearly contributes to perceptions of a rigged system that favors the rich and the well-connected.

[See 11 things wrong with Congress.]

Riches for CEOs. Median income stagnated in the decade leading up to to the recent recession, and since the downturn began, incomes have fallen by nearly 10 percent. Put more simply, many Americans are falling behind, with no relief in sight. But top executives have been largely immune to that trend. While CEO pay dipped during the recession, it rose 12 percent in the most recent year, according to one survey of 200 big companies. Average pay for that group of CEOs was $9.6 million. The AFL-CIO says the average big-company CEO earns 343 times the pay of the average worker, up eight-fold from the level in 1980.

To some extent, CEOs today are reaping the rewards for having kept their companies profitable during a bruising recession that crushed many weak or over-indebted firms. And it's no simple thing to say what "fair" pay for executives ought to be. But it's destabilizing when pay for the wealthy is going up while mostly everybody else's pay is going down. When income inequality becomes too severe, it tends to generate a political backlash that can lead to heavy-handed government, protectionism, and other policies that harm the economy more than they help it.

Corporate job cuts. Despite their large economic footprint, big companies aren't helping much with job creation. The most recent government data shows that companies with more than 1,000 employees shed about 3 million jobs between 2008 and 2010. Job cuts in big companies occurred at about the same pace as reductions in smaller companies, but big companies seem less likely to hire people back as the economy grows. Recent data, for instance, shows that mid-sized companies—those with 50 to 999 workers--have done most of the hiring in the tepid recovery, with bigger firms accounting for a tiny portion of new jobs. Where many Fortune 500 firms are hiring is overseas. What their U.S. employees tend to notice, meanwhile, is slimmer benefits, declining job security and more part-time and temporary workers in the office.

[See why the GOP's "job creators" are hard to find.]

Banks behaving badly. Banks have the right to be profitable. But consumers have the right to despise how they do it. The brouhaha over debit-card fees that Bank of America and several competitors tried to charge, then rescinded, was a populist backlash over tiny fees that many bank customers wouldn't even notice. It was significant, however, because it revealed the genuine hostility Americans seem to feel toward the financial industry. A much bigger problem is the foreclosure crisis, which might ultimately affect 10 percent of all U.S. homeowners—while also leaving stark impressions on everybody they know. In many cases, it's not the bank's fault that homeowners got in over their heads. But banks were there handing out the cash, and now it's the banks that are showing up to take away the keys. It's hard to imagine a worse way to win friends and influence people.

Business leaders have a way of reassuring themselves that all of the bad feelings will blow over, and that many Americans will come back around to the idea that business is a force for good. Maybe. But corporate bosses ought to be paying close attention to signs of a seismic shift in the nation's attitude toward business. In one of the recent GOP presidential debates, for instance, the candidates vilified big banks nearly as fervently as they attacked their one common foe—President Obama. And Republicans are supposed to be the business-friendly bunch.

[See why banks have axed one fee—but others are coming.]

To many Americans, big banks are synonymous with big business. The last time financiers and their corporate cousins came under mainstream attack was in the 1930s. Back then, the nation's problems were obviously more grave than they are today. Yet it's worth recalling that FDR's war on business generated an onslaught of regulations governing corporate behavior, including some that persist to this day. In fact, some analysts feel that the 1999 repeal of the 1933 Glass-Steagall Act, which prohibited certain types of risk-taking at banks, directly contributed to the 2008 financial crisis.

A few CEOs seem to be mindful of their negative image—and the need to do something about it. Citigroup CEO Vikram Pandit recently proposed a standardized way for all banks to be more forthcoming about the risks on their books, which in theory would bring a new level of transparency to banking, and increase confidence. The odds of it catching on seem doubtful, but it's refreshing to see an insider propose reforms for once, instead of fighting them. Starbucks CEO Howard Schultz is mounting a different kind of campaign, urging fellow CEOs to stop donating money to political candidates, until Washington solves its own fiscal problems and helps get the U.S. economy back on track. He's pointing the finger at somebody else, but it does make big business look virtuous by comparison. It's a better hearts-and-minds campaign than the rest of corporate America seems to have in place.

Twitter: @rickjnewman

(Original Post)

by Joan Engebretson November 14th, 2011

The Communications Workers of America on Friday accused Verizon Communications of being one of the nation’s biggest tax dodgers for the last three years. The comment came in an advisory sent to the media to advise them of a conference call scheduled for tomorrow titled “Unpaid Bills: How Verizon Shortchanges Government Through Tax Dodging and Subsidies.”

The CWA’s charge draws on a report by Citizens for Tax Justice and Good Jobs First, which found that 78 out of 280 corporations analyzed did not pay federal taxes in at least one of the past three years. “Verizon has proven itself to be one of the worst offenders, manipulating state revenue rules, seeking economic development subsidies and structuring its business and tax affairs to produce a negative federal income tax rate,” the media advisory states. The advisory also notes that Verizon has received state and local tax subsidies in at least 13 states and has put the Reverse Morris Trust tax loophole to extensive use, avoiding $1.5 billion in taxes on the sale of its landlines and other assets.

The CWA and Verizon have been trading barbs since this summer, when the carrier’s contracts with the CWA and another union representing a total of about 45,000 workers, expired. After a brief strike, the 50,000 workers—the majority of which are represented by the CWA–returned to work without a contract.

Verizon is asking the union for concessions, arguing that it must reduce costs in its landline business, where most of the 45,000 employees work (CP: Verizon confirms it will seek concessions from union workers).

The CWA maintains that Verizon operates at a profit and continues to see strong performance in its wireless business and therefore should not be making an attack on the middle class way of life (CP: CWA: Verizon wants union to make ‘punitive’ healthcare concessions — and won’t ‘bargain at all’).

Tomorrow’s conference call is the union’s latest attempt to portray Verizon as a fat cat that ought to be able to afford more generous benefits packages for its employees.

(Original Post)

By Conan Milner

Epoch Times Staff

Last Updated: November 13, 2011

U.S. taxpayers can safely claim that they pay more in federal income taxes than Wells Fargo, AT&T, General Electric, DuPont, Verizon, and many more of the nation’s largest corporations. As America’s most profitable companies continue to lobby for even lower corporate tax rates, a recent study shows that many of these businesses benefit from Uncle Sam and the tax system.

A review of the nation’s top companies has found that, while some businesses have paid substantial sums in annual income tax over the last three years, nearly 80 corporations managed to avoid paying anything at all.

In the report titled “Corporate Taxpayers and Corporate Tax Dodgers, 2008–2010,” research and advocacy group Citizens for Tax Justice (CTJ) examined the most recent tax records of 280 highly profitable Fortune 500 companies.

Over the three-year period, these companies reported a total of $1.4 trillion in U.S. pre-tax profits, while managing to pay very little, if any, taxes by comparison. Because of billions in subsidies, 30 of these companies actually enjoyed a negative income tax rate, despite combined pre-tax profits of $160 billion.

Although some argue that U.S. companies are burdened by rates much higher than those seen overseas, a closer examination reveals a complex mix of loopholes and subsidies that allow businesses to pay far less than the 35 percent mentioned in the federal tax code. The CTJ study found that only about one-quarter of the surveyed corporations paid close to this amount. The vast majority paid considerably less, and many enjoyed U.S. rates that were far better than those found overseas.

The CTJ report characterizes the U.S. corporate tax system as one “plagued with problems” that allow many of America’s most profitable corporations to pay little or nothing in federal income taxes. According to Robert McIntyre, CTJ’s director and the report’s lead author, the study proves that too many corporations are “being coddled” by our tax system.

McIntyre and his colleagues noted that the examined companies received $225 billion in subsidies over the course of the study. Wells Fargo made the most with $18 billion in tax subsidies over the three years, with AT&T and Verizon not far behind at $14 billion and $12 billion, respectively. General Electric and IBM enjoyed over $8 billion apiece, while Exxon-Mobil and Boeing also saw a substantial share, with each receiving a few billion dollars in subsidies.

According to CTJ, if these businesses had paid the statutory 35 percent corporate tax rate, it would have amounted to $473 billion in income taxes—twice as much as what the surveyed companies actually paid over the three years.

“This is wasted money that could have gone to protect Medicare, create jobs, and cut the deficit,” said McIntyre in a press release.

In addition to announcing the big subsidy “winners,” CTJ also pointed out a few of the casualties that have resulted from the current corporate tax system—including public respect for the system itself. According to CTJ, allowing America’s biggest companies to report only half of their actual earnings, while demanding that ordinary wage-earners report every penny, directly undermines public support of the tax code.

“Ordinary taxpayers have a right to be suspicious and even outraged about a tax code that seems so tilted toward politically well-connected companies,” states the report. “In a tax system that by necessity must rely heavily on the voluntary compliance of tens of millions of honest taxpayers, maintaining public trust is essential—and that trust is endangered by the specter of widespread corporate tax avoidance.”

(Original Post)

Income inequality isn't only unfair; it's bad for the economy

Nov 13, 2011 – 11:27 PM EST

By Michael Shank

The fact that America's biggest companies paid no federal taxes may come as no surprise to Washington. The report released earlier this month by nonprofit groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy shows that 30 of the top 300 companies paid no taxes at all or used loopholes to end up with negative tax rates. Washington's own utility company – Pepco Holdings – paid the lowest, at nearly minus 58 percent, with GE coming close second at 45 percent.

The significance of this study is not lost on any of the Occupying protesters nor should it be lost on any of the Super Committee members in Congress as they deliberate on deficit reduction tactics that may include a reform of the tax code.

It's time for a more distributive tax system. The fact that companies are paying no taxes when America's working families are still struggling to winter what Fed Reserve Chairman Ben Bernanke continues to recognize as a failed or failing recovery is a prime example of what is exacerbating income inequality in America.

Income inequality is the hot topic of late and rightly so. Three reports in the last 10 days show this issue isn't going away anytime soon. The UN Human Development Report shows that while the United States remains the fourth best country in the world to live, after adjusting for internal income inequality it drops it into 23rd place. And the report by the Congressional Budget Office showed that in the last 30 years US government policy failed to equally distribute wealth, enabling the richest in America to grow their income 15 times faster than the poor and shifting more than 80 percent of all US income wealth to the top 20 percent of earners. Additionally, a report by the US Census office showed pervasive income inequality throughout the US, with Washington DC and NY State and City ranking the highest in the gap between the rich and the poor.

No one is under the illusion that the majority of America is doing well. In fact, Americans have recently learned they have the highest poverty rate since World War II (one in six Americans living below the poverty line) and the highest youth poverty rate (one in five young people, with Hispanic youth suffering most). Last month also concluded multiple "Made in America" tours by the congressional black and progressive caucuses who were responding to the cry of the unemployed, which is only getting louder and more desperate. More recently, the Warren Buffet-inspired tax debate, regarding whether millionaires should pay at least the same tax rate as the common worker, has surfaced fractiously, pitting President Obama and Democrats against most Republicans. Underlying these recent trends, the US still maintains one the highest income inequality rates among all wealthy countries.

How vexing it is to witness America's inability to push for policies that could ensure more economic equality. Paradoxically enough, many Americans believe they are already in the middle-upper tier of income earners or will eventually end up there. This inspires a reluctance to enact policies that would more equitably balance economic burden sharing. America's increasing poverty rates may finally change this dynamic as two-thirds of Americans support raising taxes on the rich according to a NYT/CBS poll.

America's past penchant for income inequality, however, is not financially sustainable, let alone morally excusable or philosophically justifiable by capitalists who claim this to be inherent in the system. This is where UK economists Richard Wilkinson and Kate Pickett's data from the British bestseller, The Spirit Level: Why Greater Equality Makes Societies Stronger, is useful.

It shows that with income inequality comes with a host of health and social problems. The higher a country's income inequality, the higher its infant mortality rates, obesity rates, homicide rates, illiteracy rates, mental illness rates, teenage births, incarceration rates, drug addiction rates, social immobility and lower life expectancy. In other words, the bigger the gap between a nation's rich and poor populations, the greater dysfunction in that nation's society.

It may come as no surprise to some that America has the highest income inequality among the entire rich world. The gap was developed largely in the last 30 years, exacerbated by tax policies that benefited the rich at the expense of the poor. It became increasingly difficult for Americans to get ahead, get insured, get educated and get a job, all of which helps with getting respect. Consequently, the bulk of America's economic growth over the last 30 years has gone to the top one-hundredth of 1 percent, who make $27 million annually per household, leaving 90 percent of American households to subsist on roughly $30,000 a year.

Name a rich country and our inequality rates beat them by a long shot – though it's hardly something to brag about. We also have the highest rates of homicide, infant mortality, teenage births, drug addiction, mental illness, incarceration, social immobility and illiteracy. Name the social ill and we excel at it.

These health and social problems wreak financial havoc on our society—not only in terms of lost productivity and potential, but also in terms of costs associated with containing the violence, healing the sick and fixing the dysfunction. With each homicide, for example, the Centers for Disease Control and Prevention calculate that the economy loses $1.65 million in medical costs, loss of lifelong employment and economic productivity costs. With each prisoner, the US spends on average $35,000 per year for a total of $80 billion annually for its correctional system. Add to this the total cost of lost productivity of the incarcerated, which is another $97.7 billion. And don't forget violent crime, which cost America $94 billion in 2009.

Given these enormous costs to America's economy, advocates of income equality must have a seat at the congressional budget Super Committee's table, as it continues to convene on cost cutting, and must push for policies that promote equal opportunity, health, education and poverty alleviation. Reduce income inequality and you reduce the rates of every kind of social malaise that are draining our federal, state and local budgets and services. Eradicate both and you have a certain moneymaker for America – a wise and worthwhile move for a country that just raised its debt ceiling.

About Michael Shank

Michael Shank is the US Vice President for the Institute for Economics and Peace. Follow the Institute on Twitter at twitter.com/GlobPeaceIndex.

(Original Post)

By now, it is pretty well known that General Electric, a company that showed $14.2 billion in profit worldwide paid no taxes. In fact, it not only paid no taxes, but got a $3.2 billion tax rebate.

Two reports by Citizens for Tax Justice and the Institute on Taxation and Economic Policy respectively, released since the end of October, show that GE wasn't alone. Of the 280 most profitable U.S. companies, 30 of them paid "less than zero" taxes in the last three years, and 78 of them didn't pay any taxes at in at least one of the last three years.

Since the report clearly shows that corporate welfare exists, it has to be wrong and quickly discounted, right? The only welfare that exists in this country is given to lazy individuals who would rather sit on their butts than work.

The statutory tax rate for corporations in the United States is 35 percent, but by using a variety of legal tax loopholes put in place by lawmakers as payment for large campaign contributions, the 280 most profitable U.S. companies were able to whittle this down to an average of 18.5 percent. Only 71 of those companies paid more than 30 percent, clearly demonstrating a need for better lawyers and accountants.

Power company Pepco Holdings had the lowest tax rate in the nation, at negative 57.6 percent. That's negative 57.6 percent, meaning the company, which was already profitable, made more money after it paid its taxes than before. How cool is that?

Wells Fargo received the most in welfare money among the 280 companies, raking in nearly $18 billion in tax breaks in the last three years. All 280 companies took in a combined $222.7 billion in welfare over the last three years.

These reports come as a bipartisan committee of six Republicans and six Democrats pretends to struggle over how to cut the U.S. budget deficit, even though it's patently obvious how to everyone but those in power. This "supercommittee,: as it is has been called, has to come up with a plan by Nov. 23 to save at least $1.2 trillion over 10 years or risk tripping automatic budget cuts. These automatic cuts would slice deepest into defense spending. By the way, did you know we spend more on defense than all the other nations on this planet combined? So, yeah, cutting defense spending would be a bad idea.

Rest assured, though, this committee will come up with a plan, and just in the nick of time too. It's a supercommittee after all. Just you watch, a deal will be in place by midnight Nov. 23, avoiding the automatic cuts to defense and preserving the enormous profits of those who build bombs and guns and all the other machines of war. The deal will also preserve corporate welfare in every single way, and will instead cut assistance to poor and working class Americans who are, let's face it, just being lazy.

The status quo, as always, will be preserved.

Michael Kindt is writer living in South Dakota whose work has appeared in College Times, Midwest Lit Review and in the poetry anthology "It's Dark & Scary In Here." He's the author of "Early Onset of Night, Volume One" and blogs at Early-Onset-of-Night.tumblr.com. Twitter: @MichaelKindt

(Original Post)

By Bloomberg News - Nov 10, 2011 12:12 AM ET

Rick Perry stumbled when he forgot which federal departments he would shut, while Mitt Romney and other rivals for the Republican presidential nomination strayed from the facts on regulation, auto bailouts and health care in a debate focused on the economy.

Texas Governor Perry and former businessman Herman Cain blamed government regulations for the weak economy in last night’s debate co-sponsored by CNBC and the Michigan Republican Party. Former Massachusetts Governor Romney said bailouts of the auto industry were the wrong way to go.

Those and other statements by the White House contenders stretched the truth during the debate at Oakland University in Rochester, Michigan.

Following are examples of gaffes or assertions that didn’t stand up to fact-checking by Bloomberg reporters:
Perry on Agency Cuts

The Claim: Perry said he would shut three government agencies. He named two, the departments of Commerce and Education, and said he couldn’t remember the third: “I can’t. Sorry. Oops.”

Background: Perry’s Republican rivals have also called for eliminating a number of departments, with Representative Michele Bachmann of Minnesota pledging to shut the Environmental Protection Agency and Representative Ron Paul saying he would close the Department of Interior in addition to the ones Perry wants to end.

The Facts: Later in the debate Perry said the third agency he wanted to close was the Department of Energy. Perry, who made expanded oil drilling a cornerstone of his Oct. 14 jobs plan, also named that agency as one he wanted to do away with during an Oct. 1 town hall meeting in Hampton, New Hampshire.
Cain, Perry, Bachmann on Regulations

The Claims: Cain said fixing the housing crisis requires that “you get the regulators off of the backs of the banks.” Perry said “it’s the regulatory world that is killing America,” and Bachmann said, “Our biggest problem right now is our regulatory burden.”

The Background: Perry pledged to review all rules issued during President Barack Obama’s administration and revoke those that kill jobs. Former Senator Rick Santorum of Pennsylvania said he would repeal every Obama-era regulation that cost businesses more than $100 million.

The Facts: Obama’s administration approved 613 rules during his first 33 months in office, fewer than the 643 issued by President George W. Bush’s administration in the same time period, according to Office of Management and Budget statistics. A National Federation of Independent Business survey of small business owners released this month found that 26 percent of respondents cited poor sales as their top problem, compared with 19 percent citing regulations. Of almost 489,000 initial unemployment claims from extended mass layoffs in the first half of this year, 2,085 -- less than 1 percent -- came from people who employers said were fired because of government regulations, according to the Labor Department.
Romney on Bailouts

The Claim: Romney said auto bailouts by Obama and Bush were “the wrong way to go.” General Motors Co. and Chrysler Corp. should have gone through “a private bankruptcy process” instead, he said.

The Background: The Bush administration extended more than $17 billion in loans from the Troubled Asset Relief Program to General Motors and Chrysler in late 2008 to save up to 3 million jobs and the network of industry suppliers. Ford Motor Co. didn’t need government financing because it restructured its debt in 2006. In 2009, the Obama administration provided additional financing for the two car companies as well as their financing arms while an auto-industry task force shepherded them through accelerated bankruptcies. The process allowed them to shed excess facilities, workers and dealers.

The Facts: Private financing for a traditional debtor-in- possession bankruptcy for GM and Chrysler wasn’t available during the 2008-2009 credit crisis, according to Steven Rattner, who headed the Obama administration’s auto rescue, economist Mark Zandi of Moody’s Analytics Inc. and David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Michigan. Michigan’s economy is recovering from the recession at the second-fastest pace in the U.S., lifted by reviving carmakers and local manufacturers, according to a Bloomberg index that tracks the pace of states’ growth. Michigan’s 11.1 percent unemployment rate in September was down from the crisis peak of 14.1 percent in August 2009, and still higher than the national 9 percent figure. The state has added 92,500 nonfarm jobs since employment bottomed in December 2009.
Perry on Medicaid

The Claim: Perry said if the federal government let states run Medicaid, the health program for the poor, “I guarantee you we will do it safely, we will do it appropriately and we will save a ton of money.”

The Background: Republican candidates have urged the federal government to send money to the states for the joint federal-state program and let them figure out how best to spend it.

The Facts: Since Perry became governor, the number of Texas Medicaid beneficiaries covered by managed-care plans has more than doubled, from 29 percent in 2000 to 72 percent in 2009, the latest year for which the state released enrollment figures. That’s a faster shift to managed care than the country as a whole. The state contracts with the Institute for Child Health Policy at the University of Florida to review the quality of its Medicaid managed-care program. The institute said in 2009 that the 1.2 million Texans covered by the state’s largest managed- care program, called STAR, fared worse than Medicaid beneficiaries nationwide on several indicators. STAR adult beneficiaries were almost three times more likely to be admitted to the hospital for hypertension, more than twice as likely to be admitted for uncontrolled diabetes and 71 percent more likely to be admitted for urinary-tract infections.
Bachmann on Taxes

The Claim: Bachmann said the effective corporate tax rate is about 40 percent.

The Background: Republicans generally maintain that corporations need a lower federal tax rate to compete globally.

The Facts: The current top corporate rate is 35 percent. Corporations also pay state taxes that vary from zero to almost 10 percent. Many companies avoid paying the top federal rate because of the availability of tax breaks and the effects of losses. Citizens for Tax Justice, a labor-funded research group in Washington, published a study this month showing that the average effective federal corporate income tax rate for 280 Fortune 500 companies from 2008 through 2010 was 18.5 percent. Thirty companies including General Electric Co., Verizon Communications Inc. and Boeing Co., didn’t pay any federal income tax between 2008 and 2010 though they earned a combined $160.3 billion in pretax U.S. profits in that period, the study found.
Gingrich on Loans

The Claim: Former House Speaker Newt Gingrich, criticizing the federal student loan program, cited the College of the Ozarks, a work-study college where most students graduate debt- free. “You cannot apply to it unless you need student aid, and they have no student aid. You have to work 20 hours a week during the year to pay tuition and books. You work 40 hours a week during the summer to pay for room and board.”

The Background: Gingrich is seeking to depict federal student loans as helping foster dependency and debt.

The Facts: The College of the Ozarks website says that 90 percent of each entering class must show financial need and 10 percent have the need requirement waived. Each student participates in the on-campus work-study program 15 hours each week, and two 40-hour work weeks. While the Christian college in Point Lookout, Missouri, doesn’t participate in the student loan program, the website says any federal and/or state aid for which students qualify, combined with on-campus work earnings plus a college scholarship ranging from $5,090 to $13,540, meets each student’s tuition charge.
Romney on the Economy

The Claim: Romney said “median incomes have dropped 10 percent in the last three years.” He made the same claim at the Oct. 11 Republican debate in Hanover, New Hampshire.

The Background: Republican presidential candidates have tried to outdo each other with their criticism of Obama for his handling of the economy.

The Facts: Figures from the U.S. Census Bureau show that median household income fell by 2.9 percent from the end of 2008 to the end of 2010 after taking inflation into account. A report released several weeks ago by two former census officials who made their own estimates put the drop at 9.8 percent from December 2007 to June 2011. That covers a period before Obama took office in January 2009 and also takes inflation into account, something Romney didn’t mention.

To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net

(Original Post)

By Guest Contributor 11/10/11 - 07:36 AM EST

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By R. Aura Kanegis and Arnie Alpert

NEW YORK (TheStreet) -- As thousands protest skewed political and economic priorities in the streets of New York and communities around the country, the 12 legislators on the Congressional super committee are preparing to make recommendations that could worsen the problems faced by the 99% -- and further shield the 1% now gorging on tax breaks and excessive military spending.

Their recommendations to cut $1.4 trillion from the federal deficit are due Nov. 23, and could affect every federal program, from Social Security to services that feed and house struggling families including middle-class households crippled by job losses or illness.

Yet a shocking number of lawmakers have declared that the two areas of spending most responsible for increasing our nation's debt, military spending and tax cuts to benefit the wealthiest sectors of society, are the ones that should be protected at all cost.

Let's be very clear: In a budget world where all spending is capped and deep cuts are being sought, any line in the sand to protect one line item is a call to place a greater burden everywhere else. At a time when the 99% are suffering and the 1% have enjoyed stunning increases in wealth, the lines that should be drawn are ones to protect the already frail safety net holding those most vulnerable, both in the U.S. and the world.

The biggest drivers of our current deficit, aside from reduced revenue as a result of the economic downturn, are the impact of tax cuts passed in 2001 and the off-budget wars in Iraq and Afghanistan. Those tax cuts overwhelmingly benefited the wealthiest sectors of our society, with the top 5% of income earners receiving nearly half of the savings, while the bottom 60% took home only 13%, as Citizens for Tax Justice has detailed.

Our military budget has doubled in just over a decade and that does not even include spending on wars in Iraq and Afghanistan which have been funded in emergency spending packages, as documented by the National Priorities Project and other groups. Military spending now consumes 60% of the discretionary budget.

Despite some recent rhetoric, there has been no reduction to the Pentagon's actual budget. The only reductions discussed to date have been to the amount of increase sought in the Department's request. Calling an increase a cut offends common sense.

(Original Post)

By Dan Freed 11/10/11 - 06:35 AM EST

NEW YORK (TheStreet)--Wells Fargo(WFC_)'s use of a short-lived, highly controversial amendment to the tax code in its acquisition of Wachovia in 2008 has largely been forgotten.

But the amendment, announced by the Internal Revenue Service on Sept. 30, 2008 and revoked by Congress just three and a half months later, had a lot to do with why Wells Fargo beat out AT&T(T_), Verizon Communications (VZ_), General Electric(GE_) and IBM(IBM_) to top the list of 25 companies with the largest tax subsidies from 2008-2010 (see chart below).

The list was included in a report by the nonprofit advocacy group Citizens for Tax Justice (CTJ) that was released last week.

The report found that Wells Fargo(WFC) received $17.96 billion in tax breaks from 2008 through 2010, while earning more than $49 billion. Those subsidies allowed the bank to pay no taxes during those years, receiving instead a $681 million tax credit.

The unprecedented 2008 decision by the IRS was intended to encourage relatively healthy banks to acquire banks in danger of failing during some of the darkest days of the financial crisis, according to tax consultant Robert Willens.

Wells Fargo certainly appears to have gotten the message. On Oct. 3, 2008, just three days after the IRS relaxed its rules, Wells Fargo topped an earlier bid Citigroup(C_) had made on Sept. 29 --the day before the rule change -- announcing it would pay $15.1 billion for Wachovia. (The deal closed at the start of 2009 and ended up costing about $12.7 billion, according to Reuters.)

Willens says Wells Fargo's entire $17.96 billion in tax breaks could easily have come from the Wachovia deal -- adding up to considerably more than what Wells Fargo paid to acquire the bank.

The IRS rule change allowed Wells Fargo to use $60 billion in losses on Wachovia's books to shelter its own income, according to Willens. Ordinarily, Wells Fargo would only have been allowed to offset $1 billion per year of taxable income with losses from Wachovia. The difference, Willens estimates, adds up to roughly $20 billion in tax savings for Wells Fargo.

"It was widely believed that that was one of the motivators for Wells Fargo agreeing to make this acquisition -- the fact that they knew that they would be able to use those built-in losses to shelter as much income as they wanted to," Willens says.

Even leaving aside the unusual move by the IRS, Wells Fargo is "one of the most active companies in entering into tax shelters," Willens says.

A Wells Fargo spokesman disputed this characterization in an emailed statement to TheStreet.

According to the statement, the CTJ report "takes data out of context to advance an agenda. The truth is that over the past 10 years Wells Fargo has paid more than $30 billion in income taxes to federal and state authorities and billions more in other taxes, and it fulfills all tax obligations. The years cited by the study were unusual for Wells Fargo, as results included significant losses as a consequence of its acquisition of Wachovia, which when realized reduced Wells Fargo's taxable income."

The statement goes on to say that "a substantial portion of the Wachovia losses had been realized by the end of 2010, and based on results for the first three quarters 2011, Wells Fargo expects to pay significant income taxes for 2011."

Wells Fargo's Wachovia acquisition is just one example of the underappreciated role tax loopholes have played in helping U.S. companies recover from the 2008 crisis. Particularly noteworthy is General Motors(GM_), which got a big tax benefit from its purchase of Americredit last year.

That deal also generated a bit of controversy when it was announced in July of last year, with Senator Chuck Grassley (R, Iowa) wondering why GM was making a $3.5 billion acquisition before it had repaid bail out money to taxpayers and calling for an investigation.

The acquisition closed about three months after it was announced, though an audit of the tax benefits to GM by TARP Inspector General Neil Barofsky was underway when Barofsky stepped down from that post in March of this year. The current status of the audit could not be learned in time for publication of this article.

-- Written by Dan Freed in New York.

(Original Post)

by SCOTT SAXON

November 10, 2011

No doubt, the average person has slept better knowing that U.S. bailouts helped calm the waters stirred by American bankers flatulating in their own gilded tubs. If nothing else, the short-lived restabilizing was a convincing case for the importance of paying one’s taxes. Alas, a review of corporate tax-dodgers found at least five of the banks boosted by government monies—having already proven their disregard for fiscal responsibility and the greater good—skipped out on paying taxes altogether between 2008 and 2010.

A joint publication of Citizens for Tax Justice and the Institute on Taxation and Economic Policy, the study of 280 leading U.S. corporations revealed that five TARP beneficiaries, including Wells Fargo and the parasites over at Goldman Sachs, avoided paying the government its tribute for at least one of the three years reviewed, despite enjoying healthy profits. Wells Fargo, the most prof­itable of the lot, reduced its 2009 tax bill from $18-billion to a more palatable nothing. A statement from Wells Fargo alleged the review took “data out of context to advance an agenda,” and insisted they do fulfill all tax obligations—a stance mimicked by the three banks that bothered responding to requests for comment.

(Original Post)

by Karl Bode Thursday 10-Nov-2011

Two non profits, the Citizens for Tax Justice and the Institute on Taxation and Economic Policy, are circulating a new study named Corporate Taxpayers & Corporate Tax Dodgers (pdf) which names and shames corporations that are dodging taxes. The study examines financial reports from 280 profitable from the Fortune 500 between 2008 thorugh 2010. Of those companies, 78 paid no federal income tax in at least one of the last three years and 30 companies paid no taxes during the entire period.

Many of the companies actually wound up getting money back from the government using an endless series of loopholes. Wells Fargo tops the list overall in terms of government subsidies, getting nearly $18 billion in tax breaks over the last three years. AT&T and Verizon are in second and third place, respectively.

The report is particularly tough on Verizon, noting the company hasn't paid a cent in taxes in the last three years. As you might imagine, Verizon disagrees with the study results, and is sending this statement out to the press:

Verizon paid out $1.79 billion in taxes over 2008-2010, and reported earnings of $5.25 billion over this same period. In addition, Verizon has annually invested $16.5 billion in technology infrastructure. This investment has created and sustained jobs, so U.S. economic development policy allows for the payment of some taxes to be deferred. The CTJ treats deferred taxes as non-existent, it does not account for the $1.79 billion in taxes Verizon paid out over the past three years despite deferrals, and it incorrectly calculates earnings for Verizon to include income belonging to Vodafone, Verizon's partner in Verizon Wireless.

Verizon's arguing that deferred taxes (which can in some cases be perpetually deferred) still count as taxes paid. Of course Verizon also gets ample subsidies as well, which also offset any taxes paid -- and are about to get billions more in subsidies courtesy of new "reform" of the Universal Service Fund. There is really no debate that Verizon, AT&T and Comcast have lobbied their way to immense and borderline absurd subsidy and tax break benefits on the state and federal levels -- often for doing absolutely nothing.

Verizon has been using Reverse Morris Trusts to offload unwanted networks to small telcos with some disastrous effects. While the deals go poorly for acquiring companies, Verizon has offloaded mountains of debt and obtained huge tax breaks using the sophisticated financial maneuver. On the state level Verizon gets oodles of subsidies and tax breaks as well. For example, the company for generations didn't pay property tax in Massachusetts until a 1915 law, designed to help speed up phone service deployment, was recently shelved. Of course when the state stated they'd remove the law, Verizon repeatedly threatened to hold back infrastructure upgrades (Boston currently still doesn't have FiOS).

(Original Post)

By Matthew Hendley Thu., Nov. 10 2011 at 5:54 PM

NextEra Energy -- which owns Florida Power & Light Co. -- ain't too happy about being placed on a list of "corporate tax dodgers," which we wrote about earlier today.

A group that calls itself Citizens for Tax Justice issued the report evaluating 280 companies nationwide and named 78 of them that paid zero or less federal income taxes for at least one year between 2008 and 2010.

FPL called us to make it clear that they pay taxes out the ass.

Sure, they enjoyed a negative effective tax rate for a few years, but Neil Nissan from FPL tells us that the report is misleading and that FPL is actually "the largest taxpayer in the entire state of Florida."

"FPL alone paid around a billion dollars in taxes to state and local governments in Florida in 2010," he says.

The statistics in the report weren't disputed -- the company didn't pay federal income taxes in those years -- but it's the implication that FPL is a "corporate tax dodger" that doesn't sit well with them.

"Federal tax law allows businesses to deduct from their income taxes a percentage of the cost of a qualifying property in the year that it is put into service," Nissan says. "Because NextEra Energy invested billions of dollars in qualifying infrastructure, the net result was a negative federal tax rate in 2008-2010."

The argument from FPL, therefore, is that the so-called "loopholes" or deductions that deviate from the straight 35-percent federal tax are the company's way to invest during crappy economic times and create some jobs.

You may recall that this exact thing has been an issue with General Electric -- paying "zero taxes" -- which has been dumped on by a whole ton of people.

Whether you like it or you don't, everyone's power bill is still going up by about $2.50 a month next year.

(Original Post)

Forty years ago, Western New York voters sent a seemingly nice California football star named Jack Kemp to Congress, where he helped Ronald Reagan destroy the social contract, empower the financial services industry, and perfect a cynical politics of racial code words that equated social insurance with handouts to chaotic, fornicating ghetto-dwellers, all to mask a money-grab for oil companies, defense contractors, and any other outfit that can intimidate witless local politicians into agreeing to call such theft “economic development.”

But four decades after putting the happy face on this historical calamity, Western New York voters awakened to the impact of Kemp-Reagan economic royalism by rejecting its newest iteration in the person of Jane Corwin, choosing instead Kathy Hochul, an unapologetic advocate for government. Hochul is the anti-Kemp: She does not endlessly repeat a phrase from a Cliff Notes version of a cranky Austrian economist. She does not offer a single policy nostrum for all policy challenges, as did Jack Kemp when he said that tax cuts could heal the wounds in Northern Ireland. Hochul got elected by bravely calling for ending the special tax treatment of bumptious millionaires who live in exurban cul-de-sacs, wear over-large jewelry, and order takeout from the country club. Jack Kemp and his contemporary epigones refer to those people as “job creators.” Western New Yorkers who voted for Kathy Hochul, in a congressional district that was Republican since Lincoln, know that they are not.

This week, Western New York voters sent that message again. This week, Western New York voters are once again a national vanguard as we were, sadly, in 1972. The message hasn’t quite gelled, but so far we know that the elderly, the Boomers, the moderate-income households in first-ring suburbs, and a solid majority of young voters once again rejected anti-government rhetoric and chose to focus on government as a provider of services that also happens to require the payment of taxes. And voters here, after decades in their sprawling, shrinking fantasy-land of not-getting-richer, have figured out that even those services that Republicans deride as the province of the poor are for them, too—because so many people who were never supposed to be poor recognize that they actually, now, are.

Mark Poloncarz ran as a cautious manager with a dour but not sour manner. His candidacy had little life, however, until the incumbent Republican claimed—against readily available evidence to the contrary—that his superior business experience before he took office was enabling him to create jobs in the here and now. The Democrat and his union allies were effective in using official statistics to show that the Republican’s bizarre and baseless claim was, well, bizarre and baseless. The ads said that there are 13,000 fewer jobs in Erie County since 2008. (The Bureau of Labor Statistics says that there are more like 19,000 fewer jobs here than there were three years ago.) Voters who were polled last summer didn’t actually like the Republican incumbent, but they thought he was doing a good job. But once the Republican claimed that night was day, and then went on to say that sour was sweet—that the economy is on the uptick, with a lower unemployment rate than anywhere else—voters started to become the political equivalent of the little boy at the parade of the Emperor’s New Clothes. Once Collins made that claim in September and again in October, the regional experience of great and widespread economic distress became, for the second time in six months, a political fact.

Facts alone are never enough: They have to be personalized. This column has cited the Food Stamps upsurge in Erie County, which in 2008 went to just over 102,000 people, but today in 2011 go to over 143,000. We have cited the statistics on household income here, where more than 72 percent of the 410,000 households in Erie County report annual incomes of under $49,000, and only a tiny sliver—less than one percent—have incomes above $200,000. The Occupy movement does a great job reminding the people who witness their demonstration that there is the 99 percent, and that we are different from the one percent. But for three and a half years, the Republican who used the phrase “like a business” in every public utterance looked like an easy re-elect. Only when Collins told a job-hungry area that he was creating jobs did the middle class here awaken from its Jack Kemp slumber.

Will Democrats be Democrats now?

The night that Poloncarz won, Ohio voters resoundingly rejected a ballot measure that would have further reduced the collective bargaining rights of public employees. Polls collected by Anzalone Liszt Research, one of President Obama’s consultants, continue to show broad national support for restoring tax rates on high-income individuals at least to the levels in place during Bill Clinton’s presidency. A new study by Bob McIntyre at Citizens for Tax Justice shows, as his study in 1985 showed, that the largest and most profitable US corporations don’t pay taxes at the 35 percent nominal corporate income tax rate that Republicans say is stifling American business; instead, McIntyre shows that the nominal corporate income tax rate is a loophole-ridden fiction, and that the 300 biggest corporations don’t pay any corporate income taxes at all!

Harvard-trained economics professor Jeffrey Sachs, in his hopeful but politically naïve new book The Price of Civilization, says American elites must once again accept what even iconic free-market icons Milton Friedman and Friedrich Hayek accepted—that there is a role for government in the economy, that “public goods” include not only roads and bridges but also a hand up for the unlucky and for the poor. What he imagines is that we will have a new aristocracy step forward, led by somebody like Michael Bloomberg, who can grab the “vital center,” and end corporate welfare, and end rule by the egregious nouveaux riches who flash their dough around, condescend to the middle class, and sneer at the poor from Spaulding Lake.

Yes. And giant lobsters will soon play cards on top of a downtown hotel, just as humor columnist Dave Barry said they would.

The sad political fact is that places like Spaulding Lake exist and keep producing Republican candidates, because suburban cul-de-sacs are full of people who look at you funny when you cite Professor Sachs’s call for “civic virtue” or “public purpose,” and who giggle when you use a word like “fairness,” and roll their eyes when you, or the earnest Sachs, say “sustainability.”

The trouble with the message that Western New York has sent to America this year is that the consultants who shape campaigns are still advising candidates that they have to sound like cul-de-sac favorites Jack Kemp and Ronald Reagan rather than like Theodore Roosevelt or Bobby Kennedy. The genuine aristocrat Roosevelt warned against “malefactors of great wealth.” The aristocratic, Aeschylus-quoting Kennedy warned against soulless materialism.

We are still forming our next political paradigm. Perhaps there is a Bloomberg who can become the philosopher-king by out-spending, out-messaging, and out-organizing the corporations who rent consultant-thugs to run Republican campaigns. But Republicans have been winning Polonia for a long, long time—since at least Richard Nixon’s day. The cul-de-sac crowd defeated civic virtue and public purpose for many years with Cheektowaga’s racial anxieties. In Nixon’s day, Republicans amplified the brand-new tensions of the sexual revolution, equating anti-Vietnam protesters with the betrayed Poland at Yalta, and blaming unions for the massive deindustrialization that made the Great Lakes industrial zone into the Rust Belt.

That technique might have worked again, had the Republicans in Erie County fielded cannier, more sensitive, less self-satisfied candidates. The Republicans here, in 2011, didn’t. Does that mean that the Democrats understand what FDR and RFK were talking about? Will we ever have an aristocrat, or even a person of aristocratic outlook, campaign on what Sachs calls “the price of civilization”? Perhaps. But we’ll only get to that stage if Western New York’s 2011 economic realism and class self-consciousness reshapes American politics as effectively as Western New York’s 1972 status anxiety, racism, and manipulability shaped it.

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

(Original Post)

Steve Forbes first made it fashionable. Now, some Republican presidential candidates endorse it. Even Rep. Paul Ryan advocates a version of it. I am talking about the flat tax.

Sounds pretty crazy, right? Actually, not at all, and Democrats who lament that wealthy individuals and corporations don't pay their fair share of taxes ought to get on board.

Warren Buffett famously proclaimed that he is paying income taxes at a lower rate than his secretary. In 2009, Forbes reported that the wealthiest 400 people in America paid an effective tax rate of only 17%. Likewise, the left-leaning Citizens for Tax Justice just released a study revealing that 280 of the largest publicly traded companies in the country incurred taxes equal to 18.5% of their profits during the past three years. Bear in mind that the maximum tax rate for both individuals and corporations is 35%.

What gives? The short answer is that interest groups continuously lobby Congress to insert tax breaks here or there, while shifting the cost to someone else. Pretty soon, the law bulges with tens of thousands of narrow provisions and exceptions that favor the well-connected. Our so-called progressive tax system has become a mirage.

A flat tax would rid us of multiple tax brackets and, more important, myriad "carrot and stick" provisions that now plague our system. Although Democrats cringe at being associated with Perry, et al, even a majority of President Barack Obama's own deficit reduction commission - Democrats and Republicans alike - supported the concept of a flatter, simpler tax with few or no deductions.

Apologists for the status quo aver that complexity can't be helped. They argue that since human transactions are complex, the tax rules governing those transactions must be, too. That's a cop-out. On rare occasion, Congress has demonstrated that tax laws can be dramatically simplified (see the 1986 Tax Act), and it could happen again.

A flat rate could be set to raise whatever is deemed to be the appropriate amount of income. And it would be fair because those who earn more would pay proportionately more. The exotic write-offs that their advisers find for them to drive down their effective tax rates would no longer exist.

As for the middle class, why would they care if, say, the mortgage interest deduction were curtailed, provided that their tax rate was adjusted accordingly? To the contrary, almost all would applaud getting to the bottom line of what they owe in taxes with a lot less gnashing of the teeth.

Corporations, too, would benefit from not having to devote inordinate resources to just preparing tax returns.

Aside from these pluses, a flat tax, with its simplicity and transparency, would engender more respect for our revenue system. That, in turn, would sharply reduce the level of tax noncompliance the government now encounters. Finally, a flat tax could also serve as a model for the states, including Wisconsin, that generally mimic the federal tax scheme.

True, transitioning to a flat tax would be a painful ordeal, much like it is for a heroin addict giving up his habit. But the system is broken; we can't afford to wait much longer to fix it.

Jay Miller of Whitefish Bay is a tax attorney. Email jay.miller7799@yahoo.com

(Original Post)

by Brad Johnson

9 Nov 2011 4:24 PM

Cross-posted from ThinkProgress Green.

Chart.Tax breaks and subsidies for energy companies have gotten so extreme that dozens of top companies have made billions in profits while having negative taxes -- actually receiving taxpayer welfare instead of paying anything to the federal treasury. An analysis by Citizens for Tax Justice and the Institute on Taxation and Economic Policy found dozens of companies that had a negative tax balance [PDF] between 2008 and 2010, while making billions in profits. Because of tax breaks and questionable tax dodging, these companies reported higher post-tax profits than pretax profits, often actually getting checks from the Internal Revenue Service.

During these years of negative taxation, 32 companies in the fossil-fuel industry -- from Exxon Mobil and Peabody Energy to ConEd and PG&E -- transformed a tax responsibility of $17.3 billion on $49.4 billion in pretax profits into tax benefits of $6.5 billion, a $24 billion windfall.

The official corporate tax rate in the United States is 35 percent, but subsidies and dodges make that figure meaningless. The overall tax rate for top utility companies from 2008 to 2010 was 3.7 percent [PDF], the report found. Companies in the oil, gas, and pipelines sector paid 15.7 percent. The report's authors comment:

    It seems rather odd, not to mention highly wasteful, that the industries with the largest subsidies (driven in part by their large share of total profits) are ones that would seem to need them least.

    Regulated utilities, for example, make investment decisions in concert with their regulators based on the needs of the communities they serve. Oil and gas companies are so profitable that even President George W. Bush said they did not need tax breaks.

D.C.-area utility Pepco had the highest negative tax rate of the 280 companies surveyed in the report, with negative taxes of $508 billion on $882 pretax profits, a whopping negative 57 percent effective tax rate. Pepco chairman, president, and CEO Joe Rigby made $3.6 million in 2010.

The 99% is subsidizing welfare for the 1%. First the corporations profit from the utility bills and gas prices that take a disproportionate chunk of working families' budgets, then they get another cut from a corporate-friendly tax code. The lion's share of the profits are kept for the benefit of overpaid executives and superwealthy shareholders. Furthermore, these corporations are profiting from the extraction and burning of fossil fuels, giving them the triple subsidy of the long-term costs of pollution being paid primarily by children and the elderly.

The companies that paid no tax for at least one year between 2008 and 2010 are the utilities Ameren, American Electric Power, CenterPoint Energy, CMS Energy, Consolidated Edison, DTE Energy, Duke Energy, Entergy, FirstEnergy, Integrys Energy Group, NextEra Energy, NiSource, Pepco, PG&E, PPL, Progress Energy, Sempra Energy, Wisconsin Energy and Xcel Energy; and the fossil-fuel extraction and services companies Apache, Atmos Energy, Chesapeake Energy, El Paso, Exxon Mobil, FMC Technologies, Halliburton, Holly, Marathon Oil, Occidental Petroleum, Peabody Energy, and Scana.
Brad Johnson is the editor for ThinkProgress Green at the Center for American Progress Action Fund. Brad holds a bachelor's degree in math and physics from Amherst College and master's degree in geosciences from the Massachusetts Institute of Technology. He is the co-author of Technomanifestos, a history of the Information Revolution, and the founder of HillHeat.com, which covers climate policy in our nation's capital.

(Original Post)

by Marian Wright Edelman
November 09, 2011

Picture an iceberg. Many children know the danger from the “Titanic Song” they learn in school or summer camp. One verse goes like this: “It was off the coast of England not very far from shore, when the rich refused to associate with the poor. So they sent them down below, where they were the first to go. It was sad when that great ship went down. Oh it was sad, so sad. It was sad, too bad. It was sad when the great ship went down . . . husbands and wives, little children lost their lives—it was sad when the great ship went down.”
Some days it feels like America may be speeding towards that iceberg. Every day there is more disturbing evidence of the growing income and wealth gaps between rich and poor. Recent poverty data shows the number of people in extreme poverty, defined as a family of four living on less than $30 a day — one in 15 Americans — has reached a 35-year high. At the same time the gap between CEO and average worker pay rose dramatically from 263-to-1 to 325-to-1 last year. Twenty-five of the 100 highest paid CEOs last year took home more in pay than their company paid in 2010 federal income taxes.

A new study by Citizens for Tax Justice reported that 30 companies paid no federal income taxes at all for the last three years and that the 280 biggest publicly traded American corporations on average paid federal income tax equal to 18.5 percent of their profits during the last three years—about half of the full corporate tax rate of 35 percent. This tax payment rate was lower than in many industrialized countries. In fact, the report found two-thirds of American companies with significant profits overseas actually paid more in taxes to foreign governments than to the U.S. government.

As the Supercommittee struggles to make difficult decisions in the coming weeks to reduce the budget deficit, one of the proposals they are considering is reducing the corporate tax rate. Corporations are pushing for a cut in their official rate, claiming they are at a disadvantage in the global marketplace. Their evidence is not so clear. We should all be looking closely at the important choices the Supercommittee could and should be making to ensure everyone—including the rich and powerful—contributes their fair share. It would be deeply disturbing if all or any of the Republicans on the Supercommittee continue to refuse to put revenue on the table and insist on a cut-only approach to deficit reduction at the expense of children and the poor who did not create our fiscal crisis.
By the end of last year, American corporations reaped profits of more than $1.5 trillion. Each minute, $195,967 are lost to corporate tax loopholes. Every hour, corporate tax breaks cost the U.S. government about $11.8 million. If Congress were to balance corporate profits against critical child needs, just one hour of revenue generated by closing corporate tax loopholes could pay for:
Medicaid health benefits for 4,800 poor children for a year, or  Women, Infants, and Children [WIC] nutritional benefits for  23,600 women and children for a year, or Supplemental Nutrition Assistance Program [SNAP] benefits providing food for 9,700 children and adults for a year at a time when hunger affects 1 in 6 Americans, orPell Grants for 3,100 low-income students to attend college.

Corporate excess looks a lot like General Electric’s balance sheet at the end of 2010. Huge pretax profits of $5.1 billion filtered through corporate tax loopholes meant GE paid no federal income taxes. To add insult to injury, had GE paid the full 35 percent corporate tax rate, it would have paid $1.8 billion in federal income taxes. Add this to GE’s reported $3.3 billion in tax benefits and you get a grand total of more than $5 billion of federal tax breaks for the year. This lost revenue could have been used to fund Head Start for an additional 670,000 preschoolers, creating at least 67,000 new jobs in the process.

Budget cuts already enacted on the federal, state, and local levels have harmed children and their families, especially low-income families hit hardest by the recession. Education cuts have led at least 292 school districts to cut back to a four day school week for children when more than 60 percent of our children in all racial and income groups cannot read or do math at grade level in the 4th, 8th, and 12th grades. According to the Washington Post the number of school districts using a four day school week has more than doubled in two years. Arizona, Florida, Georgia, Illinois, Massachusetts, North Carolina, Texas and other states have cut funding—including critical early childhood education programs that help children get ready for school—to help close their budget shortfalls and adversely affecting hundreds of thousands of at-risk children.

What other choices could citizens demand our political leaders make? If they closed tax loopholes for the oil and gas industry it would generate at least $45 billion over ten years. About one year of that money could fund slots for over half a million infants and toddlers in Early Head Start, a program that currently reaches only four percent of eligible children during their period of crucial brain development. Expanding Early Head Start would create almost 150,000 new teaching positions.

The tip of the iceberg is the budget deficit; the failure to invest in our human capital deficit — our children who are the poorest age group in America — is the rest of the iceberg that will sink America’s ship of state. This is the critical time to raise our collective voices and tell members of the Supercommittee, Congress, and the White House we want them to cut and not increase corporate tax breaks and make sure rich corporations and rich CEOs pay their fair share. We must not balance the budget on the backs of our babies who need health care and nutrition, quality early childhood development and education, an affordable college education, and good jobs to build a strong America and rescue America’s vanishing dream. Children did not cause the budget deficit and they must not be sacrificed to help solve it.

(Original Post)

By Matthew Lasar

A scathing new report on corporate tax breaks is out, and telcos and media companies figure prominently. Authored by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, the survey focuses on 280 corporations that it concludes paid, on average, far less than the 35 percent corporate income tax tithe.

"Over the three years covered by our study, the average effective tax rate for all 280 companies was only 18.5 percent," charges Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010. "For the past two years, 2009 and 2010, the effective tax rate for all 280 companies averaged only 17.3 percent, less than half of the statutory 35 percent rate."

AT&T, Comcast, and Verizon Communications appear in the study. The last company places number 19 in the survey's list titled "30 Corporations Paying No Total Income Tax in 2008-2010."

Below is an excerpt from that roster, highlighting the top two cited corporations, followed by Verizon at 19th place. Yes, those are minus signs next to those 2008 through 2010 tax estimates.

Company ($-millions)     08-10 Profit     08-10 Tax     08-10 Rate
1. Pepco Holdings     $882     $-508     -57.6%
2. General Electric     10,460     -4,737     -45.3%
19. Verizon     32,518     -951     -2.9%

"These companies generated so many excess tax breaks that they reported negative taxes (often receiving outright tax rebate checks from the US Treasury), totaling $21.8 billion," the report charges. "These companies' 'negative tax rates' mean that they made more after taxes than before taxes in those no-tax years."

Verizon is hardly up there with General Electric, which the report says generated an eye-popping negative 45.3 percent tax rate from 2008 through 2010, but it identifies the wireless giant's estimated minus 2.9 percent largesse as part of a general corporate trend.

The survey also includes a list titled "25 Companies with the Largest Total Tax Subsidies in 2008-10." According to that lineup, AT&T generated almost $14.5 billion, Verizon $12.3 billion, and Comcast $2.12 billion in tax breaks during those years. The estimated total tax breakage for all the companies is $114.8 billion.
We pay our share

According to the compilation, Verizon deployed a combination of depreciation and amortization to win its tax breaks, along with a "reverse Morris trust" (property spin off) transaction that saved it about $1.5 billion in federal and state taxes.

"Over a number of years, the company has deferred approximately $2.0 billion in taxes as the lessor in leveraged leasing transactions of commercial aircraft, power generating facilities, real estate, and other assets unrelated to their core business," the survey adds

We contacted Verizon about these assertions. The company strongly disputes Citizens for Tax Justices' numbers and reasoning. Verizon spokesperson Bob Varettoni called the "union orchestrated" document "deceptive and politically motivated."

Verizon "pays its fair share of taxes," Varettoni responds:

    Verizon paid out $1.79 billion in taxes over 2008-2010, and reported earnings of $5.25 billion over this same period. In addition, Verizon has annually invested $16.5 billion in technology infrastructure. This investment has created and sustained jobs, so U.S. economic development policy allows for the payment of some taxes to be deferred. The CTJ treats deferred taxes as non-existent, it does not account for the $1.79 billion in taxes Verizon paid out over the past three years despite deferrals, and it incorrectly calculates earnings for Verizon to include income belonging to Vodafone, Verizon's partner in Verizon Wireless.

We also contacted AT&T and Comcast. "We don't agree with and can't validate the Citizens for Tax Justice calculations with regard to AT&T's tax subsidies and tax rate," AT&T spokesperson Butler McCall told us, adding that between 2008 and 2010, AT&T "invested more in the United States than any other public company." McCall put the total investments at $57.9 billion—"and we're on track to invest $20 billion for full-year 2011."

The AT&T statement acknowledges that the telco has benefited from bonus depreciation rules that let it deduct more of its capital expenses, "but these rules were put in place by the Congress and the president to spur investment in the US economy, and we've done just that."

AT&T estimates its effective tax at 32.9 percent in 2009 and 48.3 percent in 2008. "In 2010, we had a tax benefit, but this was due to a settlement with the IRS over taxes paid in prior periods," McCall adds. "I'd also note that through the first three quarters of 2010, we recognized an income tax expense of $5.6 billion, for an effective tax rate of 34.1 percent YTD."

Comcast did not reply to our query.
Gaming the system

The CTJ report places the telecommunications sector at an effective corporate tax rate of 8.2 percent from 2008 through 2010. In contrast, the survey calculates the "Industrial machinery" sector's rate at negative 13.5 percent, and the "Computers, office equipment, software, data" sector at a far higher 27.1 percent.

"Only two industries, Retail & Wholesale Trade and Health Care, paid an effective tax rate of 30 percent or more over the full three-year period," the assessment contends.

In general, how do these corporations generate the breaks claimed in this survey? Offshore tax sheltering is one means. Citizens for Tax Justice and the Institute for Taxation and Economic Policy cite three other ways:

Accelerated depreciation: Current tax laws let companies deduct their capital investments much faster than their actual rate of wear and tear. In early 2008 Congress and the Bush administration created a "50% bonus depreciation" provision that allowed for a much higher rate of corporate write off. The Obama administration extended and even expanded the provision.

"These changes to the depreciation rules, on top of the already far too generous depreciation deductions allowed under pre-existing law, certainly did reduce taxes for many of the companies in our study, probably by tens of billions of dollars," CTJ and ITEP assert.

Stock options: Everyone knows that big corporations give their executives stock options—the opportunity to buy company stock at a great price in the future. But these firms can also deduct the difference between what employees pay for the stock and its actual market worth.

Of the report's cited 280 corporations, 185 filed "excess stock-option tax benefits." These saved them $12.3 billion over three years. Apple gleaned $1.5 billion in this manner, the survey estimates.

Industry specific tax breaks: General Electric, which owns 49 percent of NBC Universal, has a financial services branch. A tax break attached to this sort of activity allows companies to "pay no taxes on foreign (or ostensibly foreign) lending and leasing, apparently while deducting the interest expenses of engaging in such activities from their U.S. taxable income." According to the survey, in its 2010 Annual Report GE cited the impending repeal of this provision as one of the "risk factors" it faces.

"If this provision is not extended, we expect our effective tax rate to increase significantly after 2012," the GE annual report notes.
Photograph by Chris

(Original Post)

Wed Nov 9, 2011 4:55PM GMT

According to a recent report by Citizens for Tax Justice (CTJ), the 280 most profitable U.S. corporations sheltered half their profits from taxes between 2008 and 2010.

"These 280 corporations received a total of nearly $224 billion in tax subsidies," said Robert McIntyre, Director at Citizens for Tax Justice and the report's lead author. "This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit."

30 companies average less than zero tax bills in the last three years, 78 had at least one no-tax year.

Financial services received the largest share of all federal tax subsidies over the last three years. More than half the tax subsidies for companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas & pipelines.

U.S. corporations with significant foreign profits paid tax rates to foreign countries that were almost a third higher than what they paid to the IRS on their domestic profits.

FACTS & FIGURES

The U.S. Congress and President Barack Obama approved an $858 billion tax deal in December 2010. Critics said the law would add to the budget deficit. The tax law extended tax rates for all income groups, including the wealthiest top 2 percent. Reuters

The U.S. debt deal reached in August did not include a tax increase on the rich due to the opposition of Republicans in Congress. Reuters

More than half of the total benefit from the tax cuts in 2010 alone will accrue solely to the richest 5 percent of Americans while the middle 20 percent of Americans will reap only 7 percent of the benefit. American Progress

Some economists say extending the tax cuts for the wealthy will cost about $80 billion by the end of 2012. American Progress

ARA/SM/KA

(Original Post)

By Kevin Osborne · November 9th, 2011 · Porkopolis

Even the most ardent political junkie probably missed the news amid all the other reports last week about Ohio Issue 2, Cincinnati Issue 48, the looming City Council elections and the drama over the Occupy protests being busted up across the nation.

While the broadcast TV networks were busy covering Andy Rooney’s death, Kim Kardashian’s divorce and the Royal Couple’s visit to America, they barely mentioned a disturbing study that found 30 of the most profitable U.S. corporations had a “negative tax rate” during the recent three-year period it covered. Those same firms had combined pre-tax profits of $160 billion during that time.

The study also found that 78 of the corporations paid no taxes in at least one of the three years, and that 280 companies shelter at least half of their profits from taxes.

The comprehensive study was conducted by Citizens for Tax Justice and the Institute on Taxation and Economic Policy. It covers the years 2008-2010, and examines data from the companies’ financial reports about their pre-tax U.S. profits and their U.S. federal income taxes.

In all, 280 companies are included in the report, all of which are from the Fortune 500 list.

Those factoids would be surprising enough by themselves, but the study contains more revelations. Chief among them is that the average effective tax rate for all 280 companies in the study over the three-year period was 18.5 percent; for the period 2009-2010 it was just 17.3 percent, far below the statutory corporate rate of 35 percent.

That finding pretty much demolishes the primary argument of the national Republican Party, in its never-ending quest for lower taxes and other perks for Big Business, regardless of the disastrous effect the policy has on local, state and federal governments.

But wait, it gets even more maddening.

The study also found that U.S. corporations with significant foreign profits — totaling 10 percent or more of their total worldwide profits — paid tax rates to foreign nations that were almost one-third higher than they paid to the IRS on their domestic profits. Those nations are mostly free of demagogues like Grover Norquist, Rush Limbaugh and Sarah Palin, or at least their counterparts wield much less clout than here, and politicians realize that companies are expected to contribute their fair share for the common good.
    
What a crazy notion.

And you remember President Eisenhower’s warning about the rise of the Military-Industrial Complex during his farewell address in 1961? Well, it’s here, it’s entrenched and it’s powerful.

The study found that the top 10 defense contractors saw their combined tax rate decline from 19.3 percent in 2008 to a mere 10.6 percent rate in 2010. Outrageous.

During the same three-year period, those 280 companies were given tax subsidies of one form or another totaling $222.7 billion. Incredibly, despite the mess they caused during the financial crisis of 2008, the financial services sector received the largest share of all federal tax subsidies at 16.8 percent.

Keep those figures in mind the next time that some politician wants you to accept cuts to your Social Security or Medicare benefits, instead of raising taxes on the wealthy.

“These 280 corporations received a total of nearly $223 billion in tax subsidies,” said Robert McIntyre, director at Citizens for Tax Justice. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”

Noting that corporations continue to lobby for lower tax rates and an exemption for profits they shift offshore, McIntyre added, “Our study provides proof that too many corporations are already being coddled by our tax system.”

This is the 10th comprehensive review of corporate taxation policies released by the two groups. Their first report, released in 1984, helped lead to the landmark Tax Reform Act of 1986, signed into law in October of that year by President Reagan. It curbed tax shelters for corporations and lowered taxes on lower- and middle-income families.

The 1986 law was created to be tax revenue neutral, as individual taxes were decreased while corporate taxes were increased. Also, it simplified the tax code by reducing the number of tax brackets from 15 levels of income to four levels.

Since then, the two groups have worked diligently to keep Americans informed about the complicated — some would say rigged — federal tax code. During the debate on the effect of President Bush’s proposed tax cuts in early 2001, the GOP-controlled Treasury Department and Congress were discouraged from crunching the numbers about who would benefit the most. According to The New York Times, then-Treasury Secretary Paul O’Neill said that figuring out the benefits of Bush’s plan at various income levels would result only in ‘’a nonsense set of statistics.’’

At that point, Citizens for Tax Justice stepped into the fray and produced a computer model showing that the wealthy would benefit the most, with dire consequences for the rest of us. It led an unsuccessful effort to oppose the cuts. Nevertheless, we know what happened next: When Dubya couldn’t get the 60 votes needed in the Senate to pass the tax cuts, he used the reconciliation process to enact them. The United States went from a projected surplus to a deficit, with the tax cuts costing about $1.35 trillion over 10 years.

Then Bush borrowed about $489 billion from China to pay for the wars he started in Afghanistan and Iraq, rather than raise the tax rate on his affluent cronies. Since then, we’ve had a decade of economic despair, capped by the Great Recession. The United States has seen the widest income disparity develop between wealthy Americans and the rest of us in three decades; while the the top 1 percent of Americans had its largest share of income since 1928, incomes for the other 99 percent stagnated or declined.

As a result, I tend to trust what Citizens for Tax Justice has to say on fiscal matters.

In its current report, the group recommends that Congress consider fixes like reinstating a strong corporate Alternative Minimum Tax; reforming the way multinational corporations allocate their profits between the United States and foreign nations, so that U.S. taxable profits aren’t artificially shifted offshore; and repealing the rule that allows U.S. corporations to “defer” their U.S. taxes on their offshore profits, so there wouldn’t be a tax incentive to shift profits overseas.

Congress and the president, however, seem to have little stomach for these ideas, even though polls show most Americans like them.

“Unfortunately, corporate tax legislation now being promoted by many in Congress seems stuck on the idea that as a group, corporations are now either paying the perfect amount in federal income taxes or are paying too much,” the study concludes.

“Real, revenue-raising corporate tax reform, however, is what most Americans want and what our country needs,” it adds. “Our elected officials should stop kowtowing to the loophole lobbyists and stand up for the vast majority of Americans.”

Left unchecked, such festering inequity eventually is a recipe for disaster. Or violent social change. Let’s begin working to force politicians to deal with the problem now.

(Original Post)

GateHouse News Service

Posted Nov 09, 2011 @ 08:48 AM

Congressional Republicans are slowly coming around to the reality that controlling the deficit will require tax increases. They wouldn't call them tax increases, of course.

The search is now under way for ways to raise revenue without violating - or, at least, appear to not violate - the no-tax pledge that has so hamstrung the GOP.

Said the Capitol Hill newspaper Politico: "It is a sharp departure from the all-spending-cuts rhetoric, as Republicans realize that they have to at least sound like they're willing to deal with both sides of the ledger to pitch a credible deficit deal that might win over a few Democrats." Not to mention convincing the public and the agencies that rate the soundness of U.S. debt.

So far, the Republicans advising the deficit-reduction congressional supercommittee have proposed a grab bag of revenue-generating eliminations of tax subsidies and deductions, fees for government services and programs, and increased Medicare premiums for high-income seniors. The problem with closing loopholes is that there is a huge army of lobbyists dedicated to reopening them.

And there's a question of whether those proposals would make any kind of dent in terms of the $1.2 trillion in cuts the committee is supposed to come up with by Nov. 23. If the panel fails, cuts are to take place automatically across the board beginning in 2013. The Pentagon has already said that would devastate national defense.

The search for a solution has turned the discussion in some quarters back to the 2001 and 2003 Bush tax cuts. New York City Mayor Michael Bloomberg has called for eliminating the tax cuts for the wealthy.

The think tank Citizens for Tax Justice says that extending the tax cuts, due to expire next year, for the wealthiest 5 percent, those making over $176,000 a year, would cost the Treasury $2 trillion over the decade. If that figure were revenue, it would more than make up for the $1.2 trillion the supercommittee is seeking.

The wrangling over preserving tax privileges comes as the Census Bureau, in recalculating its figures, offered a darker view of poverty in the United States. The Census said that 49.1 million Americans, or 16 percent of the population, lived in poverty in 2010, up from the previously estimated 46.2 million. The poverty threshold for a family of four is $24,343.

Grimmer yet was that the new metrics showed a poverty rate of 15.9 percent among those 65 and older, considerably higher than the 9 percent using the old measure.

That came out simultaneously with a USA Today report that exit packages for departing CEOs have routinely begun to top $100 million - $170 million in the case of IBM's outgoing CEO.

The nation looks forward to how Republican hard-liners explain that raising their income taxes 4.9 percent and capital-gains taxes 5 percent, which would void the breaks they got under the Bush cuts, is class warfare. How is it even unfair?

(Original Post)

November 09, 2011
Rick Cohen

Earning $160.3 billion in pretax profit must have been very difficult for 30 companies between 2008 and 2010, because despite their profitability these giant firms were let off the hook that most readers of the NPQ Newswire face: these 30 corporations didn’t pay any federal income tax over that three-year period. Among the 30 were General Electric, Verizon Communications, Pepco, and Boeing. In fact, both Pepco and GE actually have negative tax rates. These are among the findings of a report issued by Citizens for Tax Justice and the Institute on Taxation and Economic Policy titled “Corporate Taxpayers & Corporate Tax Dodgers, 2008–10”.

Corporations are none too happy with the study, debating the findings and pointing to the union connections of CTJ, but sometimes, even for corporations, they might find some uncomfortable truths in research generated by groups linked to the “oppo.” The report examined 280 Fortune 500 corporations that did not show losses for any of the three years in question, and published corporate annual reports to shareholders and 10-K forms provided to the Securities and Exchange Commission with enough information to calculate the firms’ federal tax rates.

Among the 30 companies paying no federal taxes for the entire three-year period were, in addition to those above, PG&E Corporation, American Electric Power, Ryder System, Baxter International, Duke Energy, DuPont, Consolidated Edison, Navistar International, Wells Fargo, Mattel, Honeywell International, and Corning. Thirty-seven companies paid no federal income tax in 2010, the most recent tax year of the study, including Yahoo, Capital One Financial, and International Paper. Overall, for the three-year period, 111 of the 280 (40 percent) paid an effective tax rate of less than 17.5 percent—compared to the top U.S. corporate tax rate of 35 percent. The average rate of the corporations in the study was 18.5 percent. Our favorite is of course General Electric (whose CEO is a special jobs advisor to President Obama), which earned $10.5 billion in pretax profit during the three-year period and had an effective tax rate of negative 45.3 percent.

How did this happen? CNN Money says that “at the root of the problem is a system of inverted incentives that encourages corporations to lobby for special tax breaks”, some of them relatively widespread (and lucrative), such as accelerated depreciation of investments in equipment, some of them industry-specific, such as specific provisions applicable to the corporate-owned utilities. Oddly, despite so many highly profitable corporations paying effective federal taxes well below 35 percent, Republicans in Congress are looking to send a signal to the corporate sector to reduce the tax rate to 25 percent. For those companies paying nothing at all, a reduction from 35 percent to 25 percent as the top corporate tax rate has no meaning.

What does all of this say to the nonprofit sector? Fundamentally, the message to tax-exempt nonprofits is, you are not alone. There exist virtually tax-exempt entities that are highly profitable: mammoth for-profit Fortune 500 corporations. In many cases, these entities have received unbelievable amounts of government subsidy (Wells Fargo, $17.9 billion, AT&T, $14.5 billion, Verizon, $12.3 billion, General Electric, $8.4 billion, etc.). When nonprofits are challenged about their tax impacts (in terms of forgone revenues) and government subsidies, they should realize that nonprofits barely register compared to the billions devoured by the big corporations. Perhaps GE (rather than its foundation) will receive an invitation to join Independent Sector or the Council on Nonprofits as a functioning tax-exempt entity. Or maybe not.—Rick Cohen

(Original Post)

By DAVID KOCIENIEWSKI
Published: November 3, 2011

Warren E. Buffett, take note. It is not just a few wealthy individuals paying unusually low taxes to the federal government. Corporate America is not far behind.

A study said Boeing was among American firms that had no federal tax liability for three years.
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A comprehensive study released on Thursday found that 280 of the biggest publicly traded American companies faced federal income tax bills equal to 18.5 percent of their profits during the last three years — little more than half the official corporate rate of 35 percent and lower than their competitors in many industrialized countries.

Mr. Buffett, the billionaire investor, has said that the tax code is unfair, allowing him to pay just 17 percent in federal taxes last year, about half the percentage his secretary paid.

The corporate study, prepared by the left-leaning advocacy group Citizens for Tax Justice, examined the regulatory filings of the companies to compute each year’s current federal taxes. Some of the companies disputed the findings, saying that the study understated their tax payments by omitting deferred taxes that they may pay in future years.

Using information from the companies’ own corporate filings, however, the study concluded that a quarter of the 280 corporations owed less than 10 percent of profits in federal income taxes and 30 companies had no federal tax liability for the entire three-year period.

The report is being released as corporations are pushing for a cut in their official tax rate, saying the current system puts American companies at a disadvantage with competitors abroad and encourages them to shift jobs and investments overseas.

The Congressional supercommittee charged with cutting the budget deficit is also considering proposals to revamp the tax system, simplifying the corporate structure and possibly lowering corporate rates.

The study said that the shelters and loopholes in the current tax system rewarded companies that aggressively avoided taxes at the expense of those that did not. A quarter of the companies in the study had a federal tax bill of 35 percent of their profits, while a similar number had an effective rate of less than 10 percent.

“Companies that are paying their fair share ought to demand that the tax-dodging companies pay their fair share too,” said Robert S. McIntyre, the author of study. “So should the public, which is subsidizing them in terms of increased federal debt.”

The report is based on data gleaned from the companies’ regulatory filings, which can be different from their corporate tax returns. Even in a year when a company claims an overall tax benefit, it may pay some cash taxes while accumulating credits that can be redeemed in future years. But because most corporations do not release their tax returns, these corporate regulatory filings offer the best publicly available gauge of what companies pay and what strategies they use to reduce their tax bills.

Among the companies that the study said escaped a liability for all three years were Boeing and Ryder System, whose chief financial officer, Art A. Garcia, said the company had benefited from the additional depreciation intended to stimulate the economy.

Boeing officials said they, too, had paid  some federal taxes, but would not say how much. They said they had lowered their rate by taking advantage of tax breaks intended to encourage hiring. Chaz Bickers, a company spokesman, said Boeing hired 9,000 American workers this year

Also on the list was General Electric, which has come under close scrutiny since The New York Times reported earlier this year that the company had recorded $5.1 billion in American profits in 2010, but claimed a federal income tax benefit of $3.2 billion in its regulatory filing.

“The report is inaccurate and distorted,” said Kenneth Juarez, a G.E. spokesman. He said G.E. paid “billions of dollars in taxes in the United States over the last decade,” but would not say what part was federal income taxes.

The company that recorded the biggest reduction in taxes was Wells Fargo Bank, which is a large holding of Mr. Buffett’s company, Berkshire Hathaway. The banking company reported a total of $49 billion in profits in 2008 through 2010, yet received a tax benefit of $651 million. Ancel Martinez, a spokesman for Wells Fargo, said much of the tax savings came from write-offs obtained after its 2008 purchase of Wachovia, which incurred big losses during the financial crisis.

American corporations are paying a smaller share of taxes than in previous decades. They paid a total of $191 billion in federal income taxes in 2010, the Internal Revenue Service said, representing about 1.3 percent of the nation’s gross domestic product. That is down from about 6 percent during the 1950s (although some of the decline is because a smaller percentage of businesses now file as corporations).

Despite the decline in corporate tax rates since then, business advocates say the nation needs to lower its top rate further to encourage hiring and investment. Grover Norquist, head of Americans for Tax Reform, said that the United States system was not competitive because it taxed income earned around the world, instead of just in this country.

“There are still Bolsheviks who recognize that we need to bring the rates down,” he said.

But the Citizens for Tax Justice study found that two-thirds of  the American companies with significant profits overseas actually paid more in taxes to foreign governments than they did in the United States. Rather than lowering the corporate rate more, the study said, the federal government should end the subsidies and shelters that favor companies that game the system.

“Closing the loopholes will have real benefits, including a fairer tax system, reduced federal budget deficits and more resources to improve our roads, bridges and school — things that are really important for economic development here in the United States," the report said.

(Original Post)

By Marisa Taylor

(This story has been updated to include a response from General Electric.)

General Electric made big waves earlier in the year when The New York Times reported that the company paid no taxes in the U.S. in 2010, and in fact claimed a tax benefit of $3.2 billion.

How could a company that made $14.2 billion in profits worldwide avoid paying taxes? G.E. wasn’t the only one, according to a new report released on Thursday by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy. The two advocacy groups, which could be fairly described as left-leaning, claim that among the 280 most profitable U.S. companies, 30 of them paid “less than zero” in taxes in the last three years, and 78 of the companies didn’t pay any federal income tax in at least one of the last three years.

The report comes as a bipartisan committee of six Republicans and six Democrats struggles to reach an agreement over how to cut the U.S. budget deficit. The so-called "supercommittee" has to come up with a deal by Nov. 23 to save at least $1.2 trillion over 10 years, or risk tripping automatic budget cuts that would slice deeply into spending for defense and for domestic programs. So far, the panel remains divided over the issue of whether to raise taxes; Democrats insist on raising revenues and Republicans are against any increases.  

Hey middle class, tell us about yourselves

While the statutory tax rate for corporations in the U.S. is 35 percent, the report says companies use legal tax loopholes and move business offshore to evade taxes. As a result, the average tax rate for all 280 companies was 18.5 percent over the last three years. Only 71 of the 280 companies, or about 25 percent, paid more than 30 percent in taxes over the three years, with an average tax rate of 32.3 percent.

Power company Pepco Holdings apparently had the lowest tax rate, at negative 57.6 percent. The report said some companies came up with so many tax breaks that their taxes were in effect "negative," and they even received tax rebate checks from the U.S. Treasury. It explained that "negative tax rates" mean that the company made more after taxes than before taxes.

Wells Fargo received the most in tax subsidies among all 280 companies, raking in nearly $18 billion in tax breaks in the last three years. All 280 companies took in a combined $222.7 billion in tax subsidies over the last three years.
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GE, for one, took issue with the study, as well as with the New York Times story published in March.

A GE spokesman said that in both cases the authors are relying on "book accounting" reported to federal securities regulators that may not always reflect actual taxes paid.

"The report is inaccurate and distorted," said Gary Sheffer, GE's vice president for corporate communications. "GE paid billions of dollars in taxes in the United States over the last decade, and we expect our overall tax rate will be approximately 30 percent in 2011."

With respect to industry, the report found that industrial machinery companies had the lowest effective tax rate within the last three years, with an average federal income tax rate of negative 13.5 percent. And 16.8 percent of all federal tax subsidies went to financial services, the largest share of any industry; financial services, along with utilities, telecom and oil and gas were the four industries that received more than half of the corporate tax subsidies.

“This is not an ‘anti-business’ report,” the authors of the study wrote. “On the contrary, we, like most Americans, want our businesses to do well…. But we also need a much better balance when it comes to taxes. Just as workers pay their fair share of taxes on their earnings, so should successful businesses pay their fair share on their success.

"But today corporate tax loopholes are so out of control that most Americans can rightfully complain, ‘I pay more federal income taxes than General Electric, Boeing, DuPont, Wells Fargo, Verizon, etc., etc., all put together.’”

(Original Post)

November 08, 2011|By Mark K. Matthews, Washington Bureau

WASHINGTON — In a rare show of solidarity, all 27 members of Congress from Florida — 20 Republicans and seven Democrats — have united against a plan proposed by the Internal Revenue Service to collect details about foreigners who secretly deposit money in U.S banks.

Why unanimity on such an arcane topic? It's about $100billion that they fear may leave Florida — and the country.

That's the top estimate of how much foreign cash has been deposited in Florida banks — nearly $1 of every $4 held by these institutions. And if the IRS regulation prompts mass withdrawals, bankers say, that will affect banks' abilities to make loans to Floridians.

[The IRS rule] will put Americans out of work and it will force dollars out of U.S. financial institutions and into foreign financial institutions," said a letter signed by all 25 Florida House members earlier this year.

Added U.S. Rep. Bill Posey, a leader in the fight: "I can't think of any benefit we would get from this regulation."

The Rockledge Republican wants to maintain the status quo, which allows foreigners to deposit cash in U.S banks without disclosing their names or paying taxes on the interest.

But administration officials and their supporters say that some of these depositors — no one knows how many — use the U.S. as a tax haven, much as tax evaders used secret Swiss bank accounts that in recent years have been opened up because of international pressure. If the new rule takes effect, they argue, the only losers will be bankers who cater to tax evaders.

"Only people who are really cheating — those are the only ones who would lose their money," said Rebecca Wilkins of Citizens for Tax Justice, a left-leaning watchdog group.

Posey and U.S. Sen. Marco Rubio, R-Fla., have filed bills to block the IRS rule — although neither measure has advanced far. (U.S. Sen. Bill Nelson, D-Fla., is a co-sponsor of the Rubio bill.)

Meanwhile, the IRS could finalize the rule at any time, according to congressional and industry sources; the IRS did not respond to questions about when that may happen.

The Treasury Department has argued in letters to Congress that knowing more about foreign deposits in U.S. banks would enable Washington to trade information with other countries, which would help the agency to hunt down U.S. tax cheats costing the U.S. as much as $100billion a year.

"A jurisdiction's willingness to share information with the United States to combat offshore tax evasion depends on our willingness and ability to reciprocate and exchange information," wrote Michael Mundaca, a top Treasury Department official no longer with the agency, in March.

But Posey and others counter that any money gained from catching U.S. tax evaders would pale next to the potential flight of foreign deposits from American banks. That's particularly true in Florida, given the state's close ties to Latin America and South America.

Alex Sanchez, president of the Florida Bankers Association, estimated the state's banks hold $60billion to $100billion in foreign deposits, out of total deposits of about $412billion.

"They [foreign deposits] are scattered across the state but mostly centered in Miami, South Florida and Central Florida," said Sanchez, noting that the loss of even some of this money could cause a crisis for banks.

"The percentages [of foreign deposits] in some of our banks is up to 40[percent] to 50percent," he said.

How much of this money actually would leave the country, however, is unknown.

Administration officials have stated the impact would be minimal.

"The Treasury Department certainly has every interest in protecting the U.S. economy from harm. We have looked very carefully at the available data and are comfortable that the proposed regulations will not result in that outcome [a flight of foreign deposits]," Mundaca wrote.

And Sanchez acknowledges he has seen few skittish foreigners transfer their accounts since the rule change was proposed in January.

But he argues that the flight of even a few billion dollars would harm the state's still-slumping economy.

"As the health of banks go, so goes the economy," he said.

What complicates the debate is that little is known about these foreign depositors — including how much money they have in U.S. banks.

The Treasury Department estimates that foreign individuals and corporations have deposited about $460billion in the United States. But because the new rule would cover only individuals — not corporations — they note any potential fallout would affect only a fraction of that amount.

Florida opponents of the rule contend the state's foreign depositors often are rich or middle-class citizens from Latin or South America who want to put their money somewhere safe — away from either corrupt regimes or criminals who would kidnap them for ransom if they knew of their wealth.

"Kidnappings are a real way of life in most of these countries," said Simon Cruz, CEO of Intercredit Bank in Miami, who said his bank's foreign deposits were "substantial."

Supporters of the rule say those totals — and names — should be known to the government.

"The U.S. has no real idea of which foreigners are investing in the U.S. and how much they are investing," said Heather Lowe of Global Financial Integrity, a Washington-based group that supports tighter rules to stop the illegal flow of money.

"That should strike any American, who does have to provide [this] information to the IRS, as a little bit odd," she said.

mkmatthews@tribune.com or 202-824-8222

(Original Post)

John McGlade tells Greater Lehigh Valley Chamber of Commerce a skilled workforce is 'critical.'

    Air Products CEO John McGlade addresses the crowd at the Greater Lehigh Valley Chamber of Commerce annual meeting and awards luncheon at Stabler Arena Tuesday.

Air Products CEO John McGlade addresses the crowd at the Greater Lehigh… (DONNA FISHER, THE MORNING CALL)

November 08, 2011|By Sam Kennedy, Of The Morning Call

America's ability to compete globally in the future depends on its willingness to invest in education today, the head of Air Products and Chemicals told local business leaders Tuesday.

"[It's] something that I think is vital to the competitiveness of the United States going forward," CEO John McGlade said in a speech delivered to about 1,000 attendees at the Greater Lehigh Valley Chamber of Commerce's annual meeting.

He said today's workforce is composed of many soon-to-retire baby boomers and called upon government, educators, parents and the business community to work together to prepare the next generation of workers.

Air Products, which is based in Trexlertown and has operations in more than 40 countries, has its own share of baby boomer employees, he noted.

"The need for a skilled workforce is really critical," he said. "We're going to have to fill a lot of those jobs."

McGlade paid homage to the virtues of technical schools in particular — something the Fountain Hill native knows more than a little about.

As a student at Liberty High School, he attended Bethlehem Area Vocational Technical School. He later went to Lehigh University for engineering and a master's degree in business.

U.S. Rep. Charlie Dent, a Lehigh Valley Republican, introduced McGlade, calling him "a local guy who has really done well."

Indeed, McGlade was the highest paid employee of a Lehigh Valley-based, publicly traded company last year, earning $11.6 million, according to research firm Equilar Inc. of Redwood City, Calif.

In addition to education, McGlade expressed concern about the nation's energy policy and the federal tax code.

He demanded "a consistent, solid" energy policy that recognizes the importance of home-grown energy sources, such as shale gas, as well as that of nuclear energy and renewable energy sources.

And he complained that the U.S. corporate tax rate is the highest in the world, prompting businesses to shelter money overseas. He also said the tax code itself, filled with loopholes, is too complicated.

According to a study released last week, loopholes mean very few businesses actually pay the 35 percent corporate income tax rate. In fact, Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both liberal think tanks, found that 30 large and profitable U.S. corporations from 2008 to 2010 paid no income taxes at all.

The Chamber, which has 5,000 members, also gave out awards at its annual meeting. The Business of the Year award went to Sacred Heart Healthcare System.

Sacred Heart operates a hospital now in its 100th year of service in downtown Allentown, where it is a major employer. It had more than 1,200 employees in 2010, and has added about another 100 workers over the past year, according to the Catholic institution.

skennedy@mcall.com

610-820-6130

(Original Post)

November 8, 2011 By Priti Ambani

The United States isn’t broke; we’re the richest country on the planet and a country in which the richest among us are doing exceptionally well. But the truth is, our economy is broken.

    We are producing more pollution, greenhouse gasses and garbage than any other country. In these and so many other ways, it just isn’t working. But rather than invest in something better, we continue to keep this ‘dinosaur economy’ on life support with hundreds of billions of dollars of our tax money. The Story of Broke calls for a shift in government spending toward investments in clean, green solutions—renewable energy, safer chemicals and materials, zero waste and more—that can deliver jobs AND a healthier environment.

Annie Leonard, Co-Director of The Story of Stuff Project and creator of the Internet hit The Story of Stuff, says,

    “It turns out this whole “broke” story hides a much bigger story—a story of some really dumb choices being made for us, but that actually work against us. The good news is that these are choices, and we can make different ones.”

Watch Annie Leonard’s The Story of Broke: Why There’s Still Plenty of Money to Build a Better Future

Annie points out, we aren’t broke, when we are spending billions on fighter planes we don’t need or wars with no end, and then saying we’re broke. According to the ‘Friends of the Earth’ and their new Earth Budget Campaign

    “…corporate taxes only contribute 7% of federal budget revenue – a measly seven percent! Citizens for Tax Justice recently looked at 280 of America’s most profitable companies and found that 78 of them paid no federal income tax at all in at least one of the last three years. 30 companies paid less than nothing, with Wells Fargo (which also benefitted from the bank bailout) getting a tax subsidy of a cool $18 billion.

What is Our Economy Broke? Because of Dumb Choices that has benefited only about 1% of the American population.

    Tax breaks for oil companies reaping record profits;
    Mining permits that cost the same today as in 1872;
    Public loans and insurance for corporations doing risky things, like building nuclear reactors.

As the movie points out, public funds should be a tool to help companies that are helping us—the public—but instead they’ve become a prize for those with the most power to get on the handout list.The story and animated movie ties together all of the Occupy Protests, our economic woes and policies that feed the “dinosaur” economy with no sustainable vision. Unfortunately the economy is in the hands of thousands of lobbyists in Washington and billions in campaign contributions keep the subsidies flowing – and hold America back from the sustainable economy of the future.

It’s time to rebuild the American Dream; but this time, let’s build it better.

Image Credit: The Story of Stuff Project

(Original Post)

Tuesday, November 8th 2011 2:02 PM

By GetSolar Staff.

With the technology steadily coming into its own, solar installations have grown across the world at an astounding pace. But critics argue that the industry relies too heavily on the wide variety of solar incentives provided by national, state and local governments.

To an extent, this remains true in many areas, where solar power has yet to reach grid parity without the help of tax breaks or feed-in tariffs. GigaOm reports that rising economic uncertainty could spur some countries to cut back on these solar subsidies, potentially hurting the market.

However, what many fail to understand is exactly how much support solar power's rivals also receive. Reuters reports that the International Energy Agency projects that by the end of the current decade, worldwide subsidies for fossil fuels are scheduled to rise to as much as $660 billion. Already in 2010, global subsidies reached $409 billion and the biggest factors containing this growth are actually efforts by China, India and Russia to reduce fossil fuel consumption.

Though the numbers for 2010 have yet to be released, the IEA's Clean Energy Progress Report notes that its 2010 World Energy Outlook estimated fossil fuel subsidies at $312 billion in 2009, compared to only $57 billion for renewable energy sources.

In the the U.S., Zachary Shahan of CleanTechnica put together numbers estimating the costs of renewable power subsidies and tax incentives compared to those offered to traditional fossil fuels and the darling of the Great Plains, corn ethanol. Between 2002 and 2008, total renewable incentives amounted to $12.2 billion, roughly evenly split between tax breaks and direct spending. Over the same period, fossil fuels received $16.3 billion in direct spending alone, with another $53.9 billion coming in the form of tax breaks. Meanwhile, corn ethanol received $16.8 billion and carbon capture received $2.3 billion.

Some of the expenses considered in these calculations take into account the health and environmental costs of fossil fuels that are often ignored in regulation, but the many other tax breaks are more straightforward.

Indeed, the energy industry shows up prominently in the recent report from Citizens for Tax Justice and the Institute on Taxation and Economic Policy, which tracked at what rate companies in the U.S. payed taxes between 2008 and 2010. The overall corporate tax rate for the hundreds of companies included amounted to 18.6 percent, slightly more than half of the purported 35 percent top rate.

Oil, gas and pipeline companies, though not among the worst, still averaged a 15.7 percent tax rate and at least one company, El Paso, saw a 1 percent return. Utilities proved far worse, averaging a 3.7 percent tax rate, with 13 out of 27 seeing a net return and Pepco reaching an astounding 57.6 percent return.

ReCharge reports that a growing number of industry executives would like to see renewables supported as well, however.

“We think that carbon regulation is inevitable. It’s just a ­matter of time,” James ­Rogers, chief executive of Duke Energy, which provides power in the Carolinas and the Midwest, told the news source.

WFPL reports that Kentucky's reliance on its plentiful coal resources could prove costly for the state when stricter environmental regulations are eventually imposed, as the state will need to quickly develop new capacity, potentially at great costs.

Yet, high costs in some areas and lingering doubts have discouraged some utilities from investing in renewable sources, particularly given the the strong incentives offered for traditional power plants. Executives suggested to ReCharge that creating a policy that does not discriminate between energy sources would likely prove the most useful.

(Original Post)

Tue Nov 8, 2011 7:00am EST

By David Cay Johnston

Nov 8 (Reuters) - In a competitive market, economists argue endlessly about who bears the burden of corporate income tax. Is it owners, who get a smaller net return? Or workers, who make less? Or suppliers, who get lower prices? Or customers, who pay higher prices?

In one sector of the U.S. economy, however, the answer is clear-cut. Corporate-owned utilities (mostly electric and natural gas) and pipeline partnerships, all of them legal monopolies, pass their income tax burdens on to customers.

Now a study, released last week, provides powerful new evidence that these two industries convert corporate income taxes from a burden to a benefit.

The study was prepared by Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Both are foundation-backed nonprofits that say the tax system favors the rich and corporations over most Americans.

Utilities charge prices, known as rates, set by political appointees who regulate the industry. Embedded in those rates are generous sums to cover corporate income and all other taxes. ()

Pacific Gas & Electric , the northern California utility, was awarded $431 million to pay 2007 corporate income taxes, a final decision by the California Public Utilities Commission shows. ()

Similar amounts were approved, or are in the process of final approval, for each subsequent year.

REFUNDS

But in the three years from 2008 through 2010, PG&E's corporate parent did not pay roughly $1.7 billion in federal income taxes on $4.8 billion of profits, the expected sum based on the federal 35 percent corporate income tax rate.

Instead, PG&E collected more than $1 billion in refunds, thanks in good part to a 2008 increase in accelerated depreciation, which lets companies defer taxes into the future, the study showed.

Brian Hertzog, PG&E's Washington director of corporate relations, said that the rules that let the company defer paying taxes into the future mean it can use that money immediately to help pay for new plant and equipment. He said this costs much less than borrowing in the markets and thus benefits customers.

Hertzog has a point. When customers pay their monthly bills they loan money to PG&E at zero interest, which is a lot cheaper than borrowing in the markets. But that is neither capitalism nor market economics.

The market chooses to invest and sets a price for credit. The regulatory and tax systems force captive customers to make interest-free loans to utilities, denying the customers the use of their money for other purposes, including paying down their own debt, which may be at much higher interest rates than the savings from using that money to finance utility projects.

Forcing captive customers to extend interest-free credit to utilities strikes me as a subtle form of legalized theft.

PG&E's roughly $2.7 billion swing from burden to benefit is not unique.

LOW TAXES

The 26 large utilities studied paid an average rate of just 3.7 percent over the three years, a 10th of the 35 percent statutory U.S. tax rate.

Half of the 26 corporate-owned utilities analyzed got money back from the government, thanks to deferrals and tax benefits from tax shelters in non-utility operations. Just four paid corporate income tax of more than 10 percent.

The trophy for turning the burden of taxes into a benefit goes not to General Electric , whose skillful use of tax law and lobbying for tax breaks is famous, but to Pepco Holdings , which owns the monopoly electric utility in and around the U.S. capital.

Pepco's three-year tax rate? Minus 57.6 percent. GE's was only minus 45.3 percent.

Pepco says it pays all of its taxes as required by law. For sure that's true.

Here's the irony. Pepco's biggest customer, by far, is the federal government.

So, federal taxpayers and other customers paid electric rates to Pepco that assumed about $309 million in corporate tax payments would flow to the Treasury, only to see $508 million of their taxes flow to Pepco as refunds. Ouch.

The roughly $817 million tax benefit Pepco enjoyed -- from taxes it collected but did not turn over combined with refunds -- almost equaled the $882 million in profits Pepco's corporate parent reported during the same period.

This is an old story at Pepco Holdings. In the six years preceding the study, 2002 through 2007, Pepco Holdings reported pretax profits of $949.2 million. Its cash paid for taxes was negative $116.4 million, my analysis shows.

Cash paid for income taxes is a simpler measure than the painstakingly detailed examination in the Citizens for Tax Justice study. Cash paid also tends to understate reality.

BETTER DEAL

Pipelines have an even juicier deal. Under the 1986 Tax Reform Act they are exempt from paying corporate income taxes if organized as partnerships.

However, under a rule from the era of President George W. Bush, federal regulators let them collect the corporate income tax anyway. That IS legalized theft.

How do utilities and pipelines convert the burden of corporate income taxes into a benefit, whether temporary or permanent?

Easy as 1, 2, 3.

1. Political appointees on regulatory boards, many of whom come from and return to the utility and pipeline industries, require customers to pay the utilities' corporate income taxes measured as if the utilities were stand-alone companies filing their own tax returns.

2. Most utilities do not stand alone, but are subsidiaries of holding companies.

3. Each holding company files a tax return that consolidates its utility and non-utility businesses, allowing it to capture some of the utility taxes as additional assets or as profits.

The result is little or none of the tax that customers are forced to pay actually gets to government.

Here are two questions to ask about this costly state of affairs:

Why have you not heard about this from anti-tax politicians and organizations that insist they are trying to ease your burdens?

Who will put an end to this forced transfer of wealth from utility and pipeline customers to the companies' shareholders?

(Original Post)

Woody Klein
Published 05:30 a.m., Tuesday, November 8, 2011

If you happen to be among the 345,000 taxpayers in America who will earn $1 million or more this year, you have a golden opportunity to step up and do something patriotic to save our country from falling into the worst financial hole in our history.

Last week, not a single Republican in the Senate supported President Barack Obama's plan to spend $60 billion on infrastructure repairs -- one part of his jobs bill that would create thousands of badly needed jobs across the country. Obama's bill would pay for itself with a 0.7 percent surtax on people making more than $ 1 million a year.

That's less than 1 percent!

The 345,000 figure, the Times reported, was based on an analysis by the independent Citizens for Tax Justice. Founded in 1979, CTJ is a non-profit, non-partisan research and advocacy think tank based in Washington, D.C. It focuses primarily on federal tax policy. Itsstated mission, it says, is to "give ordinary people a greater voice in the development of tax laws."

It was the third time in a month that the Senate voted down a version of Obama's jobs bill that would be financed totally with a tax on income exceeding $1 million a year. The Senate voted 51 to 49 to take up the bill, but 60 votes were needed.

The New York Times lead editorial page headline summed it up this way last Friday: "Putting millionaires before jobs, Republicans reject vital infrastructure and jobs bill rather than raise taxes on a `small elite.' "

One could argue that paying less than a 1 percent increase in taxes is easy for me to say. I do not fall into that category; neither do thousands of others in my field of journalism who comment on the big issues. We are called "political pundits" and we are not held in particularly high esteem by politicians or the financial titans of our country.

There is no question that the Republicans in Washington are out to bring down President Obama -- even if means bringing down America with him. Strong words. They have clearly articulated this goal. This is a strong -- and a decidedly wrong -- motive on the part of the Republicans in Congress.

Ironically, there are some leading Republicans in the Senate and the House who have, in the past, supported President Obama's initiative to create jobs by investing in infrastructure. The problem, at present, is that the president attached the proviso that it would be funded by the very rich among us.

Obama's $60 billion bill would directly spend $50 billion on roads, bridges, airports and mass transit systems, and would add another $10 billion to an "infrastructure bank" to stimulate investment from the private sector in a public works project--not unlike the Works Project of America (WPA) that Franklin Delano Roosevelt passed in the depths of the Great Depression.

What the Democrats have not stressed enough, I believe, is that Obama is not increasing taxes to pay for these projects. He is simply rolling back the tax cuts for the rich that George W. Bush put in place after the highly successful economy of Bill Clinton's eight-year stint in the Oval Office, when he created some 20 million jobs.

Let's be honest with ourselves. None of us like to pay more taxes than we have to. But it does not seem fair, does it, that the wealthy are not paying their fair share of the revenue that America needs to function every day and to reduce its deficit.

That's why I choose to call those who are among the top 1 percent of income earners of America and support the Obama jobs bill, true "patriots." They should let their members of and their Senators know how they feel.

If you recall, when the nation came under its worst attack in history on September 11, 2001, George Bush recommended that we all go out and shop. Keep the economy flowing, I think, was his intention. Act normally. Do not be intimidated. All well and good. But as far as I can recall, the Bush administration, did not ask us as Americans to make any sacrifices during the years when he was doing his best to restore a nation in shock to its former standing as a proud country.

President Obama has been trying -- unsuccessfully -- for three years to get our political leaders to work together across the aisle in the nation's best interests. Having failed to do that because of stubborn, partisan Republican intransigence, he is now campaigning for much-needed legislation to save the country. I, for one, am glad to see him out of the White House on the road taking his case -- our case -- to the voters of America. I sincerely hope he prevails.

Finally, we have a president who has been asking, since he took office, for the wealthiest among us to sacrifice just a little. Is that too much to ask? I think not.

Incidentally, there's no mystery as to who I am talking about in our town of Westport.

If you are a member of the country's "small elite," you know who you are.

(Watch the Video On CNN)

Many big firms pay zero corporate tax

The Situation Room|Added on November 3, 2011

A new study finds that some of the country's biggest companies are paying $0 in income taxes. Mary Snow has more.

(Original Post)

By Pat Garofalo on Nov 7, 2011 at 11:50 am

Last week, Citizens for Tax Justice released a report showing that 30 major corporations have paid no income taxes for the last three years, as they made $160 billion. CTJ looked at 280 companies in the Fortune 500, and found that “while the federal corporate tax code ostensibly requires big corporations to pay a 35 percent corporate income tax rate, on average, the 280 corporations in our study paid only about half that amount.”

In fact, over the last three years, only two industries — retail and health care — paid an effective tax rate of 30 percent or more. And as the Hill noted today, one industry is doing very well when it comes to tax avoidance — defense contractors:

    American defense manufacturers pay an average annual tax rate of 17.5 percent, placing them in a class with some of the nation’s least-taxed sectors like information technology, telecommunications, financial services and energy, Citizens for Tax Justice and the Institute on Taxation and Economic Policy concluded. [...]

    Boeing, which also makes commercial aircraft, came in with the lowest tax rate among defense firms at -1.8 percent; SAIC had the highest at 28.7 percent, according to the report.

Boeing has been outspoken about its desire to see the corporate tax rate cut, even as it pays nothing in taxes. Prominent Republicans like House Budget Committee Chairman Paul Ryan (R-WI) have joined Boeing’s griping about corporate taxes, ignoring that the company doesn’t actually pay them.

Defense contractors have made billions in profits this year, and “so far earnings by defense contractors have yet to see the effects of the end of fighting in Iraq, plans to draw down Afghanistan and expected cuts in defense spending.”

(Original Post)

Updated: 11/07/2011 11:14:26 AM EST

Monday November 7, 2011

If there is anything we should be able to agree upon in this fractured nation it's that giant corporations should not pay less in federal taxes than the average small business or working man and woman. Especially those corporations that extravagantly compensate their top officers and/or ship jobs overseas where they pay their workers pennies. There is no defense for this chicanery, but even as preposterous flat tax and 9-9-9 tax plans that would punish the middle class get floated, there is little serious discussion on the campaign trail about corporate tax reform.

A new report emerged last week to put a finer point on what was already part of the motivating force for the Occupy protest movement. The nonprofits Citizens for Tax Justice and the Institute on Taxation and Economic Policy found that 30 of 280 corporations studied paid no federal taxes between 2008 and 2010. Several, courtesy of tax breaks, ended up with what amounts to negative tax rates. Under the federal tax code, corporations are supposed to pay 35 percent of their profits in taxes, but the study found that only 71 of the corporations paid taxes in roughly that proportion while approximately the same number paid less than 10 percent.

It has been known for some time that General Electric collected tax rebates even without paying taxes last year, but the study puts a number on it -- a remarkable minus 45 percent negative tax rate over three years. The giant corporation's undeniably gifted tax attorneys found a variety of loopholes to squirm through to avoid paying federal taxes, loopholes that don't apply to or can't be located by the average small business or working person.

A spokesman for Verizon, which paid a negative 3 percent rate from 2008 to 2010 according to the study, told The Washington Post that "Verizon fully complies with all tax laws and pays its fair share of taxes." Plainly, a minus tax rate is not a fair share of taxes. It's no share. And no one is accusing Verizon of cheating on its taxes. The fact that the profitable corporation had a minus tax rate for three years while complying with tax laws makes the argument that the tax code must be reformed and corporate loopholes closed.

Taxes are not a penalty for living in America; they are the price for living in a nation with obligations -- like defense, education, infrastructure, law enforcement, food inspections and many more -- that contribute to our standard of living and must be paid for. The corporations that benefit from everything America has to offer while cynically ducking their responsibility to pay for it should be embarrassed and ashamed. Financially struggling Americans should be angry, and must make corporate tax reform a major issue in the national election campaign.

(Original Post)

by Cathryn Wellner, November 5, 2011

Politicians and critics who wonder why the Occupy movement hasn’t disappeared with cooler weather should read a study just released by Citizens for Tax Justice. “Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010” makes uncomfortable but important reading.

The study looks at 280 of America’s largest companies, all of them on the Fortune 500 list. These are high-profit corporations so it would be reasonable to expect them to be fair contributors to the system that allows them to operate. After all, they benefit from roads, schools, hospitals, parks and other amenities and services tax dollars provide.

As it turns out, between 2008 and 2010, 78 of them avoided paying any taxes at all. That is only one way these corporations raided the futures of millions of their fellow Americans. Robert McIntyre, Director at Citizens for Tax Justice and lead author on the report, says, “These 280 corporations received a total of nearly $223 billion in tax subsidies. This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”

Some of the highlights, or low points, of the report:

    38 corporations had negative tax rates all three years. Pepco Holdings topped the list, at -57.6%, with General Electric second at -45.3%.
    In 2009 49 companies paid zero or less federal taxes
    In 2008, 22 of the 280 companies did not pay one dollar in federal taxes, but they received $3.3 billion in tax rebates. In 2010, those numbers jumped to 37 companies that paid no taxes but received $7.8 billion in rebates.

The list of tax avoiders and subsidy recipients includes a lot of familiar names, such as Boeing, Yahoo, Yum Brands, Marathon Oil, FedEx, Hewlett Packard, American Express, and Time Warner. Corporations point out they are doing nothing illegal paring their taxes to nothing and receiving rebates. They are merely abiding by tax laws. However, as the report points out, “The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support.”

Tax reform is desperately needed in a country where the growing gap between rich and poor is leaving the country at risk for social instability and continuing economic chaos. However, “GOP candidates for president are all promoting huge cuts in the corporate tax or, in several cases, even elimination of the corporate income tax entirely.”

The whole report is worth reading, especially as campaign rhetoric heats to the melting point in advance of the 2012 elections.  Should elected politicians be held accountable for this untenable situation?    Can voters make them change the system?  What do you think?

(Original Post)

By Pat Garofalo on Nov 7, 2011 at 3:25 pm

A new Citizens for Tax Justice report detailing how little corporations pay in federal corporate income tax also noted that financial firms receive the highest percentage of federal tax subsidies, collecting nearly 17 percent of the tax largesse that the government hands out. The largest single recipient of federal tax subsidies over the last three years was mega-bank Wells Fargo.

(Original Post)

12:32 AM, Nov. 7, 2011  |  

Written by Brian Tumulty

Gannett Washington bureau

WASHINGTON — New York-based Corning Inc. and Consolidated Edison Inc. avoided paying federal income taxes last year, according to a new report that highlights how some Fortune 500 companies pay much higher federal tax rates than others.

The study by liberal-leaning Citizens for Tax Justice found that only a few of the 280 Fortune 500 firms the group looked at paid federal taxes at the 35 percent corporate tax rate from 2008 through 2010.

One factor was the 50 percent "bonus depreciation" tax break enacted in 2008 during the Bush administration to encourage firms to make large-scale capital investments. The Obama administration renewed the tax break through the end of 2012.

The law allows firms to write off up to 75 percent of a new investment in the first year.

Con Ed spokesman Mike Clendenin confirmed that's how the utility company serving Westchester and New York City was able to lower its tax bill.

"We invest nearly $2 billion every year in infrastructure improvements, which helps create jobs and support the economy," Clendenin said in an email. "Investment incentives account for the high level of depreciating assets we generate each year and offset federal tax obligations, which the report acknowledges."

Verizon Communications also took advantage of the bonus depreciation tax break, investing $33.3 billion in infrastructure in 2009 and 2010, according to the company.

Other tax breaks abound.

Among the 280 companies studied, 180 claimed "excess stock option tax benefits" for executives as a tax deduction.

And some had losses in earlier years.

Corning spokesman Dan Collins said losses totaling about $5 billion in 2002 through 2006 were used as "loss carry forwards" on his company's 2008 through 2010 tax returns.

"The cash taxes noted in this report do not reflect the fact that U.S. tax laws allow for the carryover of prior years losses to reduce current year taxes." Collins said in an email. "It is these losses that reduced our cash taxes from 2008-2010."

Robert McIntyre, director of Citizens for Tax Justice and the report's lead author, said multinational firms also lower their tax bill by moving profits from intellectual property and other operations overseas, where they are taxed at a lower rate.

"The international issue is at the heart of the problem," he said.

Republican Rep. Dave Camp of Michigan, chairman of the House Ways and Means Committee, recently proposed a "territorial" taxation system that would exempt overseas profits from taxes if the profits are returned to the U.S.

The Senate Finance Committee also is considering options for corporate tax reform but has not issued any recommendations.

Con Edison and Corning don't dispute the findings in the report, but Verizon Communications does.

Verizon says Citizens for Tax Justice has a political agenda linked to the Communications Workers of America, which went on strike in August, and whose president, Larry Cohen, sits on the CTJ board.

"This union-orchestrated report is deceptive and politically motivated," Verizon spokesman Bob Varettoni said in an email. "Verizon fully complies with all tax laws and pays its fair share of taxes."

One source of Verizon's tax breaks, according to Citizens for Tax Justice, is the company's investment in unrelated businesses.

That includes leasing commercial aircraft and investing in power-generating facilities and real estate. Verizon did not respond to a request for a comment on that aspect of the report.

McIntyre of Citizens for Tax Justice said the aircraft leasing by Verizon highlights how some companies aggressively use the tax code to reduce their tax bill while others don't.

Among three Westchester-based firms included in the report, International Business Machines paid an effective tax rate of 2.1 percent on its $8.86 billion 2010 profit, MasterCard paid 19.3 percent on its $1.59 billion profit, and PepsiCo paid 21.7 percent on $3.89 billion in profits.

The disparities occur even among competitors. Among package delivery companies, FedEx paid a 0.9 percent effective tax rate on its profits while United Parcel Service paid 24.1 percent.

Officials at UPS are among businesses that advocate overhauling corporate taxes by lowering the current 35 percent rate in exchange for ending various corporate tax deductions and credits.

Many advocates of this approach recommend a 25 percent rate.

But a report issued this past week by the congressional Joint Committee on Taxation found that a revenue neutral exchange would lower the corporate rate only to 28 percent.

(Original Post)

Posted: 11/7/11 08:55 AM ET

Leo W. Gerard, International President, United Steelworkers

Voting doesn't work anymore. If it did, Americans would get what they want -- or at least some of it -- from Washington.

But they don't.

Instead of the people's priority, which is jobs, country club conservatives in Congress stubbornly fixate on deficits. Instead of ensuring millionaires and corporations pay their fair share, House Republicans passed a budget that would destroy Medicare and Medicaid.

Corporate and clandestine campaign contributions have undermined the power of traditional voting, the kind done at polls on election day. Rather than voters, politicians now serve donors -- billionaires and banksters -- who invest untold millions and demand returns in the form of self-serving policy.

This is demoralizing to those who cherish democracy and the sanctity of one person, one vote.

Hope, however, arrived with the debit card fee victory. The 99 percent forced Bank of America to back off its proposed fee. Average Americans accomplished this by voting differently, not at the ballot box but at the twitter account, the Occupy march and the teller window, where 1 million depositors went to move $4.5 billion from the big Wall Street banks to community banks and credit unions. They found another way to exercise their franchise and force the powerful to respond.

The 99 percent must exploit the method of this triumph to get what they need. Because politicians sure as hell aren't giving them what they want.

The numbers don't lie. Coin-operated conservatives in Congress have rejected President Obama's jobs plan, parts of the jobs plan and Obama's pitch to raise taxes on the rich to pay for it.

And yet, the electorate strongly supports both surtaxing millionaires and the elements of the jobs plan. In a CNN poll in October, 75 percent favored sending federal money to the states to hire teachers and first responders and 72 percent favored infrastructure investments.

A whopping 76 percent wanted millionaires to pay higher taxes.

In that same CNN poll, there's another compelling statistic. Sixty-one percent said reducing unemployment was the most important issue. Reducing the deficit didn't even come close at 35 percent.

The numbers aren't flukes. Another survey, taken a week later by CBS found the same thing.

At a time when companies are hoarding $2 trillion in reserves, failing to create jobs and demanding tax cuts, the CBS poll provided a snapshot of public opinion on corporate responsibility. It found 67 percent opposed shrinking big business tax obligations.

That is a result of the public knowing intuitively what a report released last week proved: corporations aren't paying their fair share. Citizens for Tax Justice conducted a comprehensive study that showed 280 of the nation's largest publicly-traded corporations paid only 18.5 percent of their profits in taxes over the past three years. That is little more than half the official rate of 35 percent, and it is lower than the rate paid by their competitors in other industrialized nations.

Thirty of the companies paid nothing. For three years.

Numerous polls over time found Americans, including Tea Partiers by a two-to-one margin, strongly oppose cutting Social Security, Medicaid and Medicare benefits. Yet, what is the Congressional super-committee talking about? Cutting Social Security, Medicaid and Medicare.

If only the public could get their elected representatives to listen. If only they could walk into those plush Congressional offices -- the way corporate lobbyists do -- grab those lawmakers and get them to understand the sentiment of all those polls, the feeling of the vast majority of the electorate: Tax the rich; don't cut the social safety net; create jobs now; worry about the deficit when the economy improves.

Traditional balloting has failed to get country club conservatives to listen to the public. To the majority. To the people who a democratically-elected government is supposed to serve.

The Bank of America debit card fee reversal suggests, however, that the majority can win with non-traditional balloting. In this case, a big bank that had been bailed out by the public after it engaged in excessively-risky betting, a bank that gave its CEO a $9 million bonus after he lost billions, announced that it had "the right to make a profit" off the backs of poor people by charging them a new $5-a-month fee to use their own money with their debit cards.

Other Wall Street banks indicated they would do the same.

Fed up, depositors said they wouldn't take it anymore. They began transferring their money out of the Wall Street banks, participating in the "Move Your Money" campaign that urged citizens to deposit their savings in community banks and credit unions. YouTube began featuring outrageous videos of Wall Street bank branches denying depositors access to their accounts when they tried to withdraw their money to move it.

The effort was tweeted and blogged. It was cheered by Occupy Wall Street protesters who marched to bank headquarters buildings in New York City carrying thousands of letters of complaint.

Wall Street banks began backing off their new fee plans. One by one they abandoned Bank of America. Finally, it too cancelled the fee, meanwhile refusing to disclose just how much businesses it lost.

Last Saturday was the big, official "move your money" day. Of course, the Wall Street banks won't tell how many more customers they lost. But depositors, more than 78,000 of whom pledged to make the move, made their point.

They voted differently. They voted with their feet and their wallets. And they won. They cast ballots in the only way coin-operated politicians and big banks respond to.

(Original Post)

By Jeanette Mulvey, BusinessNewsDaily Managing Editor
07     NOV 2011     

While small-business owners say they are struggling to pay their taxes, many large corporations haven't paid any taxes at all during the last few years, according to a report released on Friday (Nov. 3).

Verizon, Boeing, DuPont, Mattel, Honeywell and a variety of others paid no income taxes at all between 2008 and 2010, according to Citizens for Tax Justice, a non-profit advocacy group that aims to expose tax-paying inequities. The report also found that many corporations paid significantly reduced taxes, including FedEx and Amazon. Wells Fargo received more tax subsidies than any other company.

Defense contractors, financial services, utilities, telecommunications, and oil, gas and pipeline companies received the greatest share of tax subsidies or benefitted the most from tax shelters.

Overall, the report looked at 280 companies in the Fortune 500:

    The average effective tax rate for all 280 companies in the study over the three-year period was 18.5 percent; for the period 2009-2010 it was 17.3 percent, less than half the statutory rate of 35 percent.
    Seventy-eight of the companies enjoyed at least one year in which their federal income tax was zero or less.
    Thirty companies enjoyed a negative income tax rate over the entire three- year period on their combined pretax profits of $160 billion.

Small business groups, particularly those with a more progressive agenda, have spoken out against the findings of the report, calling for greater parity between the tax rate paid by small businesses vs. large ones.

"Big businesses are getting away with taxation murder,” said Frank Knapp, President and CEO of the South Carolina Small Business Chamber of Commerce and Vice Chairman of the American Sustainable Business Council. "They pay little or no taxes on massive U.S. profits and then have the gall to lobby for lowering the high corporate tax rate. Patriots pay their taxes; they don’t dodge them."

Others are encouraging Congress and the President to enact a so-called "Buffett Rule" for businesses which would require that big companies pay a tax rate similar to that of smaller firms.

"We need a Buffett Rule for corporations as well as wealthy individuals,” said Scott Klinger, director of tax policy for Business for Shared Prosperity. “Warren Buffett spotlighted the madness of a tax code that lets him pay a lower rate than his secretary. Likewise, Big Business shouldn’t be paying lower taxes than small businesses."

These business groups would like to see Congress craft tax reform to use taxes from large corporations to help solve the country's budget crisis.

"It would be budgetary suicide to accept corporate tax reform that doesn’t raise new money,” said Kelly Conklin, owner of Foley-Waite Associates in Bloomfield, N.J., and Main Street Alliance steering committee member. “We shouldn’t reward companies like GE and Verizon who dodge their taxes and stick us with the bill."

(Original Post)

By Bernie Becker - 11/07/11 05:59 PM ET

A group of economists is calling on the top congressional tax writers to lower the top corporate tax rate while eliminating a range of credits and deductions.

Officials from both sides of the aisle have heartily endorsed that broad idea for reform, while acknowledging that overhauling the tax code is a time-consuming and complex.

The 20 economists who wrote to the congressional tax panels – including Kevin Hassett of the American Enterprise Institute and Robert Crandall of the Brookings Institution – noted that bipartisan fiscal commissions had pressed for tax reform as well.

And, they signaled, revenue-neutral reform done right would entice more domestic and foreign investment and help the economy grow. “Economists recognize that reducing corporate tax rates can eliminate distortions to economic activity, such as locating a business abroad for tax reasons,” they wrote Monday to Sen. Max Baucus (D-Mont.), the Finance Committee chairman; Rep. Dave Camp (R-Mich.), the House Ways and Means chairman; Sen. Orrin Hatch (R-Utah), the Finance ranking member; and Rep. Sandy Levin (D-Mich.), the top Democrat on Ways and Means.

“In contrast, closing tax loopholes, which do not likely affect business decisions at the margin, can reduce tax avoidance, and thereby generate a broader tax base and more revenue for a given corporate tax rate,” the economists added.

While the deficit-reducing supercommittee have discussed tax reform, there has been wide skepticism that the 12 lawmakers on the panel could hash out an agreement to fully revamp the tax code. The supercommittee has just over two weeks to announce its recommendations.

Camp and others have also said that the corporate and individual codes need to be reformed together, because many businesses pay taxes through the individual code.

But while both Democrats and Republicans in Congress have called for a rate-reducing, base-broadening tax reform, some on the left, like Citizens for Tax Justice, have asserted that corporations are already adept at reducing their tax bill and should contribute more revenues to the federal government.

(Original Post)

By The Palm Beach Post

Posted: 7:23 p.m. Monday, Nov. 7, 2011

Dysfunction in Washington is so severe that stating the obvious counts as an act of courage. Three members of Florida's U.S. House delegation stated the obvious last week when they signed a letter agreeing that for the debt-reduction committee to succeed, "all options for mandatory and discretionary spending and revenues must be on the table."

Sixty Democrats, including Rep. Kathy Castor of Tampa, and 40 Republicans, including Reps. Tom Rooney of Tequesta and Ander Crenshaw of Jacksonville, risked disapproval from their own parties. Democrats generally don't want the committee to touch Medicare or Social Security. Republicans have balked at anything that could be called a tax increase. But signatories of the letter to the Joint Select Committee on Deficit Reduction, also known as the "supercommittee," want it to go beyond its mission to reduce the deficit by $1.2 trillion over 10 years, and instead identify about $4 trillion in deficit reduction. There is no way to do that without both entitlement reform and new taxes.

Granted, Republicans usually couch "revenue" in terms of reforming the tax code to lower rates and close loopholes. Still, that could be significant. Last week, a report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy found that because of loopholes and tax breaks 30 top U.S. corporations paid zero federal taxes from 2008 through 2010. One of the 30 was Florida Power & Light Co.'s parent NextEra Energy, based in Juno Beach.

The report torpedoes claims that America's 35 percent corporate tax rate puts us at a competitive disadvantage. Only about one-fourth of 280 corporations studied actually paid an effective federal tax rate above 30 percent. The report also shows why some corporations don't really want Congress to adopt a lower tax rate, if that revenue really would be collected.

The supercommittee's deadline is two weeks from Wednesday - just before Thanksgiving. A vote must take place just before Christmas. Members must act more like those courageous 100 House members and less like Santa Claus.

- Jac Wilder VerSteeg,

for The Palm Beach Post Editorial Board

(Original Post)

As campaign-finance filings come out from 2012 Republican presidential candidates, the records show women are not big-money donors for this year’s crop of hopefuls. Recent campaign-finance records evaluated by the Center for Responsive Politics reveal the median percentage of campaign cash over $200 from female donors to the GOP candidates is 27.5 percent. (For contributions under $200, donors’ personal details are not publicly disclosed.)

Nearing the bottom of the pile is Herman Cain — only 25 percent of the former pizza chain magnate’s donations above $200 have come from women. Both Michele Bachmann and Ron Paul have collected less from women (about 24 percent and 16 percent, respectively). About 33.5 percent and 29.6 percent of Texas Gov. Rick Perry and former Massachusetts Gov. Mitt Romney’s donations have come from women, respectively.

Fittingly, the tax proposals released by the leading GOP candidates — Cain, Perry and Romney — disproportionately affect women in the way they raise taxes on lower- and middle-income Americans, eliminate poverty aids and cut child-insurance programs, according to various analyses of the plans and expert input gathered by The American Independent.

Thus far, only Cain and Perry have revealed the most detailed plans, and because women are disproportionately likely to be single parents and to have lower wages, smaller pensions and more medical problems, they are expected to fare worse under these plans than their male counterparts.

The gender-wage gap and its relevancy to tax-policy discussions

According to the U.S. Bureau of Labor Statistics (PDF), in 2010, women who were full-time wage and salary workers earned 81 percent of what men earned (median weekly earnings for women were $669, and $824 for men). The female-to-male earnings ratio has hovered around 80 to 81 percent since 2004, up from 62 percent in 1979.

Last week, the Government Accountability Office (GAO) released a report (PDF) showing women make up 49 percent of the total workforce but represent 59 percent of low-wage workers -– this despite the fact that more women than men finish high school and earn bachelor’s degrees. And according to a new report (PDF) by the Martin Prosperity Institute, women hold 52.3 percent of “creative class” jobs –- engineers, doctors, lawyers, journalists, teachers, etc. -– but in these jobs, earn an average of $48,007, while men earn an average of $82,009. Controlling for hours worked and education, creative class men out-earn creative class women by 49.2 percent.

According to the 2008-2010 American Community Survey, about 29.2 percent of families whose income in the past 12 months was below the federal poverty level were families headed by single women. It gets worse depending on the presence of young children: 38.1 percent of women-run households with children under 18 were below poverty; 46.1 percent of households with children under 5 were below poverty. In comparison, only 10.5 percent of all American families — and only 5.1 percent of married-couple families — in this survey were making below the poverty level. The aforementioned GAO report found single women with children had an average household income of about $27,000.

Income disparities do not stop at wages, however. Women tend to live longer, they are more likely to outlive their savings and less likely to have significant retirement plans or to have the type of jobs that incur significant pensions. Thus, they disproportionately benefit from Social Security, Medicare and Medicaid.

According to the Social Security Administration (SSA), women represent about 57 percent of all Social Security beneficiaries age 62 and older and about 69 percent of beneficiaries over 85. In 2008, women 65 and older received an average of $11,377, compared with $14,822 for men.

According to the Kaiser Family Foundation (PDF), about 56 percent of all Medicare beneficiaries are women, and women are more likely than men to report having three or more chronic conditions.

How do women fare under ‘9-9-9’?

“The ‘9-9-9 Plan’ is a jobs plan! It is revenue, it does not raise taxes on those in need.” -- from the donation page on Herman Cain’s campaign website (AreFlaten, Flickr)

THE PLAN: ‘9-9-9’

With the nation’s attention focused on Cain’s old sexual harassment charges, scrutiny of Cain’s infamous “9-9-9? Plan is stalled for the moment. According to an analysis by the Tax Policy Center, Cain’s plan would make those earning under $50,000 pay a few thousand dollars more in taxes, while those making between half a million and $1 million would pay nearly $100,000 less in taxes. According to an analysis by the left-leaning Citizens for Tax Justice (PDF), if Cain’s plan were to go into effect today, the richest 1 percent of taxpayers would pay $210,000 less in annual taxes, while the poorest 60 percent of taxpayers would pay $2,000 more in annual taxes.

At the same time, Cain’s proposed plan is expected to raise about the same -– or potentially less –- revenue as the current tax system. Still, a recent poll of likely Iowa Caucus-goers conducted last month shows the average American making under $50,000 annually doesn’t understand the plan and believes he or she would fare better under “9-9-9.”

Cain’s plan is actually a complicated three-step process. Replacing the current tax code with a 9-percent business flat tax (or value-added tax), a 9-percent individual flat tax and a 9-percent national sales tax is only the second step in the process. And as the Tax Policy Center summarizes, combined, the three taxes are equivalent to a 25.4-percent national sales tax, with adjustments for dividends paid to tax-exempt entities and charitable contributions.

The first step in Cain’s plan, explained by The Washington Post, would actually be to cut individual and corporate tax rates to a top-25-percent rate, down from the current high of 35 percent. The third step would be to replace all federal taxes with a national sales tax.

Cain claims under “9-9-9,” Americans who fall under the federal government’s poverty level would be exempt from paying the individual income tax; however, he would eliminate the Earned Income Tax Credit (EITC), designed to help the working poor, and the Child Tax Credit (CTC). Additionally, he would eliminate payroll tax deductions for employers (except in unspecified “Opportunity Zones”), which currently serve as a hiring incentive. Helping out the wealthy, Cain would get rid of the estate tax and capital gains taxes. His plan, according to Edward D. Kleinbard of the Gould University of Southern California School of Law, involves a “disguised one-time 9 percent tax on existing wealth.”

More from TaxVox, the Tax Policy Center blog:

    A middle income household making between about $64,000 and $110,000 would get hit with an average tax increase of about $4,300, lowering its after-tax income by more than 6 percent and increasing its average federal tax rate (including income, payroll, estate and its share of the corporate income tax) from 18.8 percent to 23.7 percent. … In Cain’s world, a typical household making more than $2.7 million would pay a smaller share of its income in federal taxes than one making less than $18,000. This would give Warren Buffet severe heartburn.

EFFECT ON WOMEN

Cain’s plan would eliminate the Earned Income Tax Credit (EITC), which is a refundable credit designed to offset federal payroll and income taxes for low- and moderate-income working people.

According to the Center on Budget and Policy Priorities (CBPP), this year, working families with children with annual incomes below $36,000 to $49,000 (depending on marital status and dependents) may be eligible for the EITC. Single individuals without children who make less than $13,600 annually and married couples making less than $18,700 annually would qualify for a small EITC. In 2009, the average EITC was $2,770 for a household with children and $259 for a childless household. According to CBPP, families mostly use this tax credit to pay for necessities, home and vehicle repairs and, sometimes, additional education.

Cain would also kill the Child Tax Credit (CTC), which helps working families pay for child care costs.

According to the Urban Institute, high-working, low-income families spend $3,135 annually, or 12 percent of their income. The Institute estimates that 69 percent of children under 5 with low-income working mothers are cared for regularly by someone other than a parent, and 39 percent of these children are in child care for at least 35 hours per week.

“It would be horrifying to lose [the Earned Income Tax Credit and the Child Tax Credit],” said Elizabeth Lower-Basch, a senior policy analyst for the Center for Law and Social Policy (CLASP). “That would particularly affect women.

“We have a basically progressive tax code,” she told TAI. “If we go to a flat code, it would significantly hurt low-income workers.”

Joan Entmacher, vice president for Family Economic Security at the National Women’s Law Center, where she works at promoting policies aimed at improving the economic security of low-income women and their families, told TAI that Cain’s tax proposal appears to affect women worse than the other candidates because his plan is “much harder on lower-income Americans” in the way it would raise taxes on low- and middle-income earners.

Under Cain’s plan, millionaires would get a 17.9-percent tax rate, or a 22-percent boost after taxes. But a single mother earning between $20,000 and $30,000? Her tax rate would be 24.9 percent. In other words, a single mom making $25,000 a year will have to give 25 percent of her income, or $6,250, to taxes.

Cain has proposed creating tax benefits to certain geographic areas in what he calls “Opportunity Zones” (PDF), but he has not been specific about where these zones would be or how they would work.

“Overall, you’re going to be better off if you’re making over $1 million in income, better than single mom trying to raise kids on $25,000 per year,” Entmacher said.

Terry O’Neill, an attorney and professor who is the president of the National Organization for Women (NOW), told TAI that Cain is turning his back on women, many whom depend on the tax programs he wants to eliminate.

“When Mr. Cain wants to take away the Earned Income Tax Credit, he is punishing women who sometimes work two jobs full-time, minimum-wage jobs, just to pay for food and rent,” O’Neill said.

Perry’s postcard proposal cuts more than it balances

“American families deserve a system that is low, flat and fair. They should be able to file their taxes on a postcard instead of a massive novel-length document." -- from Governor Rick Perry’s "2020 Vision: Cut, Balance & Grow" (Gage Skidmore, Flickr)

During his speech at the Corner Stone Action Dinner in Manchester, N.H., on Oct. 28, Perry repeatedly waved a blank postcard in explaining his tax and economic-policy plan. Like Cain’s plan, Perry’s plan (PDF) is more complicated than he lets on in speeches. Where they differ is in Perry’s explicit details in how Americans would pay for the substantial tax breaks on the highest earners — by eliminating deductions and cutting specific entitlement programs that especially benefit lower-income earners, and women.

THE PLAN: ‘Cut, Balance & Grow’

Taxpayers would be able to choose whether to file their taxes under the current tax code or under a new 20-percent “flat tax.” What Perry has not emphasized is that taxpayers will have to spend time — and potentially money — calculating which plan benefits them more.

Like Cain, Perry has countered claims his plan will result in disproportionately higher taxes for lower- and middle-income families. As an example, Perry points to the provision in his 20-percent flat-tax plan, where families will be eligible for “generous” exemptions of $12,500.

In his proposal, Perry takes a dig at Cain’s proposal to introduce a federal sales tax and a business value-added tax, which he calls “highly regressive,” and uses the working poor to make his case:

    When added to existing federal income taxes and state and local income sales taxes, a national sales tax would be highly regressive. Low-income families spend a much higher percentage of their incomes on food and gas than do those with considerable wealth. For example, a household earning $25,000 each year would spend roughly 40% of its income on food, utilities, and health care, while a household earning $130,000 each year would pay less than 15% of its income on those three items.

But because Perry would eliminate the EITC, lower- and middle-income earners would still pay more under his plan than they do now. Using calculations made by the Tax Policy Center, The New York Times estimates single parents with two children making $9,700 annually would pay no income taxes under Perry’s plan but would not receive the $4,885 tax credit they receive under current tax law.

Perry, like Cain, would eliminate the capital gains tax.

EFFECT ON WOMEN

To pay for the plan, Perry has suggested cuts in education and nutritional programs for poor children. He has offered various suggestions for reforming Medicare, which include gradually raising the age of Medicare eligibility, alongside a gradual retirement-age increase under Social Security; paying Medicare benefits on a sliding scale based on income; or by creating bundled premium support payments that would go directly to the individual. He has also proposed block-granting Medicaid payments.

Entmacher told TAI that under Perry’s plan, taxes would go up for the working poor and what she calls the “true middle class” — households making no more than $75,000 per year.

“The Perry plan is particularly hard on single heads of households,” Entmacher said. “They do worse than the working poor.”

The others

As for the remaining GOP candidates in the pack, the one expected to win the nomination, former Massachusetts Gov. Mitt Romney, has a vague plan. Former House Speaker Newt Gingrich and Rep. Michele Bachmann (Minn.) have stated support for a flat tax, and all the candidates support eliminating the estate tax.

Romney’s main tax proposal is to end taxes on interest and dividend income for people who earn less than $200,000 a year, but otherwise keep the existing tax system in place. Romney does not support a flat tax or a national sales tax, stating they would largely hurt the middle class. He supports extending most, if not all, of the Bush-era tax cuts.

All of the experts TAI spoke with agreed the tax code needs reforming. With GOP candidates vying for shorter rules in the name of simplicity, Lower-Basch thinks what the tax code actually needs is more tiers and brackets to be more fair, reasoning that households making $250,000 a year should not be taxed the same as those making $1 or $2 million a year.

(Original Post)

By John T. Bennett - 11/06/11 11:28 AM ET

A new report has branded U.S. defense firms with a label that has become a political target, charging that they pay too little in taxes.

American defense manufacturers pay an average annual tax rate of 17.5 percent, placing them in a class with some of the nation’s least-taxed sectors like information technology, telecommunications, financial services and energy, Citizens for Tax Justice and the Institute on Taxation and Economic Policy concluded.

In the joint report, which features data spanning 2008-2010, the groups note the U.S. defense sector “is not exactly an industry, but it is a group that paid notably low tax rates.”

Many defense firms paid less than the mandated 35 percent corporate tax rate, the report found.

“Not only was the 2008-10 effective tax rate on the top 10 defense contractors less than half of the 35 percent official corporate tax rate,” the report states, “but the effective rate fell steadily from 2008 to 2010, from an already paltry 19.3 percent in 2008 to a tiny 10.6 percent by 2010.”

The report comes at a time when Democrats are criticizing some firms for paying low taxes despite raking in big profits, as unemployment remains high and the economy continues to sputter.

Boeing, which also makes commercial aircraft, came in with the lowest tax rate among defense firms at -1.8 percent; SAIC had the highest at 28.7 percent, according to the report.

“While the federal corporate tax code ostensibly requires big corporations to pay a 35 percent corporate income tax rate, on average, the 280 corporations in our study paid only about half that amount,” the organizations write. “Many people will be appalled to learn that a quarter of the companies in our study paid effective federal tax rates on their U.S. profits of less than 10 percent.”

Lockheed Martin, the world’s leading military manufacturer, paid taxes at an average rate of 20.2 percent over the three years. Two other top firms, Northrop Grumman and General Dynamics, paid 23.8 percent and 27 percent, respectively.

Two other top defense firms paid a much lower rate: Raytheon at 13.7 percent and United Technologies paid 10 percent, according to the report.

“Tax matters are very complex, involving issues such as losses, research and development, government contracting, insurance, employment taxes and investments,” the Aerospace Industries Association (AIA) told The Hill in a statement.

In an email, Lexington Institute COO and industry consultant Loren Thompson called the report's branding of companies as tax dodgers that merely "take advantage of legitimate provisions" in federal tax codes "misleading."

"It's like calling families tax dodgers for claiming a deduction on mortgage interest," Thompson wrote. "When Boeing claims an R&D tax credit or writes off investment in a canceled weapons program, that's quite reasonable."


McHugh sees ‘alienation’ among military

There is a growing sense of “alienation” among military service members and their families after a decade of wars in which a minuscule number of Americans have fought, says Army Secretary John McHugh.

Only about “1 percent” of the U.S. population has served in uniform in the Afghanistan and Iraq wars, with the ranks of the all-volunteer military increasingly being filled by several generations of the same families, McHugh told reporters Wednesday.

This “sense of alienation” could have impacts on the military and American society that he said would be “not positive.”

While concerned, the Army secretary said he does not worry about the military “breaking away from its civilian overseers.”

McHugh is not the first Pentagon official to raise such concerns.

While many U.S. citizens have “fond sentiments for men and women in uniform, for most Americans the wars remain an abstraction,” then-Defense Secretary Robert Gates said in a Sept. 29 speech at Duke University. “A distant and unpleasant series of news items that does not affect them personally.”

The former defense secretary warned of “cultural, social, and financial costs in terms of the relationship between those in uniform and the wider society they have sworn to protect.”

Sequestration drama could delay 2013 budget

Lawmakers could wait to void automatic Pentagon cuts that a debt-panel failure would trigger until well after the 2012 election, meaning the final 2013 military spending bill would be passed months late, says a plugged-in defense think tank.

“Enforcement of sequestration — when funding is actually taken out of accounts — does not begin until January 2013,” the Center for Strategic and Budgetary Assessments said in a new report. “This gives Congress a full year to modify, delay, or nullify sequestration.”

Some prominent Republicans, like Senate Armed Services Committee Ranking Member John McCain (Ariz.), have floated the notion of voiding the $600 billion in additional Pentagon cuts that would be set off if the debt panel fails to fashion a plan for $1.2 trillion in federal cuts that both chambers can approve.

“Given that 2012 is a Presidential election year, it is conceivable that should sequestration be triggered Congressional action to alter sequestration may not happen until after the November 2012 election,” CSBA concludes. “A lame-duck session of Congress could delay enforcement of sequestration several months into 2013 to give the next Congress time to develop an alternative. As a result, the 2013 level of funding for defense may not be known until well into the fiscal year [which begins Oct. 1].”

Irregular moment

The U.S. military’s failure to make permanent the lessons about irregular warfare during the Vietnam War are well-known. Military leaders have promised they won’t make the same mistake in the post-Iraq and Afghanistan era.

But an awkward — and rather odd — exchange during a Thursday House Armed Services Emerging Threats and Capabilities subcommittee hearing likely won’t inspire much confidence about such vows.

Subcommittee Chairman Mac Thornberry (R-Texas) asked witnesses from each of the military services whether their branches believe the U.S. military will engage in irregular warfare like that seen in Afghanistan and Iraq for years to come.

The witnesses nodded in unison — but not one uttered a single word.

The scene was a sharp contrast to the full-throated explanations service officials typically give on Capitol Hill when defending their core missions and pet hardware programs.

(Original Post)

Published Sunday, November 6, 2011 2:10 am
by Dennis Maley
 
As several non-partisan analyses have demonstrated, both Herman Cain's 9-9-9 plan and Rick Perry's two-track 20 percent plan would be major revenue drainers for an indebted government, with most of the benefits going to the richest Americans through lower marginal rates, as well as the elimination of capital gains and estate taxes. Mitt Romney, who has tried to somehow position himself as the GOP's champion of "average middle-class Americans," who he says will benefit most from his proposed tax policy, once again has a reality problem.

Romney said in an interview with FOX 13 Tampa Bay this week that he proposes "no tax cuts for the rich" and that his tax cuts focus instead on the middle class. Unfortunately, his middle-class tax cut rhetoric is derived from the idea that middle-class Americans will be able to "keep more of their savings" by avoiding a capital gains tax – a capital gains tax on investments the vast majority don't have. Romney's given no word on where these mythical investment savings would come from, considering inflation-adjusted wages for this group have been flat since the early 70's.

While Romney's plan doesn't drain the government coffers as badly as the other two, it still includes trillions in tax cuts for the richest 1 percent of Americans and large corporations. Romney also seeks to eliminate the estate tax, a very expensive proposition. The estate tax, which is paid only on estates worth over $5 million, after a wide assortment of shelters to avoid it have been maxed out, is paid not only by the richest 1 percent, but the richest one-tenth of one percent. That being said, Romney as “defender of the middle class” seems rather implausible.

Folks, this isn't a partisan issue. It's not a liberal or conservative matter. It's math! For more than three decades, effective tax rates for both corporations and individuals have been at historic lows. The returns are in and it's been a massive failure. IT HASN'T WORKED! Doubling down on a failed philosophy will not somehow reverse its course. Counting isn't a circular exercise. Continuing with such policies will exacerbate the problem and force draconian cuts in services that could leave us unable to perform even the simplest matters of the state. That might not be a problem for someone that continues to hoard more and more wealth through such policies, and if you are in the top half of the one percent and support such an end-game, so be it.

But if you are an average, hard-working American who is sick of Washington spending money irresponsibly and thinks that we are going to get the country back on track by redistributing more wealth upward, your anger is misplaced. That was the logic behind the Bush tax cuts – the ones that have cost us about a trillion dollars without providing the economic growth they promised. Corporate profits are higher than they've ever been in our nation's history and a new report from Citizens for Tax Justice shows that over the last three years, 78 Fortune 500 companies paid ZERO in corporate taxes for at least one of those three years, while 30 of them paid zero ALL THREE OF THEM, despite making over $160 billion in profits!

Personal incomes tell a similar tale. Warren Buffet really does pay less in actual percentage of taxes than his secretary, and the richest hedge fund managers, the top dozen of which "earn" hundreds of millions of dollars annually, pay a rate lower than many school teachers. This isn't science fiction. As a result, income disparity in the U.S. is at its highest since the 1929 crash that spawned the Great Depression. Those realities didn't save us, but instead have resulted in record unemployment, record personal debt, and a sharp curbing of the middle-class consumption that drives this country's economy.

Another news flash: average Americans are deeply affected by that, but multi-millionaires and billionaires aren't. Half of the world still lives on $2 a day or less, can be jailed for unionizing and don't have laws regarding pollution. The super rich can find plenty of undeveloped nations to invest in at a handsome profit with their tax savings. Why on earth do we keep assuming they'll start creating domestic jobs if they get just a little richer, when them doing so is at the expense of the consumers who create the demand from which job creation is originated? Tax cuts should be targeted to those making $250,000 or less, in order to give them more disposable income to drive domestic consumption.

We should focus on closing loopholes that incentivize incorporating subsidiaries and moving revenues to offshore tax havens, getting the largest corporations to pay their fair share and again focus relief on small businesses that are the real domestic job creators. The idea that this one-size fits all approach, where the majority of benefits from cuts go to those who need it least, while a little trickles down to the masses will right our economic ship, is laughable. As I noted, the Bush tax cuts were expensive, though more than half of the benefit went to 5 percent of taxpayers.

There is a well-funded movement among the super rich to systematically decrease their tax liability through a series of cuts in taxes and cuts in services, which in turn allow... you guessed it – more tax cuts. It is based on populist rhetoric about big government, you knowing how to spend your money better than Uncle Sam, and distortions about where most welfare money is spent. It works. It gets a deeply divided citizenry arguing with each other about crumbs falling off the table, while ignoring the bread that is being lifted from their plate.

Finally, we should fix Washington by getting the money out of politics by demanding real campaign finance reform. It's not that government can't inherently do anything right. Amazingly, government can be quite capable when it's not bought and paid for. Publicly-financed elections, in which real Americans that are not beholden to special interests actually have a chance at getting into national office, would be a good start. Banning lobbyists would be another. As for getting spending under control, I like Warren Buffet's idea: “I could end the deficit in five minutes, he told NBC. "You just pass a law that says that anytime there is a deficit of more than three percent of GDP, all sitting members of congress are ineligible for reelection."

The United States is still a very wealthy country, but while the economy has more than doubled since 1980, almost all of the gains have gone to a small class of super rich. If this sort of strategy worked, I wouldn't be writing this column. Let's put our differences aside and start focusing on the real problems in our economy – a lack of consumer demand because too few Americans have shared in the growth they've helped to create. Their earnings are flat, while gas, food and medical inflation have grown exponentially, and as a result, they are too leveraged to consume enough to keep the domestic engine pumping. Too many tax breaks for the super rich helped to cause this, more of them will not make it go away no matter what the gentlemen on the stage tell you.

(Original Post)

By Thomas Grillo
Sunday, November 6, 2011

The union that represents Bay State telephone workers is blasting Verizon following a report that said the telecommunications giant has not paid a penny in taxes for the past three years.

“We wouldn’t mind if Verizon wasn’t paying taxes if they used the money saved to invest in American jobs,” said Myles Calvey, business manager of the International Brotherhood of Electrical Workers union Local 2222. “Instead, while they dodge paying taxes in the U.S., they’re eliminating jobs and opening centers in Mexico and India. They wonder why the union hates them.”

The study, “Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010,” by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, a pair of nonprofits that scrutinize tax policy, examined financial reports from 280 corporations from the Fortune 500 list that were profitable from 2008 thorugh 2010.

Wells Fargo topped the list of U.S. corporations receiving the most in tax subsidies, getting nearly $18 billion in tax breaks from the U.S. Treasury over the last three years.

Pepco Holdings had the lowest effective tax rate of all the companies in the study, at minus 57.6 percent over the three-year period.

Among the other findings, of America’s most profitable companies, 78 of them paid no federal income tax in at least one of the last three years. Of that number, 30 companies — including Verizon — paid nothing in taxes over the period.

But Verizon is fighting back, alleging the figures used in the study are incorrect and charging the “union-orchestrated report is deceptive and politically motivated.”

“Verizon fully complies with all tax laws and pays its fair share of taxes,” said Phil Santoro, a Verizon spokesman in a statement.

He said Verizon paid $1.79 billion in taxes over 2008-2010, and reported earnings of $5.25 billion over this same period. In addition, Verizon has annually invested $16.5 billion in technology infrastructure, Santoro added.

“This investment has created and sustained jobs, so U.S. economic development policy allows for the payment of some taxes to be deferred,” Santoro said. He added that the study’s authors treat deferred taxes as non-existent and fail to account for the $1.79 billion in taxes Verizon paid out over the past three years despite deferrals, and it “incorrectly” calculates earnings for Verizon to include income belonging to Vodafone, Verizon’s partner in Verizon Wireless.

The report found that the average effective tax rate for all 280 companies in the study over the three-year period was 18.5 percent, significantly less than the statutory rate of 35 percent.

Among Massachusetts-based companies, researchers found that BJ’s Wholesale Club and the TJX Cos. paid an average tax rate over three years of 27 percent, while Staples paid 31 percent and Raytheon paid 13.7 percent.

(Original Post)

Linette Lopez | Nov. 6, 2011, 7:32 AM

The corporate tax rate in the U.S. is 35%, but there aren't many companies that end up paying that amount. According to a study by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy, the average tax rate of 280 S&P 500 companies investigated was 18.5% between 2008 and 2010.

Over 70 companies paid no taxes at all.

And then there were the 30 companies that paid less than nothing — we have those for you here.

But first, here's how they get away with it (from the report):

    Accelerated depreciation: "The tax laws generally allow companies to write off their capital investments considerably faster than the assets actually wear out. This “accelerated depreciation” is technically a tax deferral, but so long as a company continues to invest, the tax deferral tends to be indefinite."
    Stock options: Most big corporations give their executives (and sometimes other employees) options to buy the company’s stock at a favorable price in the future. When those options are exercised, companies can take a tax deduction for the difference between what the employees pay for the stock and what it’s worth (while employees report this difference as taxable wages). Paying executives with options took off in the mid-1990s, in part because this kind of compensation was exempt from a law enacted in 1993 that tried to reduce income inequality by limiting corporate deductions for executive pay to $1 million per executive.
    Industry-specific tax breaks. The federal tax code also provides tax subsidies to companies that engage in certain activities.
    Offshore tax sheltering: Over the past decade or so, corporations and their accounting firms have become increasingly aggressive in seeking ways to shift their U.S. profits, on paper, into offshore tax havens, in order to avoid their U.S. tax obligations.

It's also worth pointing out two things: 2008-2009 were strange, anomalous years in corporate history due to the severity of the crisis AND these companies will all counter and say they paid tons of taxes that weren't necessarily income taxes.

(Original Post)

Saturday, November 5, 2011

LARA MARLOWE

AMERICA: THE OCCUPY movement that started in the US seven weeks ago has been described as a shriek of pain by the American middle- class.

That pain was obvious on Thursday, when 2,000 nurses, trade unionists and government employees gathered in Lafayette Park, across the street from the White House, for a demonstration called Occupy the Treasury.

“This is the tipping point,” Ruth Poulin (55), an administrator in a federal health agency told me. “If this [protest movement] doesn’t work, we will have lost the country as we knew it. Now is the time for people to act, if they really care.”

Poulin has a home in the Washington suburbs, but she sleeps in a tent in the Occupy encampment on Freedom Plaza most nights. The protesters’ ranks have been swollen by a contingent of homeless people, who would not otherwise be allowed to have tents.

“When you live in the midst of it, you understand how hard life is and how thin is the line between those who have and those who do not,” Poulin says.

Poulin weeps when she tells me that her 23-year-old daughter works three jobs but cannot meet the interest payments on her student loans, which will dog her well into middle age.

A group of nurses from the Massachusetts Nurses Association complain that all-powerful medical insurance companies force patients out of hospital too soon, insist on replacing nurses with tele-monitors and ration care.

Brian Billiter (50), a nurse, is shocked by the number of retired colleagues in their 60s and 70s who are returning to work because their retirement funds were wiped out by the financial crash.

Billiter’s wife lost her job as a teacher. The couple have difficulty paying their mortgage and live from pay cheque to pay cheque.

Middle class America is being destroyed for the benefit of the super-rich, the nurses tell me. A congressional budget office report released on October 25th showed that the top 1 per cent of earners in the US more than doubled their share of the nation’s wealth in the past three decades.

This week, a report by the non-profit groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy showed that 30 of the US’s top 280 corporations, including General Electric, Dupont, Verizon, Boeing and Wells Fargo, paid no tax from 2008 through 2010.

“They’re squeezing and squeezing us,” says Jane Perkins (56), also a nurse, “but where is that squeeze going? Into somebody’s private airplane?”

A man wearing a sandwich board passes. “The real leeches are on Wall Street,” it says. A young woman with orange dyed hair holds a sign saying “Your system doesn’t f***ing work!”

The march on the White House and treasury was timed to coincide with the G20 meeting in Cannes.

It was co-ordinated with demonstrations in Cannes, Los Angeles and San Francisco to put pressure on leaders to agree to a financial transaction tax or FTT, also known as the Tobin tax – for Nobel Prize-winning economist James Tobin – or the Robin Hood tax.

The previous day, Democratic congressmen proposed a 0.03 per cent tax on stock, bond and derivative trades in the US, but it has no chance of passing. The FTT could provide hundreds of billions of desperately needed dollars for healthcare and social programmes and would put a brake the high frequency, algorithm-generated trading that led to a “flash crash” last year.

In his book Confidence Men , Pulitzer prize-winning author Ron Suskind recounts that President Barack Obama originally backed the FTT, but relented under pressure from his former economics adviser Larry Summers.

Summers has since returned to Harvard, but treasury secretary Timothy Geithner continues to defend Wall Street’s interests within the administration. “Tax Timmy’s Friends” said placards at Thursday’s demonstration.

In Lafayette Park, activists from the nurses’ union staged a skit in which French president Nicolas Sarkozy and German chancellor Angela Merkel tried to convince Geithner to support the FTT.

“The President of Ireland is with us against the 1 per cent!” the young man who played Geithner told me when I said I worked for The Irish Times.

“The president of Ireland made a speech in Cannes supporting the FTT! I saw it on Adbusters!”

The young man had confused Michael D Higgins with Bill Gates, the world’s second-richest man, who had made the speech in Cannes supporting the FTT.

The video that was posted on Adbusters, the Vancouver website that launched the Occupy Wall Street protests, showed a speech in the Dáil by the then TD from Galway last December on the Irish minimum wage, under the headline “President of Ireland Condemns the 1 per cent”.

Michael D’s words foretold exactly the sentiments of Occupy the Treasury protesters this week.

“The economy has been brought to a point of near destruction by a small group of unscrupulous people in the banking sector,” the future president of Ireland said, expressing the wish “that impunity soon come to an end”.

(Original Post)

Most of us don't especially enjoy paying taxes, of whatever kind.

But we realize that taxes are necessary to provide for our national security and to meet other needs that cannot readily be met by the private sector.

So the issue isn't so much whether there should be taxes at all, but whether our taxes are spent wisely and according to the limits laid down by the U.S. Constitution.

Too often, of course, they aren't.

But many people also question whether taxes are levied fairly.

Nearly half of American households pay no federal income taxes at all, though many of the households in that group do pay payroll taxes. Up to 10 percent of U.S. households, however, pay no net federal taxes, according to the Congressional Budget Office.

And now, two groups, Citizens for Tax Justice and the Institute on Taxation and Economic Policy, have said that 30 corporations avoided paying federal taxes from 2008 through 2010. Moreover, the corporations actually made money thanks to complicated tax breaks and loopholes, the organizations stated.

Not surprisingly, some of the companies disputed any suggestion that they are freeloading. And it should be noted that the companies are apparently reducing their taxes through legal means.

Some, for instance, take advantage of federal subsidies for the production of corn-based ethanol. Ethanol harms small engines and increases food prices by diverting corn from the food supply. Can you think of a good reason why Washington should be providing subsidies to promote ethanol production? We can't.

But in general, who do you think is to blame for the maze of tax laws that allows some companies to avoid paying federal taxes? Isn't it the lawmakers in Congress who enacted those laws?

Some will see this latest report as reason to blast "corporate greed." But do most Americans at any income level simply reject tax breaks and deductions when they are offered?

Shouldn't the message be that it is time to overhaul our tax code and make it simpler and more transparent -- and slash the hundreds of billions of dollars that must be spent by the American people every year on tax compliance?

(Original Post)

PSC hearings draw out some of same issues as the occupy movement

November 05, 2011|By Jean Marbella, The Baltimore Sun

You might have seen the news footage of the guy in the orange construction vest who a couple of weeks back angrily yelled at the Occupy Baltimore encampment that he was "working his butt off to support you guys," apparently referring to the unemployed among them.

If he really wanted to protest where his tax money may be going, he could have walked a couple of blocks from McKeldin Square. The findings of a new study indicate that because of corporate tax breaks, rebates and loopholes, many Fortune 500 companies pay little or no federal income taxes on their profits.

But then, that would raise other problems for the guy, including, (a) he probably wouldn't get past security guards at any corporate offices, and (b) Baltimore has only one remaining Fortune 500 company, Constellation Energy, and it's in the process of merging with the Chicago-based energy giant, Exelon Corp.

The proposed corporate nuptials, which at $7.9 billion dwarf even Kim Kardashian's recent and already defunct $10 million wedding, is under review by the Maryland Public Service Commission. The agency has some sway here — akin to wedding guests asked to speak now on any objections to the union or forever hold their peace — because Constellation is the parent company of BGE, which as a local utility answers to state regulators.

The agency is holding public hearings, which began last week and continue this week, before it decides whether to give its blessing. By accident of the calendar, the hearings are offering a glimpse into a local corporate boardroom at a time when the occupy movement has been shining its flashlight big business, and what it sees as culpability in the recession and in the well-documented rise in income disparities.

The big news so far came Thursday, when Exelon executive Christopher M. Crane said some 600 corporate jobs would be lost in the merger. While hedging on where these cuts would come, Crane acknowledged what everyone already knows: Given that Exelon is buying Constellation, and that the headquarters of the newlyweds will be in Chicago, the cuts will be "most impactful" in Baltimore.

Well, no kidding. We've seen this movie before, even down to the same starring role played by Mayo A. Shattuck III, the Constellation chief who was president of Alex. Brown when the legendary investment firm was bought first by Bankers Trust and then by Deutsche Bank, each acquisition leading to hundreds of jobs either being cut or transferred out of its hometown.

And yet Shattuck's reputation as a corporate superstar has only grown over the years, providing Baltimore with its own version of what the occupy movement has been protesting: the kind of corporate culture that rewards top execs with huge salaries and bonuses even as underlings get laid off.

Constellation has been assuring us that the merger would be "net jobs positive," but critics say some of those jobs gained would be temporary construction ones, not the kind of more permanent positions a corporate headquarters offers. The savings in merging two companies into one, of course, come in eliminating overlap.

Big corporations appear to be saving on taxes as well, according to a new study by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, which have been described as liberal-leaning research and advocacy groups. That may well lead to their findings, which are based on SEC filings, to be dismissed by some. Interestingly enough, though, these are the same groups that in the 1980s issued widely praised reports that helped lead to the 1986 tax reform act that closed corporate loopholes and was signed by President Ronald Reagan.

But since then, according to the study, large companies are managing to pay less than the official 35 percent corporate income tax rate, often through favorable legislation they've successfully lobbied for in Congress. Some even have a negative tax rate, courtesy of various subsidies and rebates, the report says.

Wells Fargo, for example, was found to have received the most tax subsidies, almost $18 billion over the last three years. Yes, the Wells Fargo that drew notoriety for its high-interest subprime "ghetto loans," as one company loan officer called them when questioned as part of a lawsuit filed by the City of Baltimore.

(Companies that have responded to the study have said it's distorted or that the groups have an agenda or simply that they comply with the current tax code and pay what is required.)

While the study looked at more than half of the Fortune 500 companies of the last three years, Constellation wasn't among them. The groups only included the companies that had profits each of those years, and the local — for now — energy company posted a loss of $982.6 million last year.

Its counterpart to the south, Pepco Holdings, was found by the study authors to have the lowest effective tax rate over the three years, in the negative range, so maybe the guy who wants to yell about where his taxes go may have to travel a little further from McKeldin Square.

(Original Post)

Written by Clark Kauffman 10:27 PM, Nov. 5, 2011

Report: Wells Fargo BENEFITS FROM $18 billion in tax breaks

Seventy-eight of the nation’s most profitable corporations paid no federal income tax at some point over the past three years, according to a new study.

The Citizens for Tax Justice and the Institute on Taxation, a nonprofit advocacy group that says it fights against “the armies of special interest lobbyists for corporations and the wealthy,” profiled 280 of America’s most profitable companies in a report issued last week. The report shows that 30 of those companies enjoyed a negative income tax rate over the three-year period despite combined profits of $160 billion.
The report comes at a time when corporations are lobbying for lower state and federal corporate tax rates and an exemption for any profits they shift offshore.

Among the report’s findings:

Wells Fargo tops the list of 280 U.S. corporations receiving the most in tax subsidies, collecting nearly $18 billion in tax breaks from the U.S. Treasury in the last three years.

The average effective tax rate for all 280 companies in 2009-10 was 17.3 percent, about half the “official” corporate rate of 35 percent that’s spelled out in federal law.

Some companies within a specific industry have fared better than others in terms of their tax bill. The tax rate for FedEx, for example, was less than 1 percent over the three-year period, while its competitor, UPS, paid 24 percent.

Wells Fargo executive Don Dana stood smiling in the ballroom of Philadelphia’s Sheraton Society Hill Hotel. He was there to accept an award from the federal government.

After shaking hands with a top administrator from the Environmental Protection Agency, Dana gripped a plaque naming Wells Fargo the federal agency’s 2007 Green Power Partner of the Year, then posed for a photo.

At the same time, lawyers working for the federal government were gathering evidence for a case involving what they would later call a “raid on the federal treasury” as they argued that Dana engineered a way for Wells Fargo to avoid $80 million in taxes.

To hear the Justice Department lawyers tell it, Dana had falsified records and constructed a “sham real estate company” that was designed to “hoodwink” regulators and effectively eliminate any federal income tax on the $400 million in capital gains Wells Fargo posted between 1996 and 1998.

Dana, the top real estate executive in Wells Fargo’s San Francisco headquarters, later acknowledged he helped structure the real estate company to include an executive officer bonus plan, even though the company had no employees. Under that plan, Dana personally collected a $3.4 million bonus.

A four-year legal battle ended in September when a federal judge ruled that Wells Fargo was not entitled to claim an $80 million reduction in its tax bill due to what the bank claimed was a loss from the sale of stock.

“The purported $423 million loss on the stock sale is fictitious,” ruled U.S. District Judge John Tunheim. Wells Fargo’s claim had no real purpose “other than tax avoidance,” he added.

Spokesman Ancel Martinez said Wells Fargo is disappointed with the decision because the company believes it engaged in a legitimate business transaction and the government owes it a tax refund.

“Wells Fargo and its executives, including Don Dana, acted appropriately and in the best interest of the company’s shareholders,” Martinez said. He added that Dana’s bonus was the result of five years of work and was “a small percentage of the cost savings realized by Wells Fargo and its shareholders.”

Tunheim’s decision against Wells Fargo was handed down in Minneapolis the same day a federal judge in Iowa disallowed $21 million in tax credits claimed by Principal Life Insurance. Wells Fargo employs about 13,000 workers in metro Des Moines, but the tax credit case did not involve its operations that are headquartered in Iowa.

Dana declined to comment on the case. But during the trial, he argued that he and others at Wells Fargo had acted in good faith.

“Mistakes were made,” he testified. “I can’t represent here that we’re perfect.”
'99.9 percent chance' of failing an IRS audit

The tax shelter that Dana and Wells Fargo constructed had its seeds in the company’s 1996 acquisition of First Interstate Bancorp, another financial services company, according to court records.

Shortly after the deal was finalized, Wells Fargo realized that it had seriously underestimated the costs associated with combining the two companies’ real estate portfolios.

Wells Fargo had been saddled with an enormous supply of excess real estate it didn’t need but was obligated to continue renting. Many of the properties were underwater, meaning that the long-term expenses exceeded any revenue they might generate. Court records indicate the losses tied to those properties were projected to hit $1 billion — far more than the $360 million Wells Fargo had anticipated.

Dana, as the company’s real estate chief, was looking for ways to cut the company’s losses when the accounting firm of KPMG approached Wells Fargo with an offer to help — for a price.

In exchange for $3 million, KPMG’s Total Tax Minimization Group would design and implement a transaction that would help solve the real estate problem: The underwater leases would be transferred to a Wells Fargo subsidiary, creating — if only on paper — a capital loss of $423 million that would offset the company’s capital gains. That would reduce Wells Fargo’s tax burden by at least $80 million.

Court records show KPMG cautioned that Wells Fargo needed to have some legitimate business purpose for the transaction that would withstand IRS scrutiny.

Wells Fargo agreed to the deal in August 1998. Dana then drafted a memo stating a business purpose for the arrangement: more effective management of the real estate.

Another Wells Fargo executive, Dan Vandermark, dismissed the memo as “bull----,” court records show. A KPMG email from that time indicates Vandermark thought Wells Fargo had “a 99.9 percent chance of losing” a tax audit unless the company could bolster its claim of a legitimate business purpose to the deal.

Dana circulated a new memo in September 1998 that offered an additional rationale for the deal: With the real estate transferred to a subsidiary that operated under a different name, Wells Fargo could insulate itself from “greedy landlords” who, because they were good customers of the bank, felt they could charge the bank higher rent. The Department of Justice would later describe this as “nothing more than a subterfuge employed to deceive the bank’s own best customers.”
CEO didn't read documents he OK'd

Eventually, Dana’s memo describing the plan’s purported business purpose grew to 50 pages. It was signed and approved by Dick Kovacevich, Wells Fargo’s chief executive officer at the time. Kovacevich, who collected up to $38 million in annual pay as CEO, later testified the business plan was “unfamiliar” to him.

He explained that he signed documents that “most of the time” he never even read.

In 2005, the IRS audit that concerned Vandermark came to pass.

Court records show Dana emailed a colleague and indicated he was confident the company would prevail.

“If we win against the IRS, or even settle, it’s a lot of money directly to the bottom line,” he wrote. “I feel that the business case is strong and I’m prepared to defend it vigorously in any administrative or judicial process.”

When the IRS rejected the company’s arguments and sought payment of $80 million in taxes, Wells Fargo fought back by suing the federal government. The stakes were high and the outcome would have implications that extended far beyond Wells Fargo’s deal with KPMG.

But federal authorities told the judge the real estate deal was a “meaningless paper transaction designed to create a $100 million tax benefit.” They alleged that Dana had backdated some documents, and created a “phony” letter in which Wells Fargo agreed to hire KPMG — one that didn’t imply the deal was a tax dodge purchased from KPMG for $3 million.

Tunheim, the Minnesota-based judge, agreed. He ruled that Wells Fargo was not entitled to the tax refund it was seeking.

The bank says it’s now weighing its options. As for the allegedly “phony” written agreement with KPMG, the bank describes it as “a straightforward communication between the two parties.”

KPMG’s Total Tax Minimization business, meanwhile, is no more. After a series of congressional hearings and indictments, KPMG admitted to criminal wrongdoing in selling fraudulent tax shelters to its clients.

Those fraudulent tax shelters cost the U.S. Treasury $2.5 billion — the equivalent of $21.74 for every household in America.

(See Original Video)

Uploaded by AlJazeeraEnglish on Nov 4, 2011

(Original Post)

The Center for Public Integrity

By John Dunbar, iWatch News

Posted: 11/4/11 11:01 AM ET

Five banks that received federal bailout funds during the financial crisis paid no income tax at least one year between 2008 and 2010 according to an iWatch News analysis of a new study of tax dodgers.

Wells Fargo & Co., Goldman Sachs Group, PNC Financial Services Group, Capital One Financial Inc. and State Street Corp. were among 78 of America's largest and most profitable corporations that managed to avoid paying income tax in at least one of those years.

Researchers looked at 280 corporations that reported total pretax U.S. profits of $1.4 trillion. The federal corporate tax code "ostensibly requires big corporations to pay a 35 percent corporate income tax rate, on average, the 280 corporations in our study paid only about half that amount."

The study was released Thursday by nonpartisan advocacy groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy.

All five financial institutions named were profitable, but still received funds in the form of stock purchases from the Treasury Department's Troubled Asset Relief Program.

Wells Fargo received the greatest benefit among all 280 companies studied. If the bank were assessed at the usual 35 percent corporate income tax rate, it would have paid the IRS nearly $18 billion, the study said. The banking giant paid no taxes in 2009.

Wells Fargo was also among the most profitable corporations on the list, having collected $21.8 billion in profits over the three-year span. Wells Fargo received a $25 billion government investment in October, 2008 from the TARP program and paid the government back, plus a $2 billion profit, according to Treasury Department records.

In a statement, Wells Fargo disputed the report's finding and accused the authors of taking "data out of context to advance an agenda." The company says that over the past 10 years it has paid more than $30 billion in income taxes to federal and state authorities, billions more in other taxes and "it fulfills all tax obligations."

As to the finding that the company paid no income tax in 2009, the company says the years cited by the study were unusual and reflect "significant losses as a consequence of its acquisition of Wachovia" in December 2008. The purchase of the troubled bank reduced Wells Fargo's taxable income. Based on results for the first three quarters 2011, Wells Fargo "expects to pay significant income taxes for 2011."

Goldman Sachs also received government money under the TARP program in the form of a $10 billion investment. It paid it back plus $1.4 billion. The investment bank paid no income taxes in 2008, the same year of the TARP infusion. Over the three-year period Goldman reported $4.9 billion in profit, according to the study.

The other TARP recipients named:

    PNC Financial Services Group received an investment of $7.6 billion from the government and paid it back, plus $745 million. PNC's three-year profit was just under $8 billion. It paid no income tax in 2009 and 2010, according to the study.
    State Street Corp. received $2 billion from the government and paid it back, plus $124 million. The company's three-year profit was $731 million. It paid no income tax in 2010, according to the study.
    Capital One Financial Corp received a $3.6 billion investment and paid it back, plus $254 million. The company's three-year profit was $1.3 billion. It paid no income tax in 2010, according to the study.

A PNC spokesman said the bank "strictly adheres to the tax code" and that for 2009 and 2010 it recorded approximately $1.8 billion in federal income tax expenses. A spokeswoman from Capital One said the bank "fulfills all tax obligations" and that the in the three years, it paid "$2 billion in taxes to federal, state, and foreign jurisdictions" as well as $300 million in taxes for 2010.

Goldman Sachs and State Street did not respond to a request for comment.

Robert McIntyre, director of Citizens for Tax Justice and the report's lead author said tax breaks enjoyed by the companies that paid less than 35 percent amounted to "wasted money that could have gone to protect Medicare, create jobs and cut the deficit."

This story has been updated.

(Original Post)

Tyler Kingkade

WASHINGTON -- Outraged by a new report about America's largest corporations dodging their taxes, small business owners are orchestrating a new campaign to pressure the congressional super committee into delivering a legislative fix.

Twenty-five companies, led by Wells Fargo, AT&T, and Verizon, enjoyed a combined $114.8 billion in tax breaks from 2008 to 2010, according to a joint study by Citizens for Tax Justice and the Institute on Taxation and Economic Policy released Thursday. Of 280 Fortune 500 companies the report examined, analysts detailed a combined $222.7 billion in tax subsidies.

Wells Fargo collected $681 million from taxpayers after making $49.3 billion in profits in 2008-10. Verizon Communications earned $32.5 billion over the same period, but got an extra $951 million back from taxpayers.

Wells Fargo told The Huffington Post the data in the report was taken out of context, just as General Electric did on Thursday.

"The truth is that over the past 10 years Wells Fargo has paid more than $30 billion in income taxes to federal and state authorities and billions more in other taxes, and it fulfills all tax obligations," Ancel Martinez, a spokesperson for Wells Fargo, said in a statement. "The years cited by the study were unusual for Wells Fargo, as results included significant losses as a consequence of its acquisition of Wachovia [12/31/08], which when realized reduced Wells Fargo's taxable income."

Martinez added Wells Fargo expects to pay significant income taxes in 2011.

But that's not enough for some small business owners.

Jody Gorran, owner of Aquatherm Industries Inc., which employs 45 people in Lakewood, N.J. to manufacture solar panels, called it "unconscionable." Gorran told HuffPost he felt like small businesses are bearing the brunt of the business tax burden "simply because a large corporation [has] potentially hundreds of accountants looking to minimize their tax liability."

"It's crazy, it's like creating this false dichotomy as if it were reality [that taxes are too high]," Gorran said. "We pay that rate [35 percent] but no one else seems to bother."

Business for Shared Prosperity, the Main Street Alliance and the American Sustainable Business Council sent a letter this week to super committee members charged with finding ways to reduce the deficit asking them to make the corporate income tax more equitable.

"The tax code should promote a level playing field between large multinational corporations and smaller, domestic businesses," the letter read. "We need to close loopholes that allow large multinational corporations to avoid their tax obligations by shifting U.S. profits offshore, rather than rewarding firms engaging in this practice with either short or permanent tax holidays."

"Big Business is getting away with taxation murder," said Frank Knapp, president and CEO of the South Carolina Small Business Chamber of Commerce, in a statement. "They pay little or no taxes on massive U.S. profits and then have the gall to lobby for lowering the 'high' corporate tax rate. They’re even campaigning for a tax holiday to 'repatriate' profits they have stashed offshore to avoid taxes. Patriots pay their taxes; they don’t dodge them."

The number of corporations paying no corporate income taxes has doubled since 2008, the group of tax policy think tanks found. And much to the chagrin of Occupy Wall Street protesters, the financial industry has taken $37.45 billion in tax subsidies from 2008 to 2010. When asked by The Huffington Post if this validates the protesters' anger, Robert McIntyre, director for Citizens for Tax Justice said "I'm sure they'll be interested in it."

"There are vast disparities within industries and between industries. The playing field is clearly not level," said Rebecca Wilkins, senior counsel for Citizens for Tax Justice.

When Ronald Reagan took office, corporations were dealing with a 14 percent effective tax rate. After Reagan signed tax reform into law in 1986, closing loopholes, he left office with an effective tax rate of 26.5 percent. Today, federal corporate taxes have dipped to an all-time low.

"We're now in a situation much like we faced way back then," McIntyre said, adding "This is just as unacceptable as it was back in the 1980s."

House Republicans have been pushing to scale the corporate income tax rate from 35 percent to 25 percent. But by the Joint Taxation Committee's calculations, the lowest revenue neutral number they could get to is 28 percent. Even that would cause difficulties.

"You want to have a lower tax rate from 35 percent down to 25 percent? Well, fine, but eliminate the loopholes. … This takes you into discussions into off-shoring of jobs and profits and the whole issue of repatriation," Gorran said, referring to the corporate practice of stashing money abroad to avoid paying U.S. taxes.

Sen. Carl Levin (D-Mich.) studied through the Senate Joint Taxation Committee how much it would cost for a tax holiday to let companies bring their money back from off-shore accounts. They concluded it would cost taxpayers upwards of $80 billion to bring $4 billion in corporate cash currently stashed abroad back into the U.S.

"It is also unfair to the 96 or 97 percent of the companies that keep their operations here. For them to compete with companies who are paying a 5 percent tax rate as they move their jobs overseas while they're paying up to a 35 percent corporate tax rate is unfair to the companies that stay," Levin said in October. "So that kind of preference to the few at the expense of the many is one of the reason we've got so much frustration and so much anger in this country."

A majority of layoffs in 2011 have come from state governments, which have been devastated by the lack of revenue. With this income off the table thanks to federal tax law, states lose the ability to tax it. And states have seen an unprecedented drop in revenue, with declines beyond what they saw during the Great Depression.

McIntyre said Citizens for Tax Justice and the Institute on Taxation and Economic Policy plan to issue a follow-up report that takes a closer look at state corporate income taxes.

(Original Post)

A report by two left-leaning advocacy and research groups concludes that a majority of companies surveyed paid only about half of the 35% corporate income tax rate over the last three years.

By Tiffany Hsu, Los Angeles Times

November 4, 2011

Many of the nation's most profitable companies are paying far less than the government's 35% corporate income tax rate, with dozens paying no taxes at all, according to a controversial new report.

Left-leaning advocacy and research groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy examined 280 companies and concluded that they paid an average rate of 18.5% from 2008 through 2010 — about half the official rate.

Several firms mentioned in the report lashed out at the findings.

General Electric Co., which according to the study averaged a negative 45.3% tax rate over three years due in part to nearly $8.4 billion in tax subsidies, accused the report of being "inaccurate and distorted" and said that it expected to pay 30% in overall tax this year.

Verizon Wireless said the study, which called out the company for landing $12 billion in tax breaks, was "union-orchestrated" as well as "deceptive and politically motivated." The broadband giant said that it paid $1.8 billion in taxes over the three-year period.

The study was culled from Fortune 500 firms that had been profitable for each of the last three years. Report authors said their findings were not meant to be "anti-business."

They concluded that only a quarter of the companies it surveyed forked over close to 35% of their U.S. profits, while another quarter of the 280 firms paid less than 10%.

The report also found that 78 companies paid nothing — or had a negative tax rate — for at least one year because of nearly $223 billion in tax breaks, 17% of which went to the financial services industry. Thirty companies went tax-free for all three years, researchers found.

Wells Fargo alone received nearly $18 billion in tax breaks during the period, researchers found.

The bank said in a statement that the period noted in the study was "unusual" because of the company's significant losses and acquisition of the Wachovia financial services company, which reduced taxable income.

Wells Fargo added that it "fulfills all tax obligations" and expects to pay heavy income taxes this year, saying that the report "takes data out of context to advance an agenda."

In addition to federal income taxes, corporations are also on the hook for state and local income taxes as well as sales, property and payroll taxes, said Will McBride, an economist with the nonpartisan Tax Foundation research group.

For all but three years from 1994 through 2008, corporations paid out more in taxes than they pulled in through after-tax profits, he said in a statement.

(Original Post)

Andrew S. Ross, Chronicle Columnist

Friday, November 4, 2011

More grist for the anticorporate mill.

Thirty major U.S. public companies, including San Francisco's PG&E Corp. and Wells Fargo & Co., paid no federal taxes over the past three years, according to a report released Thursday. A number of them, notably Wells Fargo, also benefited greatly from various tax subsidies.

A number of other Bay Area companies appear not to have paid their fair share - i.e, less than half the nominal 35 percent corporate tax rate - including Hewlett-Packard, Yahoo and Levi-Strauss.

The report, compiled by an advocacy group, Citizens for Tax Justice and the nonpartisan Institute on Taxation and Economic Policy, examined corporate financial statements from 280 companies on the Fortune 500 list, all of whom were profitable during the 2008-10 period.

"These 280 corporations received a total of nearly $223 billion in tax subsidies," said Robert McIntyre, director at Citizens for Tax Justice and the report's lead author. "This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit."

But other companies seem to be paying their fair share and more. And some companies have questioned the report's accuracy and say the tax breaks have been used for legitimate and positive purposes.

Fourth on the list of non-payers, for example, is PG&E, which according to the study paid no federal income tax on combined profit of $4.85 billion, while netting more than $1 billion in tax breaks over the three-year period. "This goes back to measures to stimulate the economy, allowing for accelerated depreciation to encourage investment," said Brian Herzog, a spokesman for PG&E. "We used the money to make large-scale capital investments in infrastructure, as Congress intended.

"And we're able to use those tax savings instead of raising money in the capital markets, the costs of which would generally be passed along to consumers," he said.

Accelerated depreciation was one of the chief ways companies were able to pay so little in federal taxes, along with stock options, tax shelters and industry-specific tax breaks, according to the report.

Context: Topping the tax savings list was Wells Fargo, which received $18 billion in tax savings over three years while making $48 billion in profit.

Wells Fargo spokesman, Ancel Martinez, said the report "takes data out of context to advance an agenda."

"Over the past 10 years, Wells Fargo has paid more than $30 billion in income taxes to federal and state authorities and billions more in other taxes, and it fulfills all tax obligations. The years cited by the study included significant losses from its (2008) acquisition of Wachovia, which when realized reduced Wells Fargo's taxable income.

"Based on results for the first three quarters 2011, Wells Fargo expects to pay significant income taxes for 2011," said Martinez.

HP, which paid just 3.7 percent of its taxable profit over the three-year period, according to the report, declined to comment. Yahoo (8.7 percent) and Levi Strauss (10.2 percent) did not respond to requests for comment Thursday afternoon.

Paying up: Some tax analysts say there can often be a difference between corporate financial statements, which formed the basis of the report, and actual tax returns, and that major corporations often count state, local and, where applicable, foreign taxes, amongst others, into their "effective" tax rate.

According to a recent analysis of IRS data by the nonpartisan Tax Foundation, the effective corporate tax rate from 2003 to 2008 stood at 26 percent of pretax profit. In 2008, as in most years, it said, "taxes paid exceeded after-tax profits."

As itemized in the CTJ/ITEP report, Clorox, headquartered in Oakland, paid 26 percent over the past three years.

Other Bay Area companies joining Clorox in the fairer share list include Chevron and Safeway (24 percent); Visa (28 percent); Oracle (29 percent); Apple, Intel and Charles Schwab (31 percent); Ross Stores (34 percent); and Gap (40 percent).

The economic sector paying the most in total taxes (average, 30 percent) was wholesale and retail - with the exception of Amazon.com, whose business model has long rested on not paying state sales taxes. The online behemoth paid a rate of only 7.9 percent on its $1.8 billion in profit from 2008 to 2010.

(Original Post)

Nov 4th 2011, 16:06 by The Economist Online

The statutory federal income tax rate for big American companies is 35%. But a study by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy, two Washington, DC-based think-tanks, has assessed the tax records of 280 companies from the Fortune 500 list with reliable pre-tax profit reports. Among these companies the average effective tax rate between 2008-10 was only 18.5%. While 71 companies paid over 30% of their profits in federal income tax, 30 enjoyed negative tax rates over the whole three year period. Pepco, an electricity company, had the lowest effective tax rate of -57.6%. Wells Fargo, a bank, received the biggest tax subsidy over the three years of almost $18 billion, and was one of 25 companies which took more than half of the total $223 billion subsidy claimed. In at least one of the three years, 78 firms paid no or negative tax rates, and legally-by writing off capital investments before they actually wear out (known as "accelerated depreciation"), making use of tax deductible stock options and industry-specific tax breaks, and offshore tax havens.

(Original Post)

WASHINGTON -- Memphis-based FedEx Corp. paid no corporate income taxes in 2008 and International Paper Co. paid none last year, according to a study by Citizens for Tax Justice and the Institute on Taxation and Economic Policy released Friday.

By Bartholomew Sullivan

Posted November 4, 2011 at 5:26 p.m., updated November 4, 2011 at 9:51 p.m.

FedEx crisis media relations spokesman Shea Leordeanu called the report "misleading and inaccurate," saying accelerated depreciation deductions accounted for the anomaly.

International Paper attributed its low tax rate to a change in tax law permitting 100 percent expensing of capital spending and contributions to its employee pension plan.

The report, "Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010," follows the public interest group's prior landmark studies of corporate taxation that have in the past led to substantial reforms.

Friday's report indicates that while corporations are supposed to pay taxes of 35 percent of their incomes, the effective tax rate for the 280 companies examined over three years averaged less than half that amount: 17.3 percent.

It found 67 of those companies paid a less than 10 percent rate over that period and 30 paid less than zero.

The AFL-CIO and other groups embraced the report's findings which come as the Joint Select Committee on Deficit Reduction approaches a Nov. 23 deadline to reduce the U.S. budget by $1.2 trillion over 10 years or face automatic spending cuts.

The report also makes the argument that huge public subsidies to some of the most profitable Fortune 500 companies are both unnecessary in spurring the economy and bad and unfair public policy.

It notes that corporate taxes paid for more than a quarter of federal outlays in the 1950s and a fifth in the 1960s but fell to just 6 percent last year.

"If we are going to get our nation's fiscal house back in order, increasing corporate income taxes should play an important role," the report by Robert McIntyre, Matthew Gardner, Rebecca Wilkins and Richard Phillips says.

The report notes that, over three years, FedEx made $4.24 billion in profits domestically and paid a 0.9 percent effective corporate income tax rate, raising $37 million, while its foreign profits of $1.37 billion were taxed at a 44.9 percent rate, raising $619 million.

International Paper made $1.4 billion in domestic profits over the same three-year period, paid 9.4 percent in corporate income taxes of $138 million. Overseas profits of $1.1 billion were taxed at 19.1 percent, raising $227 million.

The report blames "relentless corporate lobbying, threats and campaign support" for the state of affairs and notes that, while Ronald Reagan reduced corporate loopholes in the mid-1980s, "politicians who claim to be Reagan's disciples" and who are opposed to government subsidies that interfere with market incentives are behind efforts to reduce corporate tax burdens.

"Besides being unfair, the fact that the government is offering much larger tax subsidies to some companies and industries than others is also poor economic policy," the report says.

"Most of the time, tax breaks don't have much effect on business behavior. After all, companies don't lobby to have the government tell them what to do. Why would they? Instead, they ask for subsidies to reward them for doing what they would do anyway. Thus, to a large degree, corporate tax subsidies are simply an economically useless waste of resources."

In response to a request from The Commercial Appeal, FedEx released a statement:

"FedEx is a full rate taxpayer and pays all taxes owed to local, state and federal governments. The FedEx tax information cited by these various groups is misleading and inaccurate. It does not reflect the substantial level of federal taxes we do pay. Nor does it reflect the fact that large amounts of our federal income taxes in recent years have simply been deferred to later years due to accelerated depreciation deductions on new investments we made.

"The simple fact is this: FedEx has paid $3.5 billion in federal income tax in the last 10 years alone. We have not reported an effective tax rate of less than 35 percent in more than 20 years.

"FedEx has been a job and economic growth engine across the U.S. by investing billions of dollars even during a soft economy. By purchasing large capital items from U.S. companies, we keep Americans working. The tax activists refer to years during which our federal cash income tax was lower than normal because of depreciation deductions we received from these job-creating significant capital investments and a very large cash contribution to our employee pension fund, which reinvests in our team members' future.

"In the past few years, we have committed several billion dollars to buy new aircraft, trucks, computer equipment and services, facilities and environmental infrastructure such as solar panel installations. Major investment-level purchases create even more jobs for American workers."

In a prepared statement, International Paper spokesman Patty L. Neuhoff said: "International Paper takes its obligation to comply with all federal, state and local tax laws very seriously.

"The two primary factors that contributed to our low tax rate in 2010 were a $1.1 billion payment in pension contributions, and a change in law to stimulate the economy by allowing 100 percent expensing for capital spending.

"IP spent several hundred million dollars in capital in our U.S. operations in 2010. The combination of the pension payment and capital expenditures resulted in high deductions and low tax rate for 2010."

(Original Post)

WASHINGTON -- Memphis-based FedEx Corp. paid no corporate income taxes in 2008 and International Paper Co. paid none last year, according to a study by Citizens for Tax Justice and the Institute on Taxation and Economic Policy released Friday.

By Bartholomew Sullivan

Posted November 4, 2011 at 5:26 p.m., updated November 4, 2011 at 9:51 p.m.

FedEx crisis media relations spokesman Shea Leordeanu called the report "misleading and inaccurate," saying accelerated depreciation deductions accounted for the anomaly.

International Paper attributed its low tax rate to a change in tax law permitting 100 percent expensing of capital spending and contributions to its employee pension plan.

The report, "Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010," follows the public interest group's prior landmark studies of corporate taxation that have in the past led to substantial reforms.

Friday's report indicates that while corporations are supposed to pay taxes of 35 percent of their incomes, the effective tax rate for the 280 companies examined over three years averaged less than half that amount: 17.3 percent.

It found 67 of those companies paid a less than 10 percent rate over that period and 30 paid less than zero.

The AFL-CIO and other groups embraced the report's findings which come as the Joint Select Committee on Deficit Reduction approaches a Nov. 23 deadline to reduce the U.S. budget by $1.2 trillion over 10 years or face automatic spending cuts.

The report also makes the argument that huge public subsidies to some of the most profitable Fortune 500 companies are both unnecessary in spurring the economy and bad and unfair public policy.

It notes that corporate taxes paid for more than a quarter of federal outlays in the 1950s and a fifth in the 1960s but fell to just 6 percent last year.

"If we are going to get our nation's fiscal house back in order, increasing corporate income taxes should play an important role," the report by Robert McIntyre, Matthew Gardner, Rebecca Wilkins and Richard Phillips says.

The report notes that, over three years, FedEx made $4.24 billion in profits domestically and paid a 0.9 percent effective corporate income tax rate, raising $37 million, while its foreign profits of $1.37 billion were taxed at a 44.9 percent rate, raising $619 million.

International Paper made $1.4 billion in domestic profits over the same three-year period, paid 9.4 percent in corporate income taxes of $138 million. Overseas profits of $1.1 billion were taxed at 19.1 percent, raising $227 million.

The report blames "relentless corporate lobbying, threats and campaign support" for the state of affairs and notes that, while Ronald Reagan reduced corporate loopholes in the mid-1980s, "politicians who claim to be Reagan's disciples" and who are opposed to government subsidies that interfere with market incentives are behind efforts to reduce corporate tax burdens.

"Besides being unfair, the fact that the government is offering much larger tax subsidies to some companies and industries than others is also poor economic policy," the report says.

"Most of the time, tax breaks don't have much effect on business behavior. After all, companies don't lobby to have the government tell them what to do. Why would they? Instead, they ask for subsidies to reward them for doing what they would do anyway. Thus, to a large degree, corporate tax subsidies are simply an economically useless waste of resources."

In response to a request from The Commercial Appeal, FedEx released a statement:

"FedEx is a full rate taxpayer and pays all taxes owed to local, state and federal governments. The FedEx tax information cited by these various groups is misleading and inaccurate. It does not reflect the substantial level of federal taxes we do pay. Nor does it reflect the fact that large amounts of our federal income taxes in recent years have simply been deferred to later years due to accelerated depreciation deductions on new investments we made.

"The simple fact is this: FedEx has paid $3.5 billion in federal income tax in the last 10 years alone. We have not reported an effective tax rate of less than 35 percent in more than 20 years.

"FedEx has been a job and economic growth engine across the U.S. by investing billions of dollars even during a soft economy. By purchasing large capital items from U.S. companies, we keep Americans working. The tax activists refer to years during which our federal cash income tax was lower than normal because of depreciation deductions we received from these job-creating significant capital investments and a very large cash contribution to our employee pension fund, which reinvests in our team members' future.

"In the past few years, we have committed several billion dollars to buy new aircraft, trucks, computer equipment and services, facilities and environmental infrastructure such as solar panel installations. Major investment-level purchases create even more jobs for American workers."

In a prepared statement, International Paper spokesman Patty L. Neuhoff said: "International Paper takes its obligation to comply with all federal, state and local tax laws very seriously.

"The two primary factors that contributed to our low tax rate in 2010 were a $1.1 billion payment in pension contributions, and a change in law to stimulate the economy by allowing 100 percent expensing for capital spending.

"IP spent several hundred million dollars in capital in our U.S. operations in 2010. The combination of the pension payment and capital expenditures resulted in high deductions and low tax rate for 2010."

(Original Post)

By Patty Murray, Wisconsin Public Radio

Two reports show some of the nation's--and Wisconsin's--largest companies pay little or no corporate income taxes.

The left-leaning group Citizens for Tax Justice looked at regulatory filings of 280 companies. It found many paid only about ten percent in federal corporate income taxes, and 30 paid nothing.

Those findings mirror a smaller report by the Institute for Wisconsin's Future which calls itself a non partisan research group. For the last five months the group has picked different Wisconsin companies and examine their state corporate tax filings.

In his October report researcher Jack Norman says three corporations paid no state income taxes since 2000 through 2009. Another paid three million dollars.

"It's especially a problem because all this crisis, the fiscal crisis of the government federal level and state level," he says. "And the difficulty of having enough money to support government programs. And there is a huge amount of wealth that is simply going untaxed."

Norman says corporations use legal tactics to reduce their tax liabilities, like setting up subsidiaries and moving taxable profits to states with lower burdens.

"So it's a very legal process and it's just the tax system is set up to be gamed and the people that take advantage of it have the resources to pay the top lawyers and accountants who can maneuver them through these legal intricacies," he says.

The data was culled from agencies like the Department of Workforce Development and the state Department of Revenue.

(Original Post)

Marian Wright Edelman; President, Children's Defense Fund

Posted: 11/4/11 07:14 PM ET

Picture an iceberg. Many children know the danger from the “Titanic Song” they learn in school or summer camp. One verse goes like this: “It was off the coast of England not very far from shore, when the rich refused to associate with the poor. So they sent them down below, where they were the first to go. It was sad when that great ship went down. Oh it was sad, so sad. It was sad, too bad. It was sad when the great ship went down... husbands and wives, little children lost their lives -- it was sad when the great ship went down.”

Some days it feels like America may be speeding towards that iceberg. Every day there is more disturbing evidence of the growing income and wealth gaps between rich and poor. Recent poverty data shows the number of people in extreme poverty, defined as a family of four living on less than $30 a day -- one in 15 Americans -- has reached a 35-year high. At the same time the gap between CEO and average worker pay rose dramatically from 263-to-1 to 325-to-1 last year. Twenty-five of the 100 highest paid CEOs last year took home more in pay than their company paid in 2010 federal income taxes.

A new study by Citizens for Tax Justice reported that 30 companies paid no federal income taxes at all for the last three years and that the 280 biggest publicly traded American corporations on average paid federal income tax equal to 18.5 percent of their profits during the last three years -- about half of the full corporate tax rate of 35 percent. This tax payment rate was lower than in many industrialized countries. In fact, the report found two-thirds of American companies with significant profits overseas actually paid more in taxes to foreign governments than to the U.S. government.

As the super committee struggles to make difficult decisions in the coming weeks to reduce the budget deficit, one of the proposals they are considering is reducing the corporate tax rate.

Corporations are pushing for a cut in their official rate, claiming they are at a disadvantage in the global marketplace. Their evidence is not so clear. We should all be looking closely at the important choices the super committee could and should be making to ensure everyone -- including the rich and powerful -- contributes their fair share. It would be deeply disturbing if all or any of the Republicans on the Supercommittee continue to refuse to put revenue on the table and insist on a cut-only approach to deficit reduction at the expense of children and the poor who did not create our fiscal crisis.

By the end of last year, American corporations reaped profits of more than $1.5 trillion. Each minute, $195,967 are lost to corporate tax loopholes. Every hour, corporate tax breaks cost the U.S. government about $11.8 million. If Congress were to balance corporate profits against critical child needs, just one hour of revenue generated by closing corporate tax loopholes could pay for:

    Medicaid health benefits for 4,800 poor children for a year, or
    Women, Infants, and Children [WIC] nutritional benefits for 23,600 women and children for a year, or
    Supplemental Nutrition Assistance Program [SNAP] benefits providing food for 9,700 children and adults for a year at a time when hunger affects 1 in 6 Americans, or
    Pell Grants for 3,100 low-income students to attend college.


Corporate excess looks a lot like General Electric’s balance sheet at the end of 2010. Huge pretax profits of $5.1 billion filtered through corporate tax loopholes meant GE paid no federal income taxes. To add insult to injury, had GE paid the full 35 percent corporate tax rate, it would have paid $1.8 billion in federal income taxes. Add this to GE’s reported $3.3 billion in tax benefits and you get a grand total of more than $5 billion of federal tax breaks for the year. This lost revenue could have been used to fund Head Start for an additional 670,000 preschoolers, creating at least 67,000 new jobs in the process.

Budget cuts already enacted on the federal, state, and local levels have harmed children and their families, especially low-income families hit hardest by the recession. Education cuts have led at least 292 school districts to cut back to a four day school week for children when more than 60 percent of our children in all racial and income groups cannot read or do math at grade level in the 4th, 8th, and 12th grades. According to the Washington Post, the number of school districts using a four day school week has more than doubled in two years. Arizona, Florida, Georgia, Illinois, Massachusetts, North Carolina, Texas and other states have cut funding -- including critical early childhood education programs that help children get ready for school -- to help close their budget shortfalls and adversely affecting hundreds of thousands of at-risk children.

What other choices could citizens demand our political leaders make? If they closed tax loopholes for the oil and gas industry it would generate at least $40 billion over ten years. About one year of that money could fund slots for over half a million infants and toddlers in Early Head Start, a program that currently reaches only four percent of eligible children during their period of crucial brain development. Expanding Early Head Start would create almost 150,000 new teaching positions.

The tip of the iceberg is the budget deficit; the failure to invest in our human capital deficit -- our children who are the poorest age group in America -- is the rest of the iceberg that will sink America’s ship of state. This is the critical time to raise our collective voices and tell members of the super committee, Congress and the White House we want them to cut and not increase corporate tax breaks and make sure rich corporations and rich CEOs pay their fair share. We must not balance the budget on the backs of our babies who need health care and nutrition, quality early childhood development and education, an affordable college education, and good jobs to build a strong America and rescue America’s vanishing dream. Children did not cause the budget deficit and they must not be sacrificed to help solve it.

(Original Post)

By Willy Staley  Fri Nov 4, 2011

A new report on corporate tax rates shows that the financial services industry pays way less than its fair share.

Citizens for Tax Justice and the Institute on Taxation and Economic Policy recently published a paper that examines the tax rates that 280 profitable Fortune 500 companies have paid over the last three years.

As plenty of Republicans have reminded you, the United States boasts a high corporate tax rate: 35%. What these politicians don’t tell you, but this report does, is that hardly anyone pays that much: the average effective tax rate among the 280 corporations over the last three years was 18.5%, a little more than half the official rate.

Corporate Taxes Were Higher Under Reagan

Between accounting dodges, deferrals, and government subsidies, corporations pay historically low corporate tax rates, especially as compared to GDP. Reagan reformed the tax code in 1986, closing loopholes, and brought corporate tax rates up to about 2% of GDP. Nowadays, it’s about half of that.

And while industrial machinery pays the lowest tax rate of any industry (-13.5%!), financial services place sixth, paying only 15.5% on average — less than half the official corporate tax rate.

Leading the pack is Wells Fargo, which paid an average federal income tax of negative 1.4% over the last few years. On $49.4 billion in profits over the last few years, Wells Fargo has paid negative $680 million dollars — taking more subsidies and tax breaks than they pay!

Indeed, Wells Fargo topped the list of all corporations by dollar amount in tax subsidies. Between 2008 and 2010, Wells Fargo received nearly $18 billion in tax subsidies!
Other Banks Benefitted Too

Close behind Wells Fargo was PNC Financial, which paid an effective rate of 1.4% over the last three years. On nearly $10 billion in profits, the bank paid only $144 million in taxes.

Other retail banks that proved successful at dodging Uncle Sam were BB&T (20.4%), Capital One (24.1%), US Bancorp (27.6%). JP Morgan Chase, by paying 30.1% looks like an upstanding corporate citizen.

For anyone curious what protesters at Occupy Wall Street are upset about, maybe this can provide some answers. Banks are turning handsome profits once again, and corporations have all the rights of ordinary citizens, but they don’t have to pay their fair share of taxes.

(Original Post)

By Kevin Pinner Friday, November 04, 2011

Between 2008-2010, 280 of the largest corporations paid an average federal income tax of 18.5% despite the statutory rate being 35%.

crooge McDuck skiing on his stash while innocuous kids build money castles.

Amidst a national discussion about corporate taxation, Citizens for Tax Justice, a nonpartisan research group, and the Institute on Taxation and Economic Policy released a staggering, comprehensive report yesterday which reviewed the taxes paid by 280 Fortune 500 companies between 2008 and 2010. What they found is that on average the top 280 corporations paid half of the statutory rate, and that 30 companies had a negative tax rate, meaning they made money after taxes.

Take Verizon, for instance, who in 2010 made $12 billion; under the statutory rate they would pay the IRS $4.2 billion. However, they astonishingly managed to profit after taxes, get this, to the tune of $706 million dollars. That means Verizon’s income increased after taxes, putting them at $12.7 billion for 2010, and the federal government out $5 billion.

“These 280 corporations received a total of nearly $224 billion in tax subsidies,” said Robert McIntyre, Director at Citizens for Tax Justice and the report’s lead author. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”

Wells Fargo toped the charts in this regard, making out with nearly $18 billion in breaks from the U.S. Treasury. Boeing, AT&T, Exxon Mobile, Goldman Sachs, Wal-Mart, and Coca-Cola were among the companies who received billions in subsidies.

And when it came to the lowest tax rate, Pepco Holdings’ was -57.6%, beating #2, General Electric, who paid -45.3%. Yes, those are negative signs.

A negative tax rate, in this report, indicates companies whose overall income increased after they filed taxes. Whether through loopholes or subsidies or both, these companies made out with more money from the U.S. Treasury than they put in. Keep in mind that all of these companies were profitable – this is not the highly-publicized “bailout money.”

In fact, Wells Fargo, General Electric, and Verizon were among 30 public firms that paid no taxes at all during these years. In 2009 alone, 49 companies paid no taxes at all. Again, all the companies were profitable; they all deserved a tax rate of (positive) 35%.

The tone of the report is decisive but not derisive. It hones in on the appalling fact that “corporate tax loopholes are so out of control that most Americans can rightfully complain, ‘I pay more federal income tax than General Electric, Boeing, Dupont, Wells Fargo, Verizon, etc., etc., all put together.’” The reports authors call this “an unacceptable situation.”

Although the average rate of taxes paid by these firms was 18.5% during the years 2008 to 2010, between 2009 and 2010 it was 17.3%, which is below half of 35%, and a matter of billions lost on the Treasury.

So what are we left to think about corporate taxation?

When I first saw signs at the Occupy movement proclaiming “Tax the rich!” I was dubious that we weren’t already taxing them. Finding out that publicly traded corporations are supposed to pay a tax rate of 35% was easy. It’s on the IRS’s website.

That’s why this study is so crucial. While statutory rates are made widely available, buried loopholes in our tax policy are not. If the Occupy movement were to issue one demand it ought to be reforming campaign finance because politicians are the ones who allow these loopholes to exist.

Top corporations across the board are lobbying for even lower rates, despite the fact that they are the lowest they’ve ever been. It’s a platform piece for all the GOP candidates: lower corporate tax rates.

Perhaps the more appalling conclusion is that giving corporations massive tax breaks is decisively not part of President Obama’s platform, yet during the years of his presidency, especially the year he took office, which was the worst (or best, depending on your perspective) year for corporate taxation, they have run rampant.

Although these data are news to most of the American public, they aren’t news to the IRS. The corporations studied who seem to be engaged in illegal activity are actually scotch-free.

You can find all the information cited above in the original report and the press release on Citizens for Tax Justice’s website.

(Original Post)

By Ed Sutherland (8:36 am, Nov 04)

Don’t look for the Occupy movement to picket Apple. The iPhone maker is among just a few tech companies paying their fair share of corporate taxes. According to a report released Thursday, Apple paid a 31 percent tax rate. By comparison, the likes of HP, Yahoo and Amazon.com appeared to have paid less than half the 35 percent corporate rate — or even lower.

The report by advocacy group Citizens for Tax Justice and nonpartisan Institute on Taxation and Economic Policy, checked the financial statements of 280 corporations on the Fortune 500 list. Of those, 30 paid no federal taxes over the previous three years, the groups charge. Among Silicon Valley, both Apple and Intel paid a 31 percent corporate tax, while Internet retail giant Amazon.com paid only a 7.9 percent tax rate on $1.8 billion in profits between 2008 to 2010.

The list was released amid spreading ‘Occupy’ demonstrations of anger at the wealth disparity in the U.S. and so-called ‘corporate greed’ seen as causing much of today’s economic troubles. Although the violence-tinged Occupy movement in Oakland, Calif. has drawn much public attention, the demonstrations have also made their way to the state’s Bay Area, home to many high-tech companies and startups.

In August, we reported Apple had joined a Washington, D.C. lobbying campaign to provide a “tax holiday” for large corporations that bring home cash stashed in overseas banks. The “WIN American Campaign” effort also attracted the likes of Google, Oracle and Cisco. The proposed 5-day tax holiday would “immediately inject up to $1 trillion into our economy and provide businesses with the security and certainty they need to help Americans get back to work,” according to the campaign’s website. In a bit of odd political bedfellows, Apple found itself aligned with a Republican-controlled U.S. House of Representatives and against President Barack Obama, who opposes the plan. During the 2008 election, Apple was among companies that gave $1.3 million to Obama’s election effort.

(Original Post)

Editorial Board

Updated: 8:57 p.m. Friday, Nov. 4, 2011
Published: 8:34 p.m. Friday, Nov. 4, 2011

We're thankful Austin hasn't experienced the violence that has plagued other offshoots of the Occupy Wall Street movement, especially in Oakland, Calif.

We thank the protesters who have been camping out at City Hall since Oct. 6 for their determination to gather peacefully, and we thank city officials and the Austin police, notably Police Chief Art Acevedo, for their patience and understanding that these citizens have a right to assemble and express their views. It's an accommodating stance superior to the antagonistic one seen elsewhere.

Yet, Occupy Austin hasn't been free of bumps. The city, in part concerned about some of the homeless people who had gathered around the protest, posted new rules last week regarding a food distribution table, ordering its removal from 10 p.m. to 6 a.m. When protesters failed to comply early last Sunday, police moved in and arrested about three dozen demonstrators.

The sour turn of events prompted discussions between protesters and city officials about safety and cooperation. The city lifted its restrictions on the food table but asked protesters to remove the table when the plaza is being cleaned. Protesters said they would.

"We want to be good neighbors," Occupy Austin spokesman Carl Lindemann told the American-Statesman. "We're doing the best we can."

Its followers' objectives are sometimes fuzzy, but at its center the Occupy Wall Street movement is about corporate influence in politics and the nation's growing income inequality. The unequal distribution of income in the United States has dramatically widened the gap between the richest 1 percent of Americans and the other 99 percent over the past 30 years. It's an issue that deserves attention and thoughtful debate. To raise the issue is not necessarily an expression of class warfare, as critics' bromides would have it; it can be an expression of deep concern about the health of our democracy.

The Congressional Budget Office released a study last week that showed that the after-tax income for the top 1 percent increased 275 percent from 1979 to 2007. The middle of the economic scale saw its after-tax income grow by 40 percent over the same period. Those at the bottom experienced an anemic 18 percent increase.

Another study, released Thursday by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, found that 30 of the nation's biggest companies paid no federal taxes from 2008 to 2010, and some of these companies even made money thanks to tax credits and government refunds. Dozens more companies paid an effective tax rate of less than 10 percent over the three years despite the fact that the federal corporate tax rate is 35 percent.

Those occupying City Hall and other locations around the country, as well as those sympathetic to the Occupy Wall Street cause, know that any degeneration into lawlessness and violence only hurts their movement. A right to assemble does not mean a right to assemble without rules. While Occupy Wall Street prides itself on its lack of leadership, the fact is the longer the protests go on, the more a few individuals will have to step forward to organize logistics, speak for the group and negotiate with officials.

That appears to be happening in Austin following last weekend's arrests. Any changes, either from the city or from the protesters, must be clearly communicated and enough time must be given for everyone to adjust.

Protesters should protest responsibly. City officials should react responsibly. In Austin at least, both sides are mostly doing so.

(Original Post)

Friday, November 04, 2011

According to the U.S. tax code, corporations pay a 35% tax rate on their earnings. But at least 30 of them paid zero federal income over the last three years, while hundreds of other companies paid half the official corporate rate.
 
The findings, produced in a new report from Citizens for Tax Justice and the Institute on Taxation and Economic Policy, included 78 major businesses that paid no federal income tax in at least one of the last three years. Included in this group were five banks that received bailout funds from the government: Wells Fargo, Goldman Sachs, PNC Financial Services Group, Capital One Financial Inc. and State Street Corp. An even larger group (280) paid federal income taxes equal to 18.5% of their profits.
 
“These 280 corporations received a total of nearly $223 billion in tax subsidies,” said Robert McIntyre, director at Citizens for Tax Justice and the report’s lead author. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”
 
The largest recipient of tax subsidies, according to the study, was Wells Fargo, which received nearly $18 billion from 2008 to 2010.
 
Last year, 37 companies paid no income taxes to the U.S. Treasury. This group included General Electric, Honeywell International, DuPont, Yahoo, Verizon, Boeing and Corning.
-Noel Brinkerhoff
 
Report: 280 Most Profitable U.S. Corporations Shelter Half Their Profits from Taxes; Thirty Companies Paid

Less Than Zero in Taxes In The Last Three Years (Citizens for Tax Justice and the Institute on Taxation and Economic Policy) (pdf)

Biggest Public Firms Paid Little U.S. Tax, Study Says (by David Kocieniewski, New York Times)

Banks that Received TARP Money Managed to Avoid Income Tax (by John Dunbar, iWatch News)

Corporate Taxpayers & Corporate Tax Dodgers 2008-10 (Citizens for Tax Justice and the Institute on Taxation and Economic Policy) (pdf)

39 of the Biggest Corporations Paid a Lower Tax Rate than the Average American (by David Wallechinsky, AllGov)

General Electric Doesn’t Pay Taxes; Why Should You? (by Noel Brinkerhoff and David Wallechinsky, AllGov)

Corporations Have Easy Time Beating Tax Code (by Noel Brinkerhoff, AllGov)

(Original Post)

By Michael Miller Fri., Nov. 4 2011 at 9:30 AM

Ever wonder what's in the back of all those Ryder trucks?

Your tax dollars, apparently.

According to a new study by Citizens for Tax Justice, the Miami-based Fortune 500 company paid -7.3 percent federal income tax from 2008-10. That's negative 7.3 percent. Kinda makes you want to torch the nearest moving van, doesn't it?


According to the study, Ryder System's -7.3 percent was the 13th lowest of all Fortune 500 companies. All in all, thirty companies paid no federal income taxes from 2008-10.

Riptide contacted a Ryder spokeswoman for comment on the study. She hasn't gotten back to us with a statement, but when she does we'll update the post. In a New York Times story on the report, the company's chief financial officer, Art A. Garcia, says the firm "had benefited from the additional (tax) depreciation intended to stimulate the economy."

At a time when thousands of Americans are camped out in cities across the country protesting corporate greed, and even multi-billionaires like Warren Buffett are calling for higher taxes on the rich, Ryder's golden corporate welfare ticket would seem... um... shameful.

But not if you're Ryder CEO Gregory Swienton. Here he is on Fox News last year saying that extending the Bush tax cuts is "a no brainer."

Swienton says:

    Keeping the current tax rates and not increasing them on January first, that's just like the hippocratic oath: "Do no harm." That's just good. Secondly, you want to make them permanent... Then start talking about reducing taxes to really get the economy going and reduce government spending.

Ah, right. Reduce government spending! Like... tax dollar giveaways to highly profitable companies that don't seem to need them.

And here's Swienton again on Fox News this February gloating about Ryder's profits amid the recession.

Needless to say, Swienton doesn't give Big Government a shout-out for the tax help. Instead, he credits "the fundamental business changes" Ryder has made. In fact, he even bitches about EPA fuel requirements being "a big sticker shock."

He adds that Ryder expects 12 percent revenue growth in 2011. Does that mean the company will finally start paying some taxes like the rest of us?

(Original Post)

Published: Friday, Nov 4, 2011, 15:52 IST
Place: NEW YORK | Agency: IANS

Thirty of the 280 most profitable US corporations, including General Electric, Verizon and Boeing, paid no federal income tax in 2008-10, Citizens for Tax Justice (CTJ) said in a report released Thursday.

Together, those 30 companies enjoyed pre-tax profits of $160 billion, yet actually received tax refunds.

Another 78 firms studied did not pay any tax in at least one of the three years, and the effective tax rate for all 280 companies was 18.5 percent, compared with a statutory rate of 35%.

The 280 companies - drawn from among the Fortune 500 - garnered $222.7 billion in tax subsidies during 2008-10. The big winner was banking giant Wells Fargo, to the tune of nearly $18 billion.

And all of this was perfectly legal under the current tax code.

"This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit," CTJ Robert McIntyre, the report's lead author, said.

Referring to lobbying by business groups for lower corporate tax rates and additional exemptions, he said the "study provides proof that too many corporations are already being coddled by our tax system".

The study, prepared by the CTJ in partnership with the Institute on Taxation and Economic Policy, also highlights disparities in tax treatment between companies in the same industry.

While FedEx paid tax at a rate of only 0.9 percent over the 2008-10 period, competitor UPS was taxed at a 24.1% rate, according to the report.

(Original Post)

By Dave Beal | Friday, Nov. 4, 2011

Best Buy faced a federal income tax liability of 39.3 percent for the three-year period of 2008-10 — above the statutory rate of 35 percent — while Wells Fargo ended up paying nothing.

The disparity between two companies with a strong Minnesota presence is not unusual throughout the nation, a study released Thursday shows. (The chart below shows how 17 Minnesota-related companies fared on corporate income taxes for the three-year period.)

Another 29 of the nation's largest and most profitable corporations also paid no federal income taxes over this stretch.

Those are among the findings of the study (PDF) — "Corporate Taxpayers and Corporate Tax Dodgers" — done by Citizens for Tax Justice and the Institute for Taxation and Economic Policy, left-leaning DC-based organizations that advocate for tax fairness. They have collaborated on similar studies for years, including research in the 1980s on corporate tax avoidance that helped pave the way for the historic 1986 tax overhaul.
Minnesota chart explanation

The official federal income tax rate is 35 percent of pretax profits, but a new analysis shows that many of the nation's largest and most profitable corporations pay a far lower rate by taking advantage of a variety of subsidies and tax breaks.

Table shows the widely ranging rates paid by 15 companies based in Minnesota and two with significant interests in the state (Alliant Techsystems and Wells Fargo).
Effective federal income tax for MN corporations
Sources: Citizens for Tax Justice and Institute on Taxation and Economic Policy, MinnPost graphic

A number of corporations, including Wells Fargo, dispute the study's conclusions and lash back at its presentation and methodology.

The issue of corporate tax breaks is a big one. It is squarely before the 12-member Congressional Supercommittee assigned to decide by Nov. 23 on how to reduce the nation's long-term fiscal deficit. Ending some of these so-called "tax expenditures" could be a significant part of the solution, but the panel remains deadlocked over how to change the tax system.

Overall, the income generated by corporate income taxes has now fallen to barely more than 1 percent of the nation's gross domestic product — its lowest level since 1983, the study found.

That was a few years before the sweeping tax overhaul, achieved in 1986 under President Ronald Reagan and Congress, eliminated a slew of corporate tax breaks and subsidies and helped boost the income from this tax to more than 2 percent of GDP for much of the time since 1986.

Not anymore.

Part of the problem is a familiar one: Typically, after a tax code gets cleaned up, it gradually reverts to where it was before the overhaul as interest groups win more exemptions and subsidies that end up shooting gaping new holes in the system. This process has gotten "out of control," the study said.

Wells Fargo spokesperson Peggy Gunn released a statement explaining that the years cited by the study were unusual from a tax perspective because of the bank's acquisition of North Carolina banking giant Wachovia on Dec. 31, 2008. The statement defended the bank's tax practices, countered that the study "takes data out of context to advance an agenda," and said, "Over the last 10 years Wells Fargo has paid more than $30 billion in income taxes to federal and state authorities and billions more in other taxes, and it fulfills all tax obligations." Wells expects to pay "significant income taxes" for 2011, the statement said.

Area tax specialists comment
Twin Cities tax specialists — former Minneapolis Fed research chief Art Rolnick and Mark Haveman, executive director of the Minnesota Taxpayers Association — said the study points up various shortcomings of the federal corporate income tax.

The study covered 280 of the Fortune 500 corporations. The other 220 were eliminated either because they were unprofitable during one or more of the three years or because they didn't disclose enough in their regulatory reports to determine domestic profits, current federal income taxes or both.

The statutory federal corporate income tax rate is 35 percent, but the analysis found that on average, the 280 corporations were able to reduce that rate to 18.5 percent — $250.8 billion in taxes on $1.35 trillion in pre-tax profits — over the three years.

In the report and in a conference call Thursday, Citizens for Tax Justice Director Robert McIntyre, a steeled veteran of such studies dating to the early 1980s, did not allege any illegalities. The study agreed with "corporate apologists" who "correctly point out that loopholes and tax breaks" that allow corporations to minimize or eliminate income taxes "are generally quite legal."

It added that growing tax preferences "stem from laws passed by Congress and signed by various presidents. But that does not mean that low-tax corporations bear no responsibility for their low taxes. These laws were not enacted in vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support."

The study challenged the claim generally made by corporate lobbies that U.S. corporations typically pay lower overall income tax rates abroad than in the U.S., and voiced skepticism about the oft-made argument that they must have lower corporate income taxes to compete globally.

It found that 87 of 134 U.S. companies with foreign pretax profits equal to at least 10 percent of their worldwide profits paid a lower U.S. rate and 47 a higher U.S. rate than their foreign rates.

Effective corporate income tax rates "are usually not a significant determinant of what companies do," the report argued. "Instead, companies have shifted jobs overseas for a variety of non-tax reasons, such as low wages in some countries, a desire to serve growing foreign markets and the development of vastly cheaper costs for shipping goods from one country to another than used to be the case."

Tax policy is also emerging as a major issue in the 2012 presidential campaign. The report likened the corporate income tax situation to the proposal by investment guru Warren Buffett that the wealthy individuals should pay higher taxes to help the country ease its fiscal woes.

But Rolnick, a longtime foe of corporate subsidies, said it's more complicated than that. Many of the exemptions are warranted, he said, and there's significant disagreement over which ones have merit and which ones ones don't.

The country ought to clean up its tax code, he said, but one approach with the corporate income tax would be to broaden the base and lower the effective rates. He added that while many Americans believe that you tax the rich when you tax large corporations, the reality is that the corporations typically end up passing the corporate income tax on to others — shareholders, employees, customers.

He said a better way to make the tax code more progressive would be to tax consumption.

'Cryptic disclosures'
The report called on large public corporations to be more transparent, instead of offering "often cryptic disclosures" in their annual reports of why federal income taxes are lower than the statutory 35 percent rate. It asked Congress to focus more on the long list of corporate tax breaks produced annually by the Joint Committee on Taxation and the U.S. Treasury, and urged lawmakers to turn around the trend to less corporate income taxation by curbing the tax breaks.

But Mark Haveman countered that the very premise of the corporate income tax is based on two now-flawed fundamentals — "source of income" and "corporate residence."

His view: "These concepts don't make much sense anymore in a modern economy — especially for multinational enterprises. Corporate profits can be sourced anywhere; corporate residence is wherever you want it to be. This is reality. The global genie is out of the bottle.

"The report is right — the federal corporate income tax is certainly a leaky and listing ship. For the sake of argument, let's say we try to patch all these holes up and that (amazingly) we are successful. Now we have something that does a fantastic job of taxing capital. The problem is everyone else in the world is heading in the exact opposite direction — lessening the tax burden on that which is highly mobile (capital) and increasing the tax burden on that which is less mobile (consumption and, to lesser extent, labor," he said.

The report identified Wells Fargo as the largest recipient of tax breaks in the entire study, with $18 billion in tax subsidies over the three-year period. Its effective rate for 2008-10 was -1.4 percent.

Wells Fargo hits back
Wells Fargo' response: "During the years cited by the study, Wells Fargo's results included significant losses as a consequence of its acquisition of Wachovia, which when realized reduced Wells Fargo's taxable income. For financial reporting purposes, the losses were recognized at the date of acquisition through purchase accounting adjustments in accordance with generally accepted accounting principles. For example, we recorded losses in excess of $40 billion on purchased credit-impaired loans. Subsequent to acquisition, as those losses are realized for income tax purposes, they are reflected as a deduction on our tax return, which therefore reduced income subject to tax."

"Over the last 10 years, we have paid more than $30 billion in income taxes to federal and state authorities (including Wachovia, which Wells Fargo acquired in 2008). In addition, Wells Fargo has paid billions over this same time frame in other taxes, including real estate, property and payroll taxes.

"Wells Fargo is a responsible corporate citizen and we believe we have fulfilled all tax obligations to federal, state and local communities where we serve our customers. Like other corporate and individual taxpayers, the amount of income taxes paid each year will vary based on the level of income subject to tax.

"This report takes data out of context to advance an agenda. A substantial portion of the Wachovia losses had been realized by the end of 2010, and based on results for the first three quarters of 2011, Wells Fargo expects to pay significant income taxes for 2011."

Xcel Energy had the second-lowest effective tax rate for the Minnesota companies in the analysis: 1.0 percent. Asked why, the company provided this explanation from Jim Duevel, Xcel's managing director of tax services:

"The referenced study reports that Xcel Energy had an average effective tax rate of 1.0 percent during the period 2008-10. To clarify, that average tax rate was our 'current' federal tax expense, and it ignored associated federal 'deferred' tax expense. Our actual overall federal effective income tax rate (as reflected in our audited financial statements) averaged about 31 percent.

"This clarification is important because, as the study itself notes, Xcel Energy's low current federal tax expense was due largely to accelerated and bonus depreciation, which is a 'timing' difference, meaning it is not a permanent reduction in tax (like a tax credit). The tax benefit will reverse in the future. Thus Xcel Energy's overall federal effective rate is a more accurate picture of its federal income tax expense.

"During 2008-10, Congress ramped up accelerated depreciation (termed 'bonus depreciation') and Xcel Energy made investment decisions in concert with regulators based on the needs of customers in the communities we serve. We took advantage of all available tax incentives, such as federal accelerated and bonus depreciation, which have been passed through to customers, thereby reducing the price of electricity and natural gas. It also should be noted that despite having reduced income tax payments in recent years, Xcel Energy still paid significant corporate taxes, including about $300 million annually in state and local property and sale taxes."

Why some pay more
Best Buy ended up paying the second-highest rate in the study — 39.3 percent, or more than 4 percentage points higher than the 35 percent statutory rate — and St. Jude Medical also paid more (37.5 percent). A Best Buy spokesperson said the company does not comment publicly on its cash tax rates. St. Jude Medical didn't return a call.

Matthew Gardner, executive director for the Institute on Taxation and Economic Policy, explained that both companies faced adverse turnarounds in taxes deferred from prior years — Best Buy for all three years of the study period, and St. Jude for one of the three years. In earlier years, they benefited from the deferrals, but that provision came back to bite them, he said.

The study's authors said the tax code now includes more than 150 corporate subsidies. It identified accelerated depreciation provisions, stock option accounting, offshore tax sheltering and industry-specific tax breaks as major reasons for lower corporate income taxes. It singled out Wachovia's "extensive schemes" to shelter its U.S. profits by "pretending to own and lease back municipal assets in Germany such as sewers and rail tracks, a practice heavily promoted by some accounting firms." Other industry-specific breaks noted include tax preferences available to NASCAR racetrack builders, movie-makers, video game producers, ethanol manufacturers and companies that move operations offshore or don't move them offshore.

Other points:

• Seventy-eight companies paid nothing or had negative tax rates in one or more years covered by the analysis — "often receiving outright tax rebate checks from the U.S. Treasury," meaning they made more money after taxes than before.

• The biggest beneficiaries were industrial machinery companies, information technology services and utilities. Only two industries – health care and retail and wholesale trade — paid effective rates of 30 percent or more.

• Yet the rates varied widely within every industry for the three years. In chemicals: DuPont had a -3.4 percent rate while Monsanto paid a 22 percent rate. In retail: Macy's paid a 12.1 percent rate; Nordstrom's, 37.1 percent. In the computer industry: Hewlett-Packard paid at a 3.7 percent rate, Texas Instruments at 33.5 percent. Another comparison: Fed Ex had an 0.9 percent rate; United Parcel Service, 24.1 percent.

• In 1988, the effective rate in a comparable study was 26.5 percent, up from 14.1 percent in 1981-83 thanks to the Reagan era overhaul (which reduced the statutory rate to 34 percent from 46 percent). But by 1996-98, the effective rate was down to 21.7 percent and by 2002, corporate tax cuts had driven it down to 17.2 percent. It was 17.3 percent for 2009-10.

• In the last half of the 1990s, revenues from the corporate income tax paid for 11 percent of federal programs; in fiscal 2010, 6 percent.

The analysis argued that the losers from corporate tax avoidance are the general public, disadvantaged corporations, the U.S. economy, state governments and "the integrity of the tax system and public trust therein."

State corporate income tax receipts are tied to the federal corporate tax returns. Thus the two organizations are planning to release state-by-state studies in December.

Dave Beal is a free-lance business journalist. He can be reached at dandcbeal[at]msn.com.

(Original Post)

11/4/2011 11:04 AM ET

(RTTNews) - While many of the Republican presidential candidates have proposed slashing the corporate tax rate as a way to stimulate the economy, a recent study found that many of the nation's most profitable companies are already paying well below the current corporate tax rate.

The study, conducted by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, examined 280 of the country's most profitable companies and found that their average effective tax rate over the last three years was 18.5 percent compared to the statutory rate of 35 percent.

For the period 2009-2010, the average effective tax rate for the companies was 17.3 percent, less than half of the statutory rate.

"These 280 corporations received a total of nearly $223 billion in tax subsidies," said Robert McIntyre, Director at Citizens for Tax Justice and the report's lead author. "This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit."

The study found that 78 of the companies had at least one year in which their federal income tax was zero or less, while 30 companies had a negative income tax rate over the last three years.

The companies with a negative income tax rate, which can reflect tax rebates, had combined pre-tax profits of $160 billion.

According to the study, Pepco Holdings (POM) had the lowest effective tax rate of the companies examined, at negative 57.6 percent over the three year period.

Pepco released its third quarter financial results on Friday, reporting earnings from continuing operations of $80 million compared to $21 million in the third quarter of 2010.

The study also said that the 280 companies received a total of $222.7 billion in tax subsidies over the three year period, with Wells Fargo (WFC) topping the list with nearly $18 billion in tax breaks.

While corporations continue to lobby for lower tax rates and an exemption for profits they shift offshore, McIntyre, said, "Our study provides proof that too many corporations are already being coddled by our tax system."

Of the 280 companies examined, 111 paid effective three-year tax rates of less than 17.5 percent, including 67 that paid less than 10 percent. Ninety-eight paid between 17.5 percent and 30 percent, while 71 paid more than 30 percent.

by RTT Staff Writer

(Original Post)

Jeff St. John: November 4, 2011

A study finds 12 U.S. utilities on a list of 30 U.S. corporations that paid no corporate income tax from 2008 to 2010—and actually saw negative taxes or tax rebates for that period. What gives?
Why Are So Many Profitable Utilities Not Paying Income Tax?

We all know that corporations find every way possible not to pay income tax -- but who knew so many utilities were on the dole as well?

According to a Thursday report by Citizens for Tax Justice (PDF), there are 12 gas and electric utilities on the list of 30 U.S. corporations that reported negative taxes or tax rebates from the U.S. Treasury from 2008 to 2010.

The top-30 list included some well-known corporate income tax avoiders, including General Electric, which famously reported 2010 profits of $14.2 billion with $5.1 billion of that coming from U.S. operations, and yet landed a tax benefit of $3.2 billion for that year. Others on the list included Verizon, Honeywell, Tenet Health Care, DuPont, Boeing and Wells Fargo.

But the inclusion of so many utilities on the list raises eyebrows. In fact, the utility sector is the most-represented industry on the list, even if utilities weren't the biggest taker of tax rebates. That dubious distinction went to Wells Fargo, with $17.9 billion in negative taxes, followed by AT&T, Verizon, GE, IBM, Exxon Mobil, Boeing, PNC Financial Services, Goldman Sachs, Procter & Gamble and Merck.

Pacific Gas & Electric came in a relatively distant 12th place, with $2.73 billion in 2008-2010 tax breaks, the report stated. All told, the 12 utilities on the list received $3.17 billion in negative taxes, out of the total of $21.8 billion on the top-30 corporations list.

Taken as a whole, the utility industry paid the equivalent of a 3.7 percent corporate income tax rate over the three years, the report found -- not as bad as the effective negative tax rate of 13.5 percent paid by industrial machinery companies like GE, but way below the nominal 35 percent rate.

Gas and electric utilities also enjoyed one of the highest rates of tax subsidies from 2008 to 2010, with an industry-wide tax subsidy bill of $31.2 billion -- just under the financial industry’s top-ranking $37.45 billion subsidy haul, and actually beating out the much-maligned oil, gas and pipelines industry’s subsidy haul of $24.18 billion.

So what’s the utility industry’s secret to writing off so many billions of profits and enjoying such a low effective corporate income tax rate? We are asking around for details.

(Original Post)

By Brian O'Connell 11/04/11 - 11:31 AM EDT

NEW YORK (MainStreet) -- Taxes are at the heart of the ongoing social debate in cities across the U.S., as the Occupy Wall Street movement flexes its muscles and escalates its visibility in clashes with police in Oakland, Calif.

A study from the polling organization Quinnipiac shows that the movement is losing favor with the public, with 30% approving and 39% disapproving of the OWS movement (the rest have no opinion).

But OWS still fares slightly better than the Tea Party in the eyes of the public when measured in percentage of disapproval. Quinnipiac reports that The Tea Party movement gets disapproval from 45% of survey respondents (versus the OWS disapproval rating at 39%), with 31% viewing the Tea Party favorably (actually one 1% higher than OWS approval), and 24% who don't know enough about it for an opinion.

While both political factions battle it out, U.S. corporations are dealing with the tax issue in their own ubiquitous way -- by dodging them.

A study from Citizens for Tax Justice and the Institute on Taxation and Economic Policy Release, called Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010, notes that 78 of 280 of America's "most profitable" companies paid no federal income tax in at least one of the past three years.

The study also claims that 30 of the 280 companies tracked by the study actually had a negative federal income tax rate during the past three years. Collectively, all of the companies tracked got hundreds of billions of dollars in tax relief, the study says.
"These 280 corporations received a total of nearly $223 billion in tax subsidies," says Robert McIntyre, director at Citizens for Tax Justice and the report's lead author, in a statement. "This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit."

"Our study provides proof that too many corporations are already being coddled by our tax system," he adds.

All of the companies monitored by the study were big ones -- each was included in the Fortune 500, the largest, most profitable companies in the U.S. The data show that, by and large, America's largest companies pay a lower tax rate than the secretaries, customer service reps and line workers the companies employ.

Here's a breakdown from the Citizens for Tax Justice Web site:

The average effective tax rate for all 280 companies in the study over the three-year period was 18.5%; for the period 2009-10 it was 17.3%, less than half the statutory rate of 35%.

Total tax subsidies given to all 280 profitable corporations amounted to $222.7 billion from 2008-10.
Wells Fargo(WFC) tops the list of 280 U.S. corporations getting the most in tax subsidies, with nearly $18 billion in tax breaks from the U.S. treasury in the last three years.

Pepco Holdings(POM) had the lowest effective tax rate of all the companies in the study, at negative 57.6% over the three-year period.

Some companies within sectors fare worse than others. For example, the report finds that Fedex(FDX) paid a 0.9% tax rate over the three-year period while its competitor, UPS(UPS), paid a 24.1% rate.
Financial services got the largest share (16.8%) of all federal tax subsidies over the past three years. More than half of federal corporate tax subsidies for companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas and pipelines.

Considering these numbers, the fact that 2012 is an election year implies that whoever can do a better job making the case for tax reform stands a better chance of helping their preferred candidates gain or keep elected office.

Expect more studies highlighting who is and isn't paying their "fair share" of taxes in the next year.

(Original Post)

By Julie Patel November 4, 2011 12:40 PM

Thirty companies, including the parent company of Florida Power & Light, legally paid less than zero in federal income taxes in recent years, according to a report this month by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy.

The two liberal-leaning groups examined federal income taxes for 280 of the largest and most profitable U.S. companies from 2008 to 2010. All were profitable those years.

Corporations are supposed to pay an average tax rate of 35 percent but there are many exemptions and exceptions allowed by federal law.

Some companies included in the report criticized its methodology, saying the tax rate estimates shouldn't include deductions that are allowed to encourage investments and jobs.

The report found 71 companies paid effective three-year tax rates of more than 30 percent; 67 paid less than 10 percent, with an average tax rate of zero; and 30 companies paid less than zero percent, an average rate of –6.7 percent.

Altogether, the 30 companies, including Verizon, AT&T and Duke Energy, earned a profit of $160 billion, before taxes, over the three years. NextEra Energy, FPL's parent company, earned $6.4 billion before taxes, and paid an average tax rate of –2.2 percent, according to the report.

FPL Spokesman Mark Bubriski said a provision of federal tax law allows for bonus depreciation, or for businesses to deduct from their income taxes a percentage of the cost of an eligible property during its first year. Nearly all of NextEra's billions of dollars of investments in infrastructure and clean energy during the three years qualified for bonus depreciation so naturally, the tax rate was negative, he said.

He noted that an official from the Edison Electric Institute, an industry trade group, said the study is misleading because electric utilities in the report invested $235 billion during the three years, offsetting federal tax requirements. The official said their investments increased sharply during the economic downturn, generating hundreds of thousands of jobs.

The companies in the report also paid billions in other taxes. NextEra, for instance, pays $1 billion in taxes in Florida, making it the state's largest taxpayer, Bubriski said.

NextEra, one of the country's largest renewable energy producers, and its subsidiaries received more than half a billion dollars in federal renewable energy grants from 2009 to 2010. It also has loan guarantees from the federal government that were criticized recently because NextEra Chairman Lew Hay is on President Barack Obama's jobs panel, which has recommended federal incentives for clean energy projects.

Updated at 1:50 p.m.

(Original Post)

Friday, 04 Nov 2011 12:53 PM

By Jim Meyers

With the federal government drowning in debt and lawmakers struggling to curtail the deficit, a new report shows that many of the nation’s biggest companies paid no federal taxes over the past three years — and some even made money through credits and refunds from the government.

The report was compiled by the nonprofit groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy. The authors examined the finances of 280 corporations from 2008 through 2010 and found that while they made pretax U.S. profits of $1.4 trillion, they used an array of loopholes and tax breaks to lower their tax burdens.

Many Republicans are calling for a reduction in the corporate tax rate of 35 percent to make the United States more competitive in world markets, and would compensate for any reduced revenue by closing tax loopholes. This report could add impetus to their efforts.

Of the 280 firms, 30 paid zero taxes during that 3-year period, or wound up with negative tax rates. Pepco Holdings, a utility, paid the lowest rate of all the companies probed, minus 58 percent, and General Electric paid minus 45.3 percent.

Other major firms that actually received rebates from the government by applying tax credits to earlier years when they paid taxes include DuPont, Verizon Communications, Consolidated Edison, Boeing, Wells Fargo, Tenet Healthcare, PG&E, Mattel, and Corning.

Corporations will say rightly that the loopholes that allow them to slash their taxes were perfectly legal, the report said.

"But that does not mean that low-tax corporations bear no responsibility. The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support," according to the report.

One large tax break corporations enjoy is accelerated depreciation that lets them write off equipment faster than it actually wears out. Other tax breaks include deductions on executive stock options, and write-offs for research and development and for making products in the United States instead of overseas. Offshore tax shelters play a role as well.

Retail companies and healthcare firms tend to pay more in taxes because they usually have less intellectual property that can be shifted overseas to exploit other nations’ lower tax rates, The Washington Post observed. Tech companies, manufacturers, and utilities tend to pay less.

Pepco Holdings made $229 million in pretax profits last year, the report noted, and claimed $270 million in federal tax credits, making the company’s tax rate that year about minus 118 percent.

The authors of the report conclude: “Just as workers pay their fair share of taxes on their earnings, so should successful businesses pay their fair share on their success.

“But today corporate tax loopholes are so out of control that most Americans can rightfully complain, ‘I pay more federal income taxes than General Electric, Boeing, DuPont, Wells Fargo, Verizon, etc., etc., all put together.’ That’s an unacceptable situation.”

(Original Post)

By BRUCE BARTLETT, The Fiscal Times

November 4, 2011

There is growing evidence that many large corporations are paying well less than their fair share of taxes. On November 3, Citizens for Tax Justice, a liberal group, published a study of taxes paid by the 280 most profitable U.S. corporations. It found that 40 percent of them paid an effective rate of 17.5 percent or less over the last three years, with 30 companies paying nothing and 67 companies paying less than 10 percent.

Even so, both Republicans and Democrats believe that lowering the corporate tax rate and fixing the convoluted corporate income tax is essential to improving American competitiveness, which is the driving force in the current tax reform debate.

Corporations complain that they pay higher taxes here than in foreign countries and that U.S. laws discourage them from repatriating foreign earnings.

One of the key problems in the corporate tax reform discussion is figuring out which tax rate really matters for corporate decisionmaking. While it is true that the statutory corporate tax rate in the U.S. is relatively high compared to other countries, it’s not clear that this is a meaningful measure of the tax burden on corporate businesses.

In order to calculate the total federal tax rate on income earned in the corporate sector, one needs to follow the trail to the owners of a corporation, its shareholders. Since they also pay taxes on the same income that is taxed at the corporate level—corporate profits are double taxed in most countries—the tax rate on dividends is also relevant to the calculation. Presently, dividends are taxed at a maximum rate of 15 percent in the U.S., compared to a federal income tax rate on wage income that can go as high as 35 percent.

According to the Organization for Economic Cooperation and Development, many countries that appear to have low corporate tax rates actually have high rates on corporate income once individual rates on distributed profits (dividends) are taken into account. For example, Ireland has a corporate rate of just 12.5 percent, compared to 35 percent in the U.S., but it taxes dividends at a rate as high as 41 percent. Other countries provide tax relief for dividends paid, which reduces their effective tax rate.

Just as with the individual income tax, many deductions and credits reduce the taxes that corporations actually pay. When one calculates the effective federal tax rate on U.S. corporations—taxes divided by gross income—the corporate tax burden in the U.S. is very competitive.

On October 24, University of Michigan law professor Reuven Avi-Yonah and Ben Gurion University economist Yaron Lahav published a study examining the corporate tax burden on the 100 largest companies based in the U.S. and the European Union. The data come from publicly available financial reports issued by the companies. The study found that while the statutory tax rate is about 10 percentage points higher in the U.S., the effective tax rate paid by U.S. and European companies is about the same because European companies get fewer tax preferences.

The study suggests that this shows a path toward tax reform. If the U.S. broadened its corporate tax base to European levels then the U.S. could reduce its corporate tax rate to European levels.

However, on October 27, the Joint Committee on Taxation of the U.S. Congress released an estimate of how much the corporate tax rate could be reduced if all corporate tax breaks were eliminated. It found that completely wiping the slate clean would only allow the rate to be reduced by 7 percentage points to 28 percent. Republicans and the corporate community have been pushing to reduce the rate to 25 percent.

This suggests that if tax reform is to be done in a revenue-neutral manner—neither raising nor lowering aggregate revenues—then reducing the corporate tax rate will have to be paid for partially by raising taxes on individuals. This would seem to be prohibitively difficult, politically. Congress can pay for tax rate cuts for individuals by closing corporate tax loopholes, as was done in the Tax Reform Act of 1986, but it is very unlikely that people will support doing it the other way around.

Ending Unfair Tax Breaks
Of course, the last three years have been difficult ones for virtually all businesses. And because losses can be carried forward into future tax years, heavy losses in the past can shield profits from taxation today. Nevertheless, it has been considered scandalous in the past for large, profitable corporations to get away with paying little, if any, federal taxes. In 1982, for example, Ronald Reagan supported the Tax Equity and Fiscal Responsibility Act, the largest peacetime tax increase in American history, in large part because General Electric had avoided paying any taxes due to its aggressive use of legal tax breaks.

One area in which there is some agreement between the two parties is on changing the way foreign income is treated. The U.S. taxes multinational corporations based here on all their income earned in foreign countries, with a credit for taxes paid in those countries. Most countries only tax their corporations on income earned domestically. However, U.S. taxes are only levied when profits are repatriated from abroad.

One suggestion has been to allow corporations a one-time tax holiday in which they would pay a lower tax on repatriated earnings. Republicans say this would stimulate growth, but there is no reason to think so because the production that gave rise to the profits takes place in other countries, and allowing a tax holiday will only make foreign production more attractive.

Furthermore, Congress instituted a tax holiday on repatriated earnings in 2004 and there is no evidence that it led to increased growth, domestic investment or jobs, according to a 2009 Congressional Research Service report. An October 11 study by the Senate Committee on Homeland Security and Governmental Affairs found that much of the money went into executive compensation and that corporations raised the amount of funds they kept abroad in anticipation of another tax holiday. For these reasons, even the conservative Heritage Foundation agrees that a tax holiday would not be economically stimulative.

While a reduction in the corporate tax rate is a good idea, figuring out how to pay for it will not be easy. It would be a bad idea to allow a tax holiday for foreign earnings unless the whole system of taxing foreign-source income is reformed. Otherwise, it will just increase the incentive for multinationals to park their profits in foreign tax havens.

(Original Post)

BY JIM DOYLE jdoyle@post-dispatch.com > 314-340-8372 | Posted: Friday, November 4, 2011 12:00 am

A new report on corporate taxation identifies Tenet Healthcare Corp., Boeing Co., and Wells Fargo & Co. as among 30 profitable companies nationwide that paid no net federal tax over the past three years.

The study, titled "Corporate Taxpayers & Corporate Tax Dodgers 2008-10," was released by Citizens for Tax Justice and the Institute for Taxation and Economic Policy, two nonprofit advocacy groups based in Washington.

The study looked at the past three tax years combined. Some companies paid tax in some years but enjoyed tax breaks in other years that offset those payments — meaning they paid no tax overall during the period, according to the study.

The study says 280 of the largest publicly traded U.S. companies faced federal income tax bills equal to 18.5 percent of their profits in the past three years — little more than half the official corporate rate of 35 percent.

The study reported some companies having a negative effective tax rate, meaning they paid no taxes and in fact enjoyed rebates. This can take place by carrying back excess tax deductions or credits to an earlier year or years and receiving a tax refund check from the U.S. Treasury Department, according to the study.

Boeing executives sharply disputed the study's conclusions, arguing it paid taxes at effective rates between 26 and 34 percent over the past three years — rather than the minus 1.8 percent rate reported in the study. The company, which has nearly 15,000 employees locally, earned total profit of $9.7 billion in 2008, 2009, and 2010, according to the study.

The advocacy groups used information from the companies' regulatory filings to conclude that a quarter of the 280 companies owed less than 10 percent of profits in federal income taxes for the 3-year period.

But the companies' regulatory filings can differ from their federal tax returns, which most companies do not disclose. Some companies argued that the study understated their tax payments by omitting deferred taxes that they may pay in future years.

Tenet Healthcare, which is based in Dallas, operates 49 hospitals, including two locally: St. Louis University Hospital and Des Peres Hospital. Tenet employs about 2,500 people in the St. Louis area.

According to the study, Tenet earned a total of $415 million in profits in 2008, 2009, and 2010, but its effective tax rate was minus 11.6 percent for the three-year period. However, the study did not say whether Tenet's accumulated losses from 2003 to 2007 affected the negative tax rate.

Tenet spokesman Rick Black told the Post-Dispatch last month that the company's current effective tax rate, after deductions and tax credits, was 39 percent. He did not return calls Thursday seeking comment on the new study.

Wells Fargo, which employs more than 6,100 people here, recorded the biggest reduction in taxes. The banking company reported a total of $49 billion in profits in 2008 through 2010, but its effective tax rate was minus 1.4 percent, the study said.

Company executives said much of the tax savings came from write-offs obtained after its 2008 purchase of Wachovia, which incurred big losses during the financial crisis.

The New York Times contributed to this report.

(Original Post)

By Bowdeya Tweh bowdeya.tweh@nwi.com, (219) 933-3316 | Posted: Friday, November 4, 2011 12:00 am

NiSource Inc. was one of 30 companies that benefited from a negative income tax rate in the past three years, according to two national tax policy research groups.

In a report released Thursday, Citizens for Tax Justice and the Institute on Taxation and Economic Policy listed NiSource among 280 companies that received nearly $223 billion in tax subsidies between 2008 and 2010. The report also said corporate taxes paid for more than 25 percent of federal spending in the 1950s, but in the 2010 fiscal year that share shrunk to 6 percent.  

Report lead author Robert McIntyre, director at Citizens for Tax Justice, said the subsidies were "wasted money that could have gone to protect Medicare, create jobs and cut the deficit."

The report named Fortune 500 companies that were profitable in the past three years and provided information in financial reports about their pretax U.S. profits and U.S. federal income taxes. Other companies named in the report as large beneficiaries of tax breaks were Wells Fargo Bank N.A., Exxon Mobil Corp. and The Boeing Co.

Merrillville-based NiSource, which is the corporate parent for NIPSCO, earned $588.7 million in profit between 2008 and 2010, according to the company's 2010 annual report filed in February. The report said the company had a income tax benefit over the past three years of $223.4 million.

Mike Banas, a NiSource spokesman, said Thursday the report is misleading because it doesn't adequately acknowledge tax law changes that occurred during the past couple of years. Those rules include short-term tax incentives for companies that make significant investments in creating new jobs, rebuilding infrastructure and spurring economic recovery.

One rule NiSource, among other companies, benefited from was a bonus depreciation rule that lowered the federal tax expense.

"This law, enacted by Congress, encouraged companies like NiSource to accelerate capital investments to spur economic recovery by permitting portions of these investments to be deducted at an accelerated rate," Banas said Thursday in an emailed statement.

"It is important to note that only the timing of the deductions was changed, and not the amount that could be deducted. This means our income tax expense will likely be higher in the future."

Banas also said in the past three years, NiSource has spent more than $3 billion in capital expenditures to support energy infrastructure projects to aid local spending and job creation.

(Original Post)

Published: 12:09 AM 11/04/2011 | Updated: 8:37 AM 11/04/2011

During the Obama administration’s first year, 49 U.S. corporations in the Fortune 500 paid a negative rate of income tax, some even receiving rebate checks from the Treasury Department, a report from Citizens for Tax Justice disclosed Wednesday. In 2010, 37 Fortune 500 companies paid a negative federal tax rate.

Perennial offenders include energy companies Pepco Holdings, PG&E and El Paso, as well as General Electric.

Pepco’s average federal tax rate for the 2008–2010 period was negative-57.6 percent — a net loss for Uncle Sam. General Electric’s was negative-45.3 percent.

Citizens for Tax Justice tracked $222.7 billion in federal tax subsidies granted to 280 of America’s most profitable companies, which its report said “earned almost $1.4 trillion in pretax profits in the United States” between 2008 and 2010.

More than $114.8 billion went to just 25 of those companies, each receiving more than $1.9 billion.

The most taxpayer-subsidized industries were the financial, utilities, telecommunications and energy industries. Together, they received more than $123 billion over the three-year span.

The tax-reform advocacy group’s report also found that the 280 heavily subsidized corporations paid federal taxes at, on average, only about one-half the standard 35-percent corporate rate.

During the Obama administration’s first year, 49 U.S. corporations in the Fortune 500 paid a negative rate of income tax, some even receiving rebate checks from the Treasury Department, a report from Citizens for Tax Justice disclosed Wednesday. In 2010, 37 Fortune 500 companies paid a negative federal tax rate.

Perennial offenders include energy companies Pepco Holdings, PG&E and El Paso, as well as General Electric.

Pepco’s average federal tax rate for the 2008–2010 period was negative-57.6 percent — a net loss for Uncle Sam. General Electric’s was negative-45.3 percent.

Citizens for Tax Justice tracked $222.7 billion in federal tax subsidies granted to 280 of America’s most profitable companies, which its report said “earned almost $1.4 trillion in pretax profits in the United States” between 2008 and 2010.

More than $114.8 billion went to just 25 of those companies, each receiving more than $1.9 billion.

The most taxpayer-subsidized industries were the financial, utilities, telecommunications and energy industries. Together, they received more than $123 billion over the three-year span.

The tax-reform advocacy group’s report also found that the 280 heavily subsidized corporations paid federal taxes at, on average, only about one-half the standard 35-percent corporate rate.

(Original Post)

Published: Nov. 4, 2011 at 1:52 AM

WASHINGTON, Nov. 4 (UPI) -- Many of the largest U.S. companies paid corporate income taxes at an effective rate far below the 35 percent in the tax code, a report released Thursday said.

Two liberal groups, Citizens for Tax Justice and the Institute on Taxation and Economic Policy, looked at the records of 280 companies that made money each year between 2008 and 2010, CNN reported. They found the companies paid an average of about 18.5 percent in corporate taxes.

While 71 companies paid more than 30 percent, others paid no corporate income tax at all -- and 30 had tax liability in negative territory thanks to what the report's authors called "excess tax breaks." Those included utility Pepco Holdings Inc. with total income of $882 million over the three years and General Electric Co. with income of $10.5 billion.

Tax breaks, many of them geared to specific industries and even specific companies, have crept back into the tax code since a housecleaning during President Ronald Reagan's administration, the report said.

"GE paid billions of dollars in taxes in the United States over the last decade, and we expect our overall tax rate will be approximately 30 percent in 2011," the company said in a statement. "We believe the U.S. tax system needs to be reformed to close all loopholes, to lower the corporate rate and to provide a territorial system like every other major country in the world."

(Original Post)

By Motley Fool Staff Posted 10:12AM 11/04/11 Investing

Nobody likes to pay taxes. But what gets people really upset is finding out that somebody else isn't paying taxes.

That message came through loud and clear earlier this week, when the Citizens for Tax Justice and the Institute on Taxation & Economic Policy released a new study that looked at how much major corporations pay in corporate tax. Although most news sources have focused on the populist anti-corporate angle in reporting on the study, investors should see the results as a mark of a company's success and competence in navigating the complex set of U.S. tax laws to its maximum advantage -- and consider the report's list of "corporate tax dodgers" as a watchlist for further research.

Why corporate taxes inspire such anger
The corporate income tax is a particularly divisive issue. Some people believe that corporations shouldn't have to pay income tax at all; after all, other business forms, including partnerships and limited liability companies, avoid entity-level tax and merely pass through their taxable income to their investors. Critics argue that corporate tax combined with the tax on dividends and capital gains amounts to double taxation, unfairly penalizing equity investors in comparison to debt financing, for which businesses get tax deductions on interest.

At the other end of the spectrum, though, are those who see the 35% statutory corporate tax rate as something that every corporation ought to pay. Yet because of the impact of credits, deductions, and other tax preferences -- the same things that keep many individual taxpayers from ever paying anywhere close to their marginal tax rate -- many companies dramatically reduce their tax bills. In fact, when you look at short periods of time, as the CTJ/ITEP study did, you'll even find periods during which credits outweigh tax liability, creating negative effective tax rates.

Here's a quick look at some of the 30 companies that achieved that dubious distinction between 2008 and 2010, according to the survey:

    Utilities made a strong showing on the list, with Duke Energy (NYS: DUK) , American Electric Power, and NextEra Energy all showing up with negative tax figures. Pepco Holdings led the list with an effective tax rate of -57.6%, while PG&E had a negative tax bill of more than $1 billion.
    At No. 2 on the list was General Electric (NYS: GE) , whose tax attributes already got plenty of attention earlier this year.
    Blue-chip stocks from many industries showed up among the 30, including glass-tech leader Corning (NYS: GLW) , aircraft-maker Boeing (NYS: BA) , and chemical giant DuPont (NYS: DD) .
    Despite government bailouts, only one major bank made the list: Wells Fargo (NYS: WFC) , with a reported effective tax rate of -1.4%. It was identified as the company with the largest total tax subsidies, however, at nearly $18 billion -- likely due in large part to its acquisition of Wachovia and its attendant tax-losses.

Policymakers can argue the pros and cons of making certain changes to the tax laws. But for investors who are more interested in the system we have now, the study is invaluable in pointing to winners and losers.

Why pay more?
The key information the study provides is its industry-by-industry breakdown of tax rates. For instance, among financial stocks, you might expect to see most companies making fairly attractive showings. But JPMorgan Chase (NYS: JPM) pays effective taxes of more than 30%. At least in theory, that's a huge headwind that favors Wells Fargo -- and is a major point in favor of choosing it over JPMorgan Chase.

Of course, the major caveat in acting on this study is whether you believe that tax reform will ultimately happen. If big changes occur, then winners under the old system could become losers under a new one, and vice versa. But if you think any reforms will make only minimal changes to the status quo, then you can fairly expect adroit tax-managing corporations to keep up the good work.

Where activism and investing conflict
Tax strategies to minimize tax may offend your sense of fairness, but they're part and parcel of managing a business well. Until serious reform gets closer to fruition, companies that have rewarded shareholders in the past with their tax-smart moves will likely keep doing so.

If you want to cut your own taxes, head over to the Fool's Tax Center. There, you'll find lots of advice to help you give less of your money to the IRS.

(Original Post)

By Kirsten Valle Pittman
kpittman@charlotteobserver.com
Posted: Friday, Nov. 04, 2011

Major U.S. companies - including a big bank, an energy titan and a manufacturer with close Charlotte ties - are paying unusually low taxes to the federal government, a study released Thursday found.

The report from two left-leaning think tanks, Citizens for Tax Justice and the Institute on Taxation and Economic Policy, studied the federal income taxes of Fortune 500 corporations that were profitable between 2008 and 2010.

It found those 280 companies paid, on average, about half of the top corporate tax rate of 35 percent in those years, despite combined pretax U.S. profits of $1.4 trillion.

While about one-fourth of the companies paid more than 30 percent over the three-year period, almost the same number paid less than 10 percent, the study found. Thirty companies employed so many loopholes and tax breaks that they had no federal tax liability from 2008 to 2010, the Washington, D.C.-based organizations found.

Wells Fargo & Co., the San Francisco bank that bought Charlotte's Wachovia, and Charlotte-based Duke Energy Corp. were among the 30 firms to pay no federal income taxes over the course of the study, the report said.

Charlotte manufacturer SPX Corp. was one of the 78 companies paying zero taxes in at least one of the years. It also was on the list of firms that paid less than 10 percent overall.

The study's authors argued in the report that their results show corporate tax loopholes are "out of control."

"Just as workers pay their fair share of taxes on their earnings, so should successful businesses pay their fair share on their success," they said.

But some companies disputed the findings, saying the study omitted deferred taxes they might pay in future years or ignored the reasons for low tax rates, including efforts to create jobs and deliver return to shareholders.

Wells tops in tax breaks

"This report takes data out of context to advance an agenda," Wells Fargo officials said in a statement. "The truth is that over the past 10 years, Wells Fargo has paid more than $30 billion in income taxes to federal and state authorities and billions more in other taxes, and it fulfills all tax obligations."

Among the 280 companies, Wells Fargo racked up the most in tax breaks from 2008 to 2010, nearly $18 billion, the report said. Its overall tax rate was minus 1.4 percent on more than $49 billion in total profits for the three years studied.

But the bank said those years were unusual, because Wells Fargo bought Wachovia in 2008. That resulted in significant losses and reduced Wells' taxable income.

"A substantial portion of the Wachovia losses had been realized by the end of 2010, and based on results for the first three quarters of 2011, Wells Fargo expects to pay significant income taxes for 2011," the bank's statement said.

Duke Energy was one of the study's top 25 companies in terms of corporate tax breaks, too. The utility's three-year tax rate was a minus 3.9 percent on profits of nearly $5.5 billion, the study found.

Wells, Duke: We pay our due

Company spokesman Tom Williams said Duke's tax rate was lowered by bonus depreciation, which allows a company to deduct a higher percentage of capital purchase costs in the first year, among other factors.

Duke is a "hugely capital intensive business" - it has built four new power plants that will come online next year, for instance - and like other companies, has taken advantage of related tax breaks the government offers, he said.

Duke wasn't alone in the tax study: Most utilities had low tax rates, cited as one of the report's "low-tax industries."

Williams added that bonus depreciation is designed to create jobs, "and our capital projects did create thousands of jobs."

SPX, the Charlotte-based manufacturer that provides equipment for food and beverage, electricity and vehicle services, paid a federal tax rate of 6.2 percent on nearly $566 million in profits during the three-year period, the study found. Company representatives could not be reached for comment Thursday.

Thursday's report comes as corporations push Congress for a cut in their official tax rate, arguing it would make them more competitive with companies overseas, and as lawmakers consider proposals to simplify the tax system.

The study was based on data from companies' regulatory filings and does not include deferred taxes.

(Original Post)

By Monitor staff
November 4, 2011

The driving force behind the Occupy Wall Street protests that have cropped up across the nation is the participants' belief that the game is rigged. Corporations and wealthy political campaign donors concoct the rules and a Congress more concerned with reelection than governing makes them the law of the land.

That belief, one we in good measure share, was reinforced this week by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, reform groups that analyzed the regulatory filings of 280 Fortune 500 corporations that made a profit in 2008, 2009 and 2010. Their findings show that for many companies the 35 percent corporate tax that Republicans complain so bitterly about is a farce. Few companies pay it; the average effective tax rate, for the 280 analyzed, came to less than 19 percent.

The nation's 70,000-page tax code is so laden with loopholes, injected with incentives and larded with credits that 30 of the 280 companies either paid nothing in federal taxes or got money back. And 78, during at least one of the three years studied, paid nothing in federal taxes.

Pepco Holdings, an energy company that delivers electricity in New Jersey, Maryland and other mid-Atlantic states was the king of the tax avoidance companies; its effective tax rate over the three-year period was a negative 57.6 percent, the group's report said. GE came in a close second, with a tax rate of negative 45.3 percent.

The study found a huge disparity in the effective tax rate paid by some of the most profitable corporations; 71 paid 30 percent or more while 67 paid less than 10 percent. The companies that paid the least tended to come from the industries that receive the biggest government subsidies, oil and gas industries, financial services, telecommunications and utilities.

The study was released with debate under way in Congress and among presidential candidates over tax reform, whether to lower the corporate tax rate, and a request by companies for a temporary tax holiday to repatriate their foreign earnings.

Nice word, repatriate. Sort of like Old Home Day for money. The problem is the corporations lobbying for repatriation want to bring the money home at a tax rate, in a bill in the Senate, of 8.75 percent, and in a House bill, 5.25 percent.

Ostensibly, the companies would use the money to create jobs, which is what they said they would do with profits repatriated in a 2004 tax holiday. That money went instead, to boost CEO salaries, buy back stock and profit shareholders. There should be no tax holiday. Collectively, corporations are sitting on an estimated $2 trillion in cash that they've been unwilling to invest in ways that create jobs.

The tax study's authors, in the preface to their report, said this: "Today, corporate tax loopholes are so out of control that most Americans can rightfully complain, 'I pay more federal income taxes than General Electric, Boeing, DuPont, Wells Fargo, Verizon, etc. etc. all put together.' That's an unacceptable situation."

It's also why across America people are protesting by sleeping in parks and just 6 percent of people polled by the CBS News and the New York Times think most members of Congress should be re-elected. Charlie Bass and Frank Guinta - take note.

(Original Post)

By Jia Lynn Yang, Thursday, November 3, 12:00 AM

Many of this country’s biggest companies paid no federal taxes — or even made money through credits and refunds from the government — over the past three years by using an array of loopholes and tax breaks, according to a report released Thursday.

The authors examined the finances of 280 corporations from 2008 through 2010 and found that 30 paid zero taxes or used loopholes to wind up with negative tax rates. Local utility Pepco Holdings paid the lowest rate of all the firms investigated, clocking in at nearly minus 58 percent.

According to the 2011 Fortune 500 list, these firms are the nation’s biggest.

Who’s not paying corporate taxes?

Study: Many big corporations have paid no federal taxes

Under the federal tax code, corporations are supposed to pay 35 percent of their profits in taxes. But the study found many of the companies used legal tax breaks that allowed them to pay lower rates than ordinary Americans.

The report, compiled by the nonprofit groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy, was published as corporations and White House officials have pushed for a reform of the corporate tax code. Powerful business lobbying groups, including the Business Roundtable, have said they want lawmakers to lower the overall 35 percent tax rate in exchange for closing some loopholes. These lobbyists frequently cite this rate when arguing that U.S. firms pay more than their foreign competitors.

Some corporations pushed back at the report, saying it relied on fuzzy accounting.

The “findings in this and other recent reports have been more politically motivated than truthful,” said Robert Varettoni, a spokesman for Verizon, which was cited in the report for having a negative 3 percent rate from 2008 through 2010. “The fact is, Verizon fully complies with all tax laws and pays its fair share of taxes.”

The report said that 71 of the companies paid an effective rate of more than 30 percent over the three years. But roughly an equal number paid less than 10 percent.

The range between industries is wide. Retail and health-care companies, in particular, tend to pay more in taxes. These firms usually have less intellectual property that can be shifted overseas to take advantage of other countries’ lower tax rates. The report found they paid an effective rate of 30 percent over the three years.

By contrast, tech companies and manufacturers, including General Electric, paid far less. GE, for instance, paid a rate of minus 45 percent, the report said.

“The report is inaccurate and distorted,” the company said in a statement. “GE paid billions of dollars in taxes in the United States over the last decade, and we expect our overall tax rate will be approximately 30 percent in 2011. We believe the U.S. tax system needs to be reformed to close all loopholes, to lower the corporate rate and to provide a territorial system like every other major country in the world.”

The report also noted that defense contractors paid notably low rates, averaging about 15 percent.

Gas and electric utilities also tend to pay less. Last year, Pepco Holdings made $229 million in pretax profits, the study said, and claimed $270 million in federal tax credits, making the company’s tax rate about minus 118 percent.

Bob McIntyre, a co-author of the study and director of the Center for Tax Justice, said it was hard to tell from Pepco’s annual financial filings exactly how it managed to lower its taxes by so much. But it appeared that much of the savings came from “accelerated depreciation,” a tax rule that allows companies to write off their capital investments faster than they wear out. Companies then deduct from their taxable income the falling value of these investments.

Pepco, which has raised the ire of local residents over sustained power outages, did not quibble with any of the specific numbers from the report. But the company said in a statement that it “pays all its required taxes in all the taxing jurisdictions within which it operates [Pepco] takes seriously its responsibility to adhere to legal tax requirements and its fiduciary responsibility to its customers and shareholders to minimize costs where possible.”

The report said that many other companies took advantage of tax breaks that favor certain industries, including drilling for oil and gas, making video games, building NASCAR racetracks, producing ethanol, and making movies.

Combined, the companies examined earned almost $1.4 trillion in pretax profits, according to the study. As a group, however, the firms claimed $223 billion in subsidies, with Wells Fargo, AT&T and Verizon topping the list.

“Wells Fargo is a responsible corporate citizen,” said a company spokesperson, “and we believe we have fulfilled all tax obligations to federal, state and local communities where we serve our customers.”

AT&T did not respond to requests for comment.

“We were way overdue for corporate tax reform a decade ago at the least, and nothing has happened in Congress,” McIntyre said. He said the report “shows how the power of these companies has grown over time.”

(Original Post)

A new report about companies' finances won't just enrage you -- it'll make you run to the nearest protest

By Andrew Leonard

In 2010, Verizon reported an annual profit of nearly $12 billion. The statutory federal corporate income tax rate is 35 percent, so theoretically, Verizon should have owed the IRS around $4.2 billlion. Instead, according to figures compiled by the Center for Tax Justice, the company actually boasted a negative tax liability of $703 million. Verizon ended up making even more money after it calculated its taxes.

Verizon is hardly alone, and isn’t even close to being the worst offender. Perhaps most famously, General Electric raked in $10.5 billion in profit in 2010, yet ended up reporting $4.7 billion worth of negative taxes. The worst offender in 2010, as measured by its overall negative tax rate, was Pepco, the electricity utility that serves Washington, D.C. Pepco reported profits of $882 million in 2010, and negative taxes of $508 million — a negative tax rate of 57.6 percent.

Altogether, according to “Corporate Taxpayers & Corporate Tax Dodgers 2008-10,” a blockbuster new report  put together by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy that will have you reaching for your hypertension medicine before you finish reading the third page, 37 of the United States’ biggest corporations paid zero taxes in 2010. The list is a blue-chip roll-call.

As the authors acidly note, “Most Americans can rightfully complain, ‘I pay more federal income taxes than General Electric, Boeing, DuPont, Wells Fargo, Verizon, etc., etc., all put together.’ That’s an unacceptable situation.”

The “high taxation” lie

Reading through this report, you will find yourself seized by an irresistible desire to hurl yourself headlong into the nearest OccupyYourLocalCity protest. In an era of crushing government deficits and mass unemployment, corporate America is not only skating blissfully free of its civic responsibilities, but continues to complain that it is paying too much in taxes. Even worse: Congressional Republicans and many Democrats agree! Listening to our politicians talk, you would imagine that corporate America’s neck is permanently under the tax man’s steel-tipped boot. When, in fact, the exact opposite is the truth.

The list of companies that paid zero taxes is only the beginning of the travesties documented by the report. The authors looked at the tax filings from 2008-2010 of 280 of the nation’s biggest, most successful corporations. These companies reported $1.4 trillion worth of profit during a period when most Americans were struggling to stay afloat. The authors discovered that the average effective tax rate — what the companies really paid after government subsidies, tax breaks and various tax dodges were taken into account — was only 18.5 percent, less than half the statutory rate. Fully a quarter of the 280 companies paid under 10 percent.

Remember that fact, the next time someone tries to tell you that American corporations pay the highest income taxes in the free world. The only number that counts is the “effective tax rate.” One of the interesting tidbits provided by the authors is that in many cases, the tax rate on foreign income for many of these companies is actually higher than the effective U.S. rate.

The most distressing part of the tale is the big picture: The overall trend line is pointed in exactly the wrong direction. If you break out just the years 2009-2010, the effective tax rate was 17.3 percent. “In 2008, 22 companies paid no federal income tax, and got $3.3 billion in tax rebates. In 2010, 37 companies paid no income tax, and got $7.8 billion in rebates.” When measured as a percentage of total GDP, over the last three fiscal years, “total corporate income tax payments fell to only 1.16 percent of the GDP … a new sustained record low since World War II.

    Corporate taxes paid for more than a quarter of federal outlays in the 1950s and a fifth in the 1960s. They began to decline during the Nixon administration, yet even by the second half of the 1990s, corporate taxes still covered 11 percent of the cost of federal programs. But in fiscal 2010, corporate taxes paid for a mere 6 percent of the federal government’s expenses.

How have these companies managed to cut their tax liabilities so far? The answer includes a mixture of targeted tax breaks that impact specific industries or companies, accounting games that corporations play with stock options, and sweeping adjustments to tax law such as changes in the rules in how companies can write off the value of depreciating equipment. The accounting rules for so-called accelerated depreciation are now so accommodating that companies can write off 75 percent of the cost of new equipment immediately.

A look at the list of the 10 corporations receiving the biggest tax-subsidy breaks from the U.S. government will defeat the ameliorating effects of any medication: Wells Fargo, AT&T, Verizon Communications, General Electric, International Business Machines, Exxon Mobil, Boeing, PNC Financial Services Group, Goldman Sachs Group, and Procter & Gamble. “56 percent of tax subsidies,” write the authors, “went to four industries: financial, utilities, telecom, oil/gas/pipeline.”

The companies that pay

However, not all companies are tax dodgers. Of the 280 companies analyzed by the authors, about 25 percent of the total paid close to the statutory rate, a little over 30 percent. But there’s no rhyme or reason to who pays or who doesn’t.

    DuPont and Monsanto both produce chemicals. But over the 2008-10 period, Monsanto paid 22 percent of its profits in U.S. corporate income taxes, while DuPont actually paid a negative tax rate of –3.4 percent. Department store chain Macy’s paid a three-year rate of 12.1 percent, while competing chain Nordstrom’s paid 37.1 percent. In computer technology, Hewlett-Packard paid 3.7 of its three-year U.S. profits in federal income taxes, while Texas Instruments paid 33.5 percent. FedEx paid 0.9 percent over three years, while its competitor United Parcel Service paid 24.1 percent.

The authors conclude on a wistful note, with a list of what Washington could do to bring sense and reason to corporate taxation, while providing the government with desperately needed revenue. But as the authors themselves readily acknowledge, their recommendations exist in an alternate universe from the one that we actually happen to live in.

    Unfortunately, corporate tax legislation now being promoted by many in Congress seems stuck on the idea that as a group, corporations are now either paying the perfect amount in federal income taxes or are paying too much. Many members of the tax writing committees in Congress seem intent on making changes that would actually make it easier (and more lucrative) for companies to shift taxable profits, and potentially jobs, overseas. Meanwhile, GOP candidates for president are all promoting huge cuts in the corporate tax or, in several cases, even elimination of the corporate income tax entirely.

And that, ultimately, is the most enraging fact about the new report from the Citizens for Tax Justice and the Institute on Taxation and Economic Policy. It won’t make a darn bit of difference.

(Original Report)

Jillian Berman First Posted: 11/3/11 10:22 AM ET Updated: 11/3/11 11:41 AM ET

Many major corporations have managed to pay taxes at just over half of the corporate income tax rate, according to a new report.

Nearly 300 of the nation's most profitable companies paid an average tax rate of 18.5 percent from 2008 to 2010, less than half of the 35 percent corporate tax rate, according to a study by the Citizens for Tax Justice released Thursday. Of the 280 companies, 78 studied paid a tax rate of zero or less during at least one year of the three year period.

And thirty companies, the report says, had a negative income tax rate from 2008 to 2010, even though they took home a combined $160 billion in pre-tax profits.

The financial services industry netted the largest share -- at 16.8 percent -- of the $222.7 billion in total tax subsidies that the companies received, the study found. Wells Fargo took home the most tax subsidies of them all, raking in nearly $18 billion in tax breaks over the last three years.

Officials at some major corporations lashed out at the study's findings following its release. In a statement, GE called the report "inaccurate and and distorted," according to the Washington Post. Verizon spokesman Robert Varettoni, told WaPo that "findings in this and other recent reports have been more politically motivated than truthful."

Even without lowering the corporate tax rate, large companies are still able to take advantage of a variety of loopholes available to them to avoid paying taxes. One, called the "active financing exception" allows corporations to sidestep paying taxes on overseas profits if the company derived those profits by "actively financing" a deal, according to the NYT.

Corporations also commonly take advantage of a rule called "accelerated depreciation," which allows them to write off investments faster than they wear out, according to WaPo. The companies then subtract the falling value of the investments from their taxable income.

The findings come as politicians wrangle over the best way to cut the nation's budget deficit. Republicans recently proposed lowering the corporate tax rate to 25 percent and paying for it by eliminating business tax breaks. A study by the Joint Committee on Taxation, requested by congressional Democrats, found that eliminating the business tax breaks alone wouldn't bring in enough revenue to make up for the lowered rate.

Republican presidential candidate Rick Perry said last month that if elected president he would cut the corporate tax rate to 20 percent. Perry told The New York Times that he didn't care that his tax plan could possibly increase income inequality. Another Republican presidential candidate, Herman Cain, vowed to slash the corporate tax rate as part of his 9-9-9 plan, which if enacted would cap sales tax, corporate income tax and personal income tax at 9 percent each.

Companies such as Apple and Google are lobbying Congress to pass an additional tax loophole known as a repatriation tax holiday that would allow corporations to avoid taxes on more than $1 trillion in offshore profits, Bloomberg reports. In exchange, the companies argue, companies would invest those dollars in the U.S.

U.S. corporations with foreign profits that amounted to 10 percent or more of their worldwide profits paid tax rates to foreign countries that were nearly one-third higher than the tax rates they paid to the U.S., the tax justice study found.

The Heritage Foundation, a conservative think tank, reversed its position on the repatriation tax holiday last month, saying that it wouldn't help to spur U.S. job growth or investment. The Treasury Department found that a similar tax holiday passed in 2004, did little to boost employment growth.

In fact, several companies that benefited from the 2004 law cut jobs in its wake. Dow Chemical, Verizon and Bank of America are just some of the 10 companies that slashed jobs after benefiting from a repatriation tax holiday, according to the Institute for Policy Studies.

(Original Post)

By Steven Sloan - Nov 3, 2011 12:00 AM ET

Thirty companies including General Electric Co. (GE), Verizon Communications and Boeing Co. (BA), didn’t pay federal income tax between 2008 and 2010 though they earned a combined $160.3 billion in pretax U.S. profits in that period, according to a report released today.

The data compiled by Citizens for Tax Justice, a Washington-based interest group backed by labor unions, expands on a study released in June that focused on 12 companies. The new report analyzes the taxes paid by 280 Fortune 500 companies that were profitable between 2008 and 2010.

The research found that 40 percent of the companies studied -- or 111 firms -- paid an effective tax rate of less than 17.5 percent after claiming deductions or credits that lowered their tax bill. The effective tax rate for one quarter of the companies exceeded 30 percent, according to the analysis. The top U.S. corporate tax rate is currently 35 percent.

The report is being released as House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, is considering a rewrite of the U.S. tax code that would lower the top corporate rate to 25 percent. He released a proposal last week that would allow U.S.-based companies to exempt 95 percent of profits held offshore from taxation.

“The U.S. Congress may be surprised given all the business lobbying that so many of these companies are paying so little in taxes,” said Robert McIntyre, director of Citizens for Tax Justice.
GE Says ‘Inaccurate’

The report said GE earned $10.5 billion in pretax profit and had an effective tax rate of negative 45.3 percent in 2008- 2010. Kenny Juarez, a GE spokesman, called the Citizens for Tax Justice report “inaccurate and distorted.”

“GE paid billions of dollars in taxes in the United States over the last decade and we expect our overall tax rate will be approximately 30 percent in 2011,” he said in an e-mailed statement. “We believe the U.S. tax system needs to be reformed to close all loopholes, to lower the corporate rate and to provide a territorial system like every other major country in the world.”

Charles Bickers, a Boeing spokesman, said the report “incorrectly states that we did not pay federal taxes.” He said the company took advantage of tax benefits designed to support manufacturing activities.

“Even at the depths of the recession, Boeing made substantial investments in our U.S. manufacturing capacity, in the retirement security of our employees (funding our pension plans) and in the development of innovative new products,” he said in an e-mail. “Many of those investments are incentivized specifically by federal tax laws.”
Using Tax Benefits

Some of the companies surveyed were able to take advantage of tax benefits to reduce their tax bill. For example, hospital operator Tenet Healthcare Corp. (THC) said in its 2011 annual report that it had $2.2 billion in net operating loss carryforwards as of Dec. 31, 2010. That allows a company to spread deductions from unprofitable years over time and helps reduce taxable income.

Citizens for Tax Justice said Tenet’s tax rate between 2008 and 2010 was negative 11.6 percent. The Dallas-based company has said its 2011 effective tax rate is 37.5 percent.

A company with a negative tax rate effectively received a benefit from the government.
Duke Energy

The analysis said Duke Energy Corp. (DUK)’s tax rate was negative 3.9 percent on three-year pretax profits of $5.5 billion. Thomas Williams, a spokesman for the Charlotte, North Carolina company said its tax rate was lowered by bonus depreciation, which allows a company to deduct a higher than usual percentage of the cost of capital purchases in the first year. The company has “large capital budgets” that support, among other items, four new power plants Duke brought on line last year, Williams said.

“We are not unique among utilities,” he said. “Companies with lots of” capital expenditures “are benefitting.”

Companies included in the report were critical of its findings. Robert Varettoni, a spokesman for Verizon Communications Inc. (VZ), said Citizens for Tax Justice has issued reports that have been “more politically motivated than truthful.”

Varettoni said Larry Cohen, the president of the Communications Workers of America, sits on the board of Citizens for Tax Justice. The union helped coordinate a strike among Verizon employees this summer.

The group said Verizon had $32.5 billion in pretax profits between 2008 and 2010 and had a negative tax liability of $951 million that resulted in a tax rate of negative 2.9 percent in those years. In an e-mail, Varettoni said the company “fully complies with all tax laws and pays its fair share of taxes.”

Citizens for Tax Justice didn’t take into account the company’s deferred tax liability that hasn’t been incurred, Varettoni said. He said 45 percent of the income attributed to Verizon is taxable to U.K.-based Vodafone Group PLC. (VOD)

To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net

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

(Original Post)

By Rob Lever (AFP) – 10 hours ago

WASHINGTON — Dozens of US corporations paid no federal taxes in recent years and many received billions of dollars in government subsidies despite earning healthy profits, a new study showed Thursday.

The report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, which examined 280 US firms, found 78 of them paid no federal income tax in at least one of the last three years.

It found 30 companies enjoyed a negative income tax rate -- which in some cases means getting tax rebates -- over the three-year period, despite combined pre-tax profits of $160 billion.

"These 280 corporations received a total of nearly $223 billion in tax subsidies," said the report's lead author, Robert McIntyre, director at Citizens for Tax Justice.

"This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit."

The study comes as a growing "Occupy Wall Street" movement has been denouncing tax breaks for wealthy firms and individuals, claiming the vast majority of Americans -- the 99 percent -- are hurt by these policies.

The study looked at 280 corporations from the Fortune 500 list, all of which were profitable in each of the last three years and provided sufficient data that their profits and taxes could be analyzed.

It found the average effective tax rate for the companies over the three years was 18.5 percent, well below the statutory rate of 35 percent.

"Many people will be appalled to learn that a quarter of the companies in our study paid effective federal tax rates on their US profits of less than 10 percent," the report stated.

"Others may be surprised to learn that an almost equal number of our companies paid close to the full 35 percent official corporate tax rate."

The study concluded that 78 of the companies had at least one year in which their federal income tax was zero or less.

Thirty companies had a negative income tax rate over the entire three year period on their combined pre-tax profits of $160 billion.

The study said banking giant Wells Fargo topped the list of corporations receiving the most in tax subsidies, getting nearly $18 billion in tax breaks in the last three years.

The report said the big conglomerate General Electric paid no taxes and received tax breaks resulting in a negative tax rate over the 2008-2010 period despite earning profits of $10.4 billion in the period.

GE responded by saying the report was "inaccurate and distorted."

"GE paid billions of dollars in taxes in the United States over the last decade, and we expect our overall tax rate will be approximately 30 percent in 2011," said a statement emailed to AFP.

"We believe the US tax system needs to be reformed to close all loopholes, to lower the corporate rate and to provide a territorial system like every other major country in the world."

Boeing was another firm that paid no taxes over three years and got tax breaks, as it earned $9.7 billion, the report said.

Other major firms that paid no tax in at least one of the past three years included ExxonMobil, Eli Lilly, Honeywell International and DuPont, according to the study.

Helped by the tax breaks, the largest US defense contractors had an effective tax rate of 10.6 percent in 2010, down from 19.3 percent in 2008, the two groups said.

The report comes as US lawmakers are struggling to find ways to curb a bulging US deficit and are looking at possible revenue sources, despite opposition by conservatives to any tax increases.

The study said many firms benefited from boosted tax breaks for depreciation of assets, but said these have failed to stimulate new investment.

Some industries have gotten specific tax breaks, and a number of firms cut their taxes by "seeking ways to shift their US profits, on paper, into offshore tax havens," it said.

(Original Post)

By Kevin Drawbaugh

Thu Nov 3, 2011 5:58am EDT

(Reuters) - Thirty large and profitable U.S. corporations paid no income taxes in 2008 through 2010, said a study on Thursday that arrives as Congress faces rising demands for tax reform, but seems unable or unwilling to act.

Pepco Holdings, a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied.

The statutory U.S. corporate income tax rate is 35 percent, one of the highest in the world, but over the 2008-2010 period, very few of the companies studied paid it, said the report.

The average effective tax rate for the companies over the period was 18.5 percent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks.

Their report also listed General Electric Co, Paccar Inc, PG&E Corp, Computer Sciences Corp and NiSource Inc as among the 30 that paid no taxes. All 280 corporations examined were profitable over the period.

Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.

"But that does not mean that low-tax corporations bear no responsibility ... The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support," the report said.

As Congress and the Obama administration struggle with a sluggish economy and high deficits, corporations are pressing Capitol Hill for more tax breaks, including one that would let them bring home overseas profits at a reduced tax rate.

The congressional "super committee" tasked with finding at least $1.2 trillion in additional budget savings by November 23 is so far deadlocked across a familiar divide -- Republicans refusing any tax hikes, Democrats defending social programs.

On Tuesday, a panel of budget experts warned super committee members that they would fail the country if they do not meet their goal. Financial markets have been waiting for many months for signs that Washington can get its financial house in order, but few have been forthcoming.

LOOKING BACK AT REAGAN

The report referred back to the 1986 tax reform pushed through by President Ronald Reagan, a Republican, who approved the largest corporate tax increase in U.S. history, largely by ending tax breaks, while cutting individual tax rates.

"Reagan solved the problem by sweeping away corporate tax loopholes," said the report, which was co-authored by Citizens for Tax Justice chief Robert McIntyre. His research 25 years ago played a key role in convincing Reagan reform was needed.

The industrial machinery business enjoyed the lowest effective tax rate during the study period, while the highest rate was paid by healthcare companies, the report said.

What are the tax breaks that corporations enjoy? One big one is accelerated depreciation that lets them write off equipment faster than it actually wears out. Deductions on executive stock options help. So do tax breaks for research and development and for making products in the United States instead of overseas. Offshore tax shelters play a role, too.

The average effective corporate tax rate, as calculated by McIntyre's group, was about 14 percent before the Reagan reforms; afterward it shot up to 26.5 percent in 1988.

As companies found their way around the reforms, the effective rate fell back to about 17 percent by 2002-2003.

Unlike in Reagan's time, taming corporate tax breaks alone will not solve today's deficit problem. Such breaks cost the government about $102 billion in lost revenues in 2011, a year when the federal deficit was an estimated $1.3 trillion.

Corporate loopholes are dwarfed by tax breaks that benefit individuals, such as the mortgage interest tax deduction -- a middle class sacred cow -- on its own worth $104 billion.

Still, said the report, "If we are going to get our nation's fiscal house in order, increasing corporate income taxes should play an important role."

(Reporting by Kevin Drawbaugh; editing by Carol Bishopric)

(Original Post)

By TIM MAK | 11/3/11 6:35 AM EDT

Thirty large and profitable Fortune 500 corporations paid no federal income taxes between 2008 and 2010, according to a new study Thursday on corporate loopholes.

In fact, the 30 companies enjoyed a negative effective income tax rate over the three-year period, even as they earned pre-tax profits of $160 billion, according to two think tanks, Citizens for Tax Justice and the Institute on Taxation and Economic Policy. A negative tax rate represents a tax benefit like a credit, not necessarily direct funds from the government.

Pepco Holdings, a Washington, D.C.-area power company, had the lowest effective tax rate at negative 57.6 percent and 78 of the 280 Fortune 500 corporations studied enjoyed at least one year in which they paid an effective tax rate of zero or less.

In addition, the average effective tax rate for the entire group of corporations studied over three years was only 18.5 percent, compared to the statutory rate of 35 percent.

The total amount of tax subsidies given to the 280 Fortune 500 firms was $222.7 billion from 2008-2010. Wells Fargo got the largest tax breaks, receiving $18 billion in breaks from 2008-2010.

The top 10 defense contractors saw their combined tax rate fall from 19.3 percent in 2008 to just 10.6 percent in 2010.

“Corporate taxes paid for more than a quarter of federal outlays in the 1950s and a fifth in the 1960s,” the report noted. “If we are going to get our nation’s fiscal house in order, increasing corporate income taxes should play an important role.”

(Original Post)

By John D. McKinnon

Overhauling the corporate tax code, as GOP presidential candidates are proposing, was never going to be easy. But two reports out this week reflect the depth of disagreement on the question of whether U.S. corporations are overtaxed.

On one hand, Citizens for Tax Justice, a left-leaning advocacy group, released a study contending that 78 of 280 profitable U.S. corporations paid no federal income tax in at least one of the last three years. That shows that while companies lobby for a lower tax rate, the current rules are already too generous, said CTJ director Robert McIntyre. Many companies argue that the group’s methodology underreports their tax bills, because it doesn’t include taxes they have deferred paying.

On the other hand, the Tax Foundation, a nonpartisan think tank that receives significant funding from businesses, posted an analysis by economist Will McBride arguing that over the last 15 years, total taxes paid by U.S. corporations exceeded after-tax profits in all but three years – in other words, that government took more from the till than shareholders did.

The effective tax rate for the federal corporate income tax was about 26% of taxable income (i.e. pre-tax profits), the study said. That shows that while individual companies sometimes benefit unduly from special breaks, companies by and large take a large hit from taxes, Mr. McBride said.

CTJ said Thursday that the Tax Foundation study looks at taxable profits rather than book-accounting profits, which tend to be higher. That skews the results, CTJ said.

At the Tzx Foundation, Mr. McBride responded that the foundation’s measure of profits “comes from the IRS and this is close to the standard measure of profits” produced by the federal Bureau of Economic Analysis. He criticized CTJ’s report for examining just the last three years, terming that period “grossly unrepresentative” because of the severe economic downturn.

(Original Post)

By Charles Riley @CNNMoney November 3, 2011: 3:10 PM ET

NEW YORK (CNNMoney) -- The corporate tax rate is 35%. But an examination of 280 of the nation's largest corporations suggests that many aren't paying anything close to that.

The real tax rate paid by a slew of major corporations averages closer to 18.5%, according to a study released Thursday by two liberal tax research groups.

The report issued by Citizens for Tax Justice and the Institute on Taxation and Economic Policy paints the corporate tax code as wildly inefficient, filled with loopholes and subject to the influence of lobbyists who carve out special provisions for the companies they represent.

The study looked at 280 companies in the Fortune 500 that were profitable for all three years between 2008 and 2010.

The results: 111 companies paid effective tax rates of less than 17.5% over the three-year period; 98 paid a rate between 17.5% and 30%; and 71 paid more than 30%.

The average rate? 18.5%.

Some companies paid zero. And 30 actually owed less than nothing in income taxes over the three years.

How does that happen?

At the root of the problem is a system of inverted incentives that encourages corporations to lobby for special tax breaks -- and politicians to insert them into the tax code.

Corporations pay lobbyists. Lobbyists convince lawmakers to add tax breaks. Lawmakers modify the tax code.

It wasn't always like this. The corporate tax code was cleaned of special tax breaks during the Reagan administration.

The clean slate didn't last long, and over time, special provisions have been added back in. NASCAR racetrack owners are allowed to write off the costs of their racetracks. There's the sweet deal for companies that make Puerto Rican rum.

Some of the biggest breaks go to companies that are allowed to write off investments in equipment more quickly than they actually depreciate.
The American tax machine

And certain companies enjoy incentives geared specifically at their businesses. The oil and gas industry, for example, is allowed to write off some drilling and exploration expenses.

All the breaks add up -- sometimes eliminating a company's tax burden altogether. Other companies reported so many "excess tax breaks" that their tax burden went "negative," the study said.

According to the study, utility Pepco Holdings and conglomerate General Electric have the highest negative income tax rates.

Pepco's profits totaled $882 million over the three-year period, while the company had a negative tax rate of 57.6%. GE earned $10.5 billion, with a negative rate of 45.3%, according to the study.

Pepco (POM, Fortune 500) said Thursday that it always operates within the law, and that the IRS audits every income tax return filed by the company.

"Pepco Holdings pays all its required taxes, including but not limited to income, sales, use, property, and gross receipts taxes, in all the taxing jurisdictions within which it operates," the company said in a statement.
The truth about GE's tax bill

GE (GE, Fortune 500), which runs an extremely complicated multi-national operation, took issue with the study, calling it "inaccurate and distorted."

"GE paid billions of dollars in taxes in the United States over the last decade, and we expect our overall tax rate will be approximately 30% in 2011," the company said in a statement. "We believe the U.S. tax system needs to be reformed to close all loopholes, to lower the corporate rate and to provide a territorial system like every other major country in the world."

GE is not alone in calling for reform. Most lawmakers acknowledge the system is broken. President Obama called for corporate tax reform in his State of the Union address and the concept has support among lawmakers on both sides of the aisle.

The idea of reform is to lower the corporate tax rate while greatly scaling back tax breaks, loopholes and other provisions of the tax code that allow most corporate income to avoid taxation.

Despite the general consensus that something must be done, lawmakers are not likely to tackle the issue anytime soon. It's possible that the congressional super committee, now trying to find a way to cut the deficit, will make reform recommendations.

But don't count on too much action. The political atmosphere on Capitol Hill has prevented movement on many fiscal and tax issues in recent months.

Daniel Shaviro, a tax professor at New York University School of Law, said he doesn't anticipate big changes in the corporate tax code, at least in the near term.

"There is widespread sympathy for lowering the corporate rates," Shaviro said. "But I I tend to doubt it happens anytime soon."  To top of page
First Published: November 3, 2011: 5:41 AM ET

Original Post

By Bernie Becker - 11/03/11 12:01 AM ET

A large swath of Fortune 500 companies, on average, paid an effective tax rate that was essentially half the top statutory corporate rate of 35 percent in 2009 and 2010, a new study found.

The report, from the liberal advocacy groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy, not only found that some sectors paid significantly less than others. It also showed that within certain industries – like retail, pharmaceuticals and aerospace – some prominent companies paid far less than others.

Robert McIntyre, CTJ’s director, told The Hill on Wednesday that he hoped the groups’ latest report had a similar impact to one crafted in the 1980s, which is credited with helping build momentum for the last overhaul of the tax code a quarter century ago.

In all, the latest study found that 67 of the 280 Fortune 500 companies it examined had an effective tax rate below 10 percent between 2008 and 2010, with 30 of those corporations having a tax rate of zero or less.

The two groups found that 78 companies paid a rate of less than zero in one of those three years. General Electric, Duke Energy, Wells Fargo and Verizon, with a combined pretax profit of some $98 billion, were among the companies with an average subzero tax rate for the full three years, according to CTJ and ITEP.

On the other side of the spectrum, 71 companies paid more than 30 percent – including Intel, UnitedHealth Group, Nike, McDonald’s and Home Depot.

McIntyre said those findings showed him that policymakers were misguided for pushing for lower corporate rates, which officials say will make American companies more competitive in the global marketplace, and for pressing for a reform of the tax code that doesn’t eat into deficits.

“It still always amuses me, when you look at these companies, a quarter of them pay basically the tax rate they’re required to,” he said. “And they’re still doing well – profitable in all three years. They didn’t have any trouble with that rate. So is that shocking? No. Interesting? Yes.”

Still, the Obama administration has signaled its interest in corporate tax reform, with Treasury Secretary Timothy Geithner saying this year he’d like to see the rate reduce to the high 20s, percent-wise.

The top congressional tax-writers, Rep. Dave Camp (R-Mich) at House Ways and Means and Sen. Max Baucus (D-Mont.) at the Finance Committee, are also pushing for a tax overhaul, with Camp last week unveiling a plan to limit the taxation of offshore corporate profits. House Republicans have also called for reducing the top corporate rate to 25 percent.

The two liberal groups’ report found effective corporate tax rates essentially unchanged from the last time they released a study some seven years ago, despite the fact the economy took a sharp downturn in the interim.

A September 2004 report from the groups found an average effective rate of 17.2 percent for major companies in 2002 and 2003, almost exactly the same as the 17.3 percent rate it found this time around.

But those rates are also sharply lower than the 26.5 percent rate the groups found in the aftermath of the 1986 tax overhaul. A survey examining corporate taxes between 1996 and 1998 found an average effective rate of 21.7 percent.

Some companies and analysts more sympathetic to corporations’ current tax approach have questioned the approach of the two groups, who examine companies’ reports to their shareholders to reach their figures.

Scott Hodge of the Tax Foundation, for instance, said earlier this year that financial reports and actual tax returns, which are not publicly available, tell a much different story.

The companies themselves have also reported much higher effective tax rates than what CTJ and ITEP found – in part because the groups only count federal taxes and corporations often include state, local and deferred taxes, not to mention levies paid to foreign governments.

The report, for instance, said IBM paid 3.8 percent over those three years, but the company says its effective rate was either 25 percent or 26 percent each year.

CTJ and ITEP also declared that Boeing was one of the companies with a subzero rate, at -1.8 percent, over the three-year span. But the aerospace giant says it paid at least 22 percent and as much as 34 percent in those years.

“Over that period – even at the depths of the recession ¬¬– Boeing made substantial investments in our U.S. manufacturing capacity, in the retirement security of our employees (funding our pension plans) and in the development of innovative new products,” Charles Bickers, a company spokesman, told The Hill in a statement.

The new report also found that one entire sector, industrial machinery, had a combined average rate of less than zero between 2008 and 2010. The telecommunications industry also paid around 8 percent, while the oil-and-gas and financial industry hovered around 15 percent.

The retail and health care sectors both paid almost exactly 30 percent during that same time span.

UPS (24.1 percent) and FedEx (0.9 percent) were also among the companies within certain industries that had very different tax rates, according to the report.

Elsewhere, the study found that Nordstrom’s (37.1 percent) paid more than three times as much as Macy’s (12.1 percent), while Texas Instruments’ effective rate (33.5) was roughly nine times higher than Hewlett-Packard’s (3.7 percent).

(Original Post)

Boeing, Amazon and Wells Fargo were among those that got the biggest tax breaks in recent years.

By Abby Ohlheiser | Posted Thursday, Nov. 3, 2011, at 12:28 PM ET

The official corporate tax rate is 35 percent, but that would be tough to tell by looking at the financial statements of some of the nation's largest companies.

A new study out Thursday found that 280 of the largest publicly traded U.S. companies faced federal income tax bills of 18.5 percent of their profits for the past three years, or a little more than half of the official rate. Furthermore, 30 of the companies faced an average annual tax bill of less than zero between 2008 and 2010, and 78 companies posted at least one no-tax year during that stretch, according to the report from the left-leaning Citizens for Tax Justice.

The study comes as some corporations argue for a lower tax rate, claiming that the current one puts American corporations at a disadvantage against foreign competitors, the New York Times notes.  But, according to the study, U.S. corporations with significant foreign profits (defined here as more than 10 percent) faced tax rates in other countries that were one-third higher than they paid domestically.   

Researchers based the study on the companies' own corporate filings. Still, some of the companies surveyed in the report dispute the findings, arguing that the research omits deferred taxes that they may pay down the road.

Other key findings from the study: The total tax subsidies for all 280 corporations surveyed from 2008-2010 was $222.7 billion; Wells Fargo received the most in tax subsidies of those studied, with $18 billion over the three years; and Amazon.com paid a 7.9 tax rate on $1.8 billion in profits from 2008-2010, while its retail and wholesale competitors paid an average 30 percent rate.

The Times and CBS News note that the study suggests some corporations are getting tax breaks and loopholes at the expense of other companies: While many corporations effectively paid the official tax rate of 35 percent, others paid little or nothing. And comparable companies do not always have comparable tax rates. CBS News with one example: "General Dynamics, on 3-year profits of $9.147 billion, paid an effective tax rate of 27 percent, while Boeing, on profits of $9.735 billion, paid -1.8 percent tax."

Companies paying no taxes for the three-year period of the study include: Pepco Holdings, General Electric, Wells Fargo, Verizon Communications, and Boeing.

(Original Post)

By Siddhartha Mahanta
| Thu Nov. 3, 2011 11:30 AM PDT

Business leaders, some congressional Democrats, and almost all congressional Republicans think corporate tax rates should be lower. By closing loopholes, corporate tax-cutters argue, the government could reduce rates from the current 35 percent to 25 percent or even lower—all without losing revenue. The Tax Policy Center's Howard Gleckman, though, says that idea is bogus:

    The non-partisan [Joint Committee on Taxation] found that even if Congress scrubbed every single corporate preference from the code (a political fantasy if ever there was one) it could not get the corporate rate below 28 percent without adding to the budget deficit, raising taxes on individuals, or cutting spending.

    The JCT study, which was requested and released by House Ways & Means Committee Democrats, comes just days after the panel’s chairman, Rep. Dave Camp (R-MI), proposed a 25 percent rate as part of a major corporate reform. Camp did not say how he’d pay for his proposed changes.

    My Tax Policy Center colleague Eric Toder has been making a similar point for months: It is painfully difficult to find the money to reduce rates very much. Unlike corporate breaks, there are more than enough individual tax preferences out there to pay for individual rate reduction (and have money left over the cut the deficit). The problem is merely a lack of political will. Abolish the mortgage interest deduction anyone?

    According to the JCT, there aren’t enough tax breaks, in dollar terms, to lower the rate below 28 percent. 70 percent of corporate tax breaks come from breaks for expensing research and experimentation costs, and capital investment.

As Gleckman points out, a number of companies, including Google and GE, already pay an effective tax rate below 10 percent, thanks to various subsidy packages and tax breaks. In fact, a study that Citizens for Tax Justice and the Institute on Taxation and Economic Policy released on Thursday found that 71 of the 280 companies surveyed paid a tax rate of less than 10 percent of their pre-tax profits last year. GE, for example, paid a rate of minus 45 percent, according to the report. (The company calls the study "inaccurate and distorted," and said it has paid billions in taxes over the past decade.)

In any case, one imagines that companies that are already paying negative tax rates—i.e., getting money from the government—would have some pretty unkind words for any lawmakers daring to unwind their favorite loopholes. And that's what makes corporate tax reform so hard to execute.

(Original Post)

George Zornick on November 3, 2011 - 11:51am ET

Particularly in recent months, Republicans have gotten a lot of mileage out of the claim that 47 percent of Americans don’t pay taxes. “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax,” Rick Perry said in his presidential announcement speech. “A majority of American households paid no income tax in 2009. Zero. Zip. Nada,” declared Senator John Cornyn of Texas this summer.

The truth behind the truth, of course, is that 47 percent of Americans don’t pay federal income taxes because they don’t earn enough money. For example, a couple with two children earning less than $26,400 isn’t required to pay any income taxes, because they are presumably stretched thin enough already. The elderly, poor and young receive various tax credits that exempt them from having to pay already meager incomes to the federal government.

If Republicans really wanted to go after tax freeloaders, they ought to start talking about big corporations. Today, Citizens for Tax Justice released a damning report detailing how many large corporations paid ridiculously low tax rates on billions in profit—and in some cases, actually got money from the government.

The CTJ studied tax information from 280 of the country’s largest corporations over a three year period from 2008–10, and found that though the corporate tax rate is 35 percent, on average those companies only paid about half of that. Among the other findings:

    Only 25 percent—71 companies—actually paid something close to the federal corporate tax rate of 35 percent. They averaged a 32.3 percent effective tax rate.

    An equal number of companies, 67, paid an effective three-year tax rate of less than 10 percent. Their average tax rate was zero.

    Most shocking, 30 companies actually paid a negative effective tax rate, meaning that through clever accounting and generous government subsidies, they actually got money from the government. These companies made a profit of $160.4 billion over the same three-year period. Here’s a list of these companies:

In my recent piece for The Nation, “How to Be a 1 Percenter,” I looked at some of the ways that rich corporations and individuals use the legislative process to protect and enrich their fortunes. Fighting for tax breaks and subsidies is a key way to protect that wealth.

The CTJ study found four industries that get 56 percent of federal tax subsidies, and they aren’t likely to elicit much sympathy from actual taxpayers: the largest industry to benefit is financial services, which received $37.5 million in federal subsidies and paid an effective tax rate of 15.5 percent over the past three years. The other three industries receiving a majority of tax subsidies are utilities (like gas and electric companies), telecommunications companies, and oil and gas companies.

Defense contractors also do pretty well—the top ten have enough accountants and lobbyists to keep their average effective tax rate at less than half of the 35 percent corporate rate, despite $67 million in profit over the past three years:

It’s hard to imagine most Americans would actually support paying fewer taxes than defense contractors, oil companies and Wall Street firms—while giving some of what they do pay in the form of subsidies to those same corporations. But that’s the reality of the current tax system.

Republicans, however, uniformly want to cut corporate taxes—while, apparently, seeking to raise them on the 47 percent of Americans that don’t make enough money to pay taxes under the current code.

Unfortunately many Democrats also support cutting corporate taxes, though they at least want to get rid of the subsidies too—President Obama recently proposed lowering the corporate tax rate from 35 percent to somewhere between 26 and 30 percent, but wanted to pay for it by closing the loopholes and exemptions that allow so many companies to get away with not paying taxes.

In any case, it’s hard to look at a tax system where many middle-income people pay taxes at a higher rate than multibillion-dollar corporations and say that it’s fair. The next time a journalist acts confused as to why so many people are taking to the street, protesting unfairness in the economic system, the CTJ report is one of many good examples to bolster the people’s case.

(Original Post)

Dino Grandoni, Nov 3, 2011

That common Republican talking point--that at 35 percent, the U.S. has one of the world's highest corporate tax rates--doesn't reflect the 18.5 percent effective tax rate that a new study from Citizens for Tax Justice found that they actually pay. The left-leaning group examined the income statements of 280 of the country's largest corporations and found that 30 companies--including General Electric, Verizon, DuPont, Boeing, and Wells Fargo--found ways to effectively be taxed at a negative rate between 2008 and 2010. According to the study, that large discrepancy between the official and effective tax rates is due to "loopholes and tax breaks" at allowed the 280 companies to pull in $222.7 billion in tax subsidies over three years. The financial-services industry "received the largest share (16.8 percent) of all federal tax subsidies over the last three years."

(Original Post)

By Andrew Duffelmeyer

Thursday, November 03, 2011 at 3:00 pm

Wells Fargo & Co. tops the list of companies receiving the largest tax breaks since 2008, according to a joint study from Citizens for Tax Justice and the Institute on Taxation and Economic Policy.

Wells Fargo is one of 30 companies that paid less than nothing in federal corporate income taxes since 2008, according to the report. The company posted over $49 billion in profits in that period but had an effective tax rate of -1.4 percent, meaning it made more after taxes than before.

The report found that amounts to $18 billion in tax subsidies over the last three years, with the company paying -$681 million in taxes.

Wells Fargo, based in San Francisco, has its main office in Sioux Falls, S.D., and runs major operations in Des Moines, West Des Moines and Davenport.

The study looked at federal income taxes paid by 280 of America’s largest and most profitable corporations in 2008, 2009 and 2010. All of the companies are on Fortune Magazine’s annual list of America’s 500 largest corporations.

It found the companies reported profits of $1.4 trillion over that period, and should have paid $473 billion in income taxes, based on the 35 percent corporate tax rate. But tax subsidies over that time totaled $222.7 billion.

Of the 280 companies, 71 paid a tax rate near 35 percent; 67 paid rates less than 10 percent; and 30 paid rates less than 0 percent, in some cases actually receiving checks from the government.

A report issued last week found Wells Fargo & Co. is one of the top 10 transparent and accountable companies in the S&P 100 when it comes to political spending. It and other companies were ranked based on 29 different indicators to gauge disclosure, policies, compliance and oversight.

On Saturday it will be one of two national banks targeted by members of the Occupy Iowa movement in Des Moines as part of “National Bank Transfer Day.” The initiative aims to convince Americans to move their money from the larger banks and into “more responsible, community-driven financial institutions.” The individuals plan to demonstrate at the Ingersoll Avenue Wells Fargo and Bank of America locations.

(Original Post)

Integrys, Baxter, Navistar and Boeing included on list

5:05 p.m. CDT, November 3, 2011
The corporate tax rate is 35 percent, but an examination of 280 of the nation's largest corporations suggests that many aren't paying anything close to that.

The real tax rate paid by a slew of major corporations averages closer to 18.5 percent, according to a study released Thursday by two liberal tax research groups.

The report issued by Citizens for Tax Justice and the Institute on Taxation and Economic Policy paints the corporate tax code as wildly inefficient, filled with loopholes and subject to the influence of lobbyists who carve out special provisions for the companies they represent.

The study looked at 280 companies in the Fortune 500 that were profitable for all three years between 2008 and 2010.

The results: 111 companies paid effective tax rates of less than 17.5 percent over the three-year period; 98 paid a rate between 17.5 percent and 30 percent; and 71 paid more than 30 percent.

The average rate? 18.5 percent.

Some companies paid zero. And 30 actually owed less than nothing in income taxes over the three years.

How does that happen?

At the root of the problem is a system of inverted incentives that encourages corporations to lobby for special tax breaks -- and politicians to insert them into the tax code.

Corporations pay lobbyists. Lobbyists convince lawmakers to add tax breaks. Lawmakers modify the tax code.

It wasn't always like this. The corporate tax code was cleaned of special tax breaks during the Reagan administration.

The clean slate didn't last long, and over time, special provisions have been added back in. NASCAR racetrack owners are allowed to write off the costs of their racetracks. There's the sweet deal for companies that make Puerto Rican rum.

Some of the biggest breaks go to companies that are allowed to write off investments in equipment more quickly than they actually depreciate.

And certain companies enjoy incentives geared specifically at their businesses. The oil and gas industry, for example, is allowed to write off some drilling and exploration expenses.

All the breaks add up -- sometimes eliminating a company's tax burden altogether. Other companies reported so many "excess tax breaks" that their tax burden went "negative," the study said.

According to the study, utility Pepco Holdings and conglomerate General Electric have the highest negative income tax rates.

Pepco's profits totaled $882 million over the three-year period, while the company had a negative tax rate of 57.6 percent. GE earned $10.5 billion, with a negative rate of 45.3 percent, according to the study.

Pepco said Thursday that it always operates within the law, and that the IRS audits every income tax return filed by the company.

"Pepco Holdings pays all its required taxes, including but not limited to income, sales, use, property, and gross receipts taxes, in all the taxing jurisdictions within which it operates," the company said in a statement.

GE, which runs an extremely complicated multi-national operation, took issue with the study, calling it "inaccurate and distorted."

"GE paid billions of dollars in taxes in the United States over the last decade, and we expect our overall tax rate will be approximately 30% in 2011," the company said in a statement. "We believe the U.S. tax system needs to be reformed to close all loopholes, to lower the corporate rate and to provide a territorial system like every other major country in the world."

GE is not alone in calling for reform. Most lawmakers acknowledge the system is broken. President Obama called for corporate tax reform in his State of the Union address and the concept has support among lawmakers on both sides of the aisle.

The idea of reform is to lower the corporate tax rate while greatly scaling back tax breaks, loopholes and other provisions of the tax code that allow most corporate income to avoid taxation.

Despite the general consensus that something must be done, lawmakers are not likely to tackle the issue anytime soon. It's possible that the congressional super committee, now trying to find a way to cut the deficit, will make reform recommendations.

But don't count on too much action. The political atmosphere on Capitol Hill has prevented movement on many fiscal and tax issues in recent months.

Daniel Shaviro, a tax professor at New York University School of Law, said he doesn't anticipate big changes in the corporate tax code, at least in the near term.

"There is widespread sympathy for lowering the corporate rates," Shaviro said. "But I I tend to doubt it happens anytime soon."

(Original Post)

November 3, 2011 |  9:54 am
-- Tiffany Hsu

Many of the nation's most profitable companies are paying far less than the 35% corporate income tax rate, with dozens paying none at all, according to a new report.

Advocacy and research groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy examined 280 companies and concluded that they paid an average 18.5% rate from 2008 through 2010 -- about half the official rate.

Companies lashed out at the findings.

GE accused the report of being “inaccurate and distorted” and said that it expects to pay a 30% overall tax rate this year. Verizon said the study was “union-orchestrated” as well as being “deceptive and politically motivated,” adding that the company paid out $1.8 billion in taxes over the three-year period.

But according to the study, only a quarter of companies paid close to 35% of their U.S. profits, while another quarter paid less than 10%.

The report also found that 78 paid zero -- or had a negative tax rate -- for at least one year due to nearly $223 billion in tax subsidies, 17% of which went to the financial services industry. Thirty companies went tax free for all three years, researchers found.

Wells Fargo alone took in nearly $18 billion in tax breaks over the last three years, followed by around $14 billion for AT&T and $12 billion for Verizon, researchers found.

Over the period, the tax rate of energy company Pepco Holdings averaged out to negative 57.6%, according to the report. General Electric’s was negative 45.3%.

The study, the 10th since 1984, culled from firms listed among the Fortune 500 who were profitable for each of the last three years.  Amid a backdrop of calls from Republican presidential candidates Herman Cain and Rick Perry to lower the existing corporate tax rate, report authors said their findings were not mean to be “anti-business.”

Corporations are also on the hook for state and local corporate income taxes as well as sales, property and payroll taxes, said Will McBride, an economist with the nonpartisan Tax Foundation research group. From 1994 through 2008, he said, corporations paid out more in taxes than they pulled in through after-tax profits for all but three years.

This week, the congressional Joint Committee on Taxation said that in order for the government to bring in a consistent amount of revenue, the corporate tax rate should drop no lower than 28%.

(Original Post)

By Bernie Becker - 11/03/11 10:47 AM ET

In the wake of a new study on corporate tax practices, some liberals are calling for a “Buffett Rule” for the business world.

The study, released Thursday by a pair of liberal advocacy groups, found that a slew of Fortune 500 companies paid well below the statutory corporate tax rate of 35 percent between 2008 and 2010.

In all, 30 companies that made $160 billion in profits over that three-year span paid no total income tax, according to the report from Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Those corporations include General Electric, Duke Energy, Verizon and Wells Fargo.

The “Buffett Rule,” named after billionaire investor Warren Buffett and announced by President Obama in September, basically asserts that those making more than $1 million a year should not pay a lower share of their income than the middle class.

With that in mind, liberals have called for broadening that idea to include businesses — an idea Rebecca Wilkins of CTJ dubbed the “G.E. rule” on Thursday.

“Warren Buffett spotlighted the madness of a tax code that lets him pay a lower rate than his secretary,” Scott Klinger, director of tax policy for Business for Shared Prosperity, said in a news release. “Likewise, Big Business shouldn’t be paying lower taxes than small businesses.”

The corporations themselves and more business-friendly analysts have questioned the report and previous ones from the groups, and say they pay a much higher effective tax rate than the study found.

For instance, Boeing, one of the 30 companies the groups said had a subzero tax rate, said its effective rate ranged from 23 percent to almost 34 percent between 2008 and 2010. G.E. has also called the report “inaccurate and distorted.”

CTJ and ITEP only considered federal taxes, while companies often count taxes paid to state, local and foreign governments as well as deferred taxes.

04:30 pm, November 3, 2011

by Eyder Peralta

As the U.S. faces a presidential election in the middle of tough economic times, taxes have been firmly in the spotlight. A study (pdf) released today is bound to add more fuel to the fire.

Citizens for Tax Justice, a left-leaning research organization in Washington, D.C., sifted through the financial reports of 280 Fortune 500 companies and found that 78 of them paid no federal income tax in at least one of the past three years. Thirty companies, the study found, paid a negative tax rate over the three-year period.

The Los Angeles Times reports that corporations have criticized the report:

    GE accused the report of being "inaccurate and distorted" and said that it expects to pay a 30% overall tax rate this year. Verizon said the study was "union-orchestrated" as well as being "deceptive and politically motivated," adding that the company paid out $1.8 billion in taxes over the three-year period.

    But according to the study, only a quarter of companies paid close to 35% of their U.S. profits, while another quarter paid less than 10%.

The New York Times reports another criticism of the study is that it did not factor in deferred taxes, or taxes companies might have to pay at a later time.

With that in mind here are some of the report's highlights that we've taken from the press release:

— "The average effective tax rate for all 280 companies in the study over the three year period was 18.5 percent; for the period 2009-2010 it was 17.3 percent, less than half the statutory rate of 35 percent."

— "Total tax subsidies given to all 280 profitable corporations amounted to $222.7 billion from 2008-2010."

— "Wells Fargo tops the list of 280 U.S. corporations receiving the most in tax subsidies,getting nearly $18 billion in tax breaks from the U.S. treasury in the last three years."

— "The top ten defense contractors saw their combined tax rate decline from 19.3 percent in 2008 to a mere 10.6 percent rate in 2010."

— "U.S. corporations with significant (ten percent or more of their total worldwide profits) foreign profits paid tax rates to foreign countries that were almost a third higher than they paid to the IRS on their domestic profits."

(Watch the Video at WSJ.com)

11/3/2011 4:06:38 PM

WSJ's John McKinnon makes a stop on Mean Street to look at both of the corporate taxation issue.

(See the Video on MSNBC)

Visit msnbc.com for breaking news, world news, and news about the economy

(See on MSNBC)

Visit msnbc.com for breaking news, world news, and news about the economy

(See Video on MSNBC)

Visit msnbc.com for breaking news, world news, and news about the economy

(Original Post)

November 3, 2011 3:00 AM

By David Morgan

(CBS News)

Advocates for reducing U.S. corporate tax rates argue that lower corporate rates charged in other countries impede American competitiveness. Yet a new study finds that many of the nation's top companies are already paying less in U.S. taxes on their pretax profits than they do overseas.

In a study comprising more than half of the Fortune 500 list of the largest U.S. corporations, a quarter of those examined paid little or nothing in federal income taxes during the 2008-2010 period, despite registering profits in all three years.

Of those 280 companies, 78 corporations had at least one year during which their U.S. federal tax was zero or less, and many had more than one year paying no tax, despite recording profits; many of these companies also received tax rebates. In 2009 alone, 49 companies earned combined profits of $78.6 billion, yet paid no taxes - and collected tax rebates totaling $10.8 billion.

The study also disputes claims that the U.S. charges excessive corporate tax rates compared to other countries: Two-thirds of the corporations studied which earned significant foreign AND U.S. profits over the same three-year period paid higher tax rates to foreign governments on their foreign profits than they paid to the U.S. government on their domestic profits.

The study, conducted by Citizens for Tax Justice and the Institute on Taxation & Economic Policy and published Thursday, examined the tax payments of 280 companies from the Fortune 500 - those that recorded profits in 2008, 2009 and 2010. (Companies that registered a loss for at least one year were not included in the study.) These companies reported total pre-tax U.S. profits of $1.4 trillion, and many of the companies examined did pay close to the official corporate tax rate of 35 percent.

But because of tax breaks and loopholes, many paid little or nothing. In the aggregate, these 280 companies actually paid about half the official corporate tax rate - 18.5 percent over the 2008-10 period, and slightly less (17.3 percent) over the last two years.

In all, the tax breaks that reduced these companies' payments to the Treasury Department cost the United States more than $200 billion over three years.

"Corporate Taxpayers & Corporate Tax Dodgers 2008-10"

The analyses are based on financial data from SEC filings.

The variation in tax payments did not correspond with profits: In some cases comparable companies with comparable U.S. pretax profits made wildly different tax payments. General Dynamics, on 3-year profits of $9.147 billion, paid an effective tax rate of 27 percent, while Boeing, on profits of $9.735 billion, paid -1.8 percent tax.

According to the report:

A quarter of the companies (71) paid more than 30 percent (averaging 32.3%) in corporate taxes over the three years.

Another quarter (67) paid effective three-year tax rates of less than 10 percent, with the average effective tax rate being zero. Thirty of these companies paid LESS than zero.

The following 30 profitable corporations paid no U.S. income tax from 2008-2010:

Company / 2008-10 Profits ($ millions) / 2008-10 Taxes ($ millions) / Effective 2008-10 Rate
Pepco Holdings $ 882 / $ -508 / -57.6%
General Electric 10,460 / -4,737 / -45.3%
Paccar 365 / -112 / -30.5%
PG&E Corp. 4,855 / -1,027 / -21.2%
Computer Sciences 1,666 / -305 / -18.3%
NiSource 1,385 / -227 / -16.4%
CenterPoint Energy 1,931 / -284 / -14.7%
Tenet Healthcare 415 / -48 / -11.6%
Atmos Energy 897 / -104 / -11.6%
Integrys Energy Group 818 / -92 / -11.3%
American Electric Power 5,899 / -545 / -9.2%
Con-way 286 / -26 / -9.1%
Ryder System 627 / -46 / -7.3%
Baxter International 926 / -66 / -7.1%
Wisconsin Energy 1,725 / -85 / -4.9%
Duke Energy 5,475 / -216 / -3.9%
DuPont 2,124 / -72 / -3.4%
Consolidated Edison 4,263 / -127 / -3.0%
Verizon Communications 32,518 / -951 / -2.9%
Interpublic Group 571 / -15 / -2.6%
CMS Energy 1,292 / -29 / -2.2%
NextEra Energy 6,403 / -139 / -2.2%
Navistar International 896 / -18 / -2.0%
Boeing 9,735 / -178 / -1.8%
Wells Fargo 49,370 / -681 / -1.4%
El Paso 4,105 / -41 / -1.0%
Mattel 1,020 / -9 / -0.9%
Honeywell International 4,903 / -34 / -0.7%
DTE Energy 2,551 / -17 / -0.7%
Corning 1,977 / -4 / -0.2%
TOTAL: On $160.341 billion in profits, they paid $ -10.742 billion in taxes, for an average effective tax rate of -6.7%.

In some cases corporations may realize tax benefits for past years through rebates, or may win disputes with the IRS for previous tax periods, thereby accruing tax benefits not recorded in earlier financial reports.

Of the companies receiving what the report terms "tax subsidies" - the difference between what they would have paid for their profits at the 35 percent rate and what they actually paid during the 2008-10 period - the largest subsidies went to Wells Fargo ($17.960 billion); AT&T ($14.491 billion); Verizon ($12.332 billion); General Electric ($8.398 billion); IBM ($8.265 billion); ExxonMobil ($4.096 billion); Boeing ($3.585 billion); PNC Financial Services ($3.354 billion); Goldman Sachs ($3.178 billion); and Procter & Gamble ($3.158 billion).

More than half (56 percent) of tax subsidies were gained by four industries: Financial; utilities; telecommunications; and oil, gas & pipelines.

There is also a wide range of tax payments between industry sectors.

While retailers and health care paid an average effective tax rate of 30 percent or more, oil, gas & pipeline companies averaged 15.7 percent. Financial companies averaged 15.5 percent. Telecom companies averaged 8.2 percent. Gas and electric utilities paid an average effective tax rate of 3.7 percent. The lowest average rate was paid by the industrial machine sector, of -13.5 percent.

There was wide variance within each sector: For example, pharmaceutical company Amgen paid 28 percent, while its competitor Baxter paid -7.1 percent. United Parcel Service paid 24.1 percent, while FedEx paid 0.9 percent.

Elements of the U.S. tax code that have allowed companies to defer or reduce their tax burdens include accelerated depreciation of capital investments; research and experimentation tax credits; non-cash goodwill impairments; stock options; tax breaks awarded to specific industries; and offshore tax shelters.

The report's authors (Robert S. McIntyre and Rebecca J. Wilkins of Citizens for Tax Justice, and Matthew Gardner and Richard Phillips for The Institute on Taxation and Economic Policy) write that lawmakers should enact corporate tax reform, focusing on what are officially known as "corporate tax expenditures"; reinstate a strong corporate Alternative Minimum Tax; revise how stock options are treated; adopt restrictions on abusive tax sheltering; reform how multi-national companies assign profits between foreign and domestic divisions; and repeal the rule allowing U.S. corporations to "defer" their U.S. taxes on their offshore profits, to end the incentive for shifting profits overseas.

"Unfortunately," the report states, "corporate tax legislation now being promoted by many in Congress seems stuck on the idea that as a group, corporations are now either paying the perfect amount in federal income taxes or are paying too much. ... Meanwhile, GOP candidates for president are all promoting huge cuts in the corporate tax or, in several cases, even elimination of the corporate income tax entirely."

The report's authors call on elected officials to stop "kowtowing to the loophole lobbyists" and enact corporate tax reform that benefits the majority of Americans.

(Original Post)

By Garth Johnston in News on November 3, 2011 2:22 PM

Whatever, its only money.

That General Electric managed to essentially pay no taxes in 2010 (despite $5.1 billion in profits) is old news—so it is not surprising, but is incredibly disheartening, to learn that GE is far from alone in finding ways around U.S. tax law. A study out today from the group Citizens for Tax Justice shows that between 2008 and 2010, 30 companies managed to pay no federal income tax, despite earning a combined $160.3 billion in profits. Good thing House Ways and Means committee chairman Dave Camp (R-MI) wants to rewrite the tax code so the top corporate tax rate is 25 percent (down from 35), right?

According to the report [PDF]:

A quarter of the 280 companies studied owed less than 10 percent of their profits in federal income taxes.
40 percent paid an effective tax rate of less than 17.5 percent after claiming deductions and credits.
Another quarter of the companies less skilled in the accounting dark arts paid an effective tax rate exceeding 30 percent.
In addition to those 30 who didn't pay a dime the whole time, 78 of the companies enjoyed at least one year in which their federal income tax was zero.

Another interesting fact—and a blow to pundits who say that we need to lower the corporate tax to better attract more businesses—according to the report those U.S. corporations with "significant foreign profits paid tax rates to foreign countries that were almost a third higher than they paid to the IRS on their domestic profits."

The biggest winner in the corporate tax game appears to be Wells Fargo, which got nearly $18 billion in tax breaks over the last three years, while Pepco Holdings had the lowest effective tax rate (negative 57.6 percent) over the same period. Wells Fargo says that its savings came from write-offs for its 2008 purchase of Wachovia. Other companies who pulled some interesting tricks include FedEx, whose effective tax rate of 0.9 percent is remarkable compared to UPS's 24.1 percent rate, and Amazon, which paid far less than most other retailers with an effective rate of 7.9 percent.

In 2010, corporations paid a total of $191 billion in federal income taxes, representing about 1.3 percent of the nation's gross domestic product. In the 1950s that number was 6 percent. Corporation: they're just like us—only with much, much, much better accountants.

(Original Post)

by Robin Marty
November 3, 2011
8:00 am

There’s some good news in the job market today, as the rate of filing for unemployment dropped to 397,000, the lowest it has been in weeks.  Although economists caution that the drop would need to be sustained in order to show true job recovery, it’s still a promising sign for a labor market in which the unemployment claims have dipped under 400,000 only three times in the last six months.

Less reassuring?  A new report that the number of Americans living in poverty has reached a record high.  Over 20 million people, or roughly one in 15, are living at or below 50 percent of the poverty level. And in D.C. itself, the number rises to over one in ten.  That means that a single person is trying to survive on less than $5500 annually, and a family of four on just over $11,000.  This is the largest number of Americans in poverty since the Census Bureau began tracking back in the mid 70's.

Meanwhile, 30 of America’s top corporations paid no federal taxes in the last three years, according to Citizens for Tax Justice and the Institute on Taxation and Economic Policy.  Due to tax breaks, credits and subsidies, many actually had a negative tax rate, despite earning a total of over $160 billion in pretax profits during that period.  “Pepco Holdings, a Washington, D.C.-area power company, had the lowest effective tax rate at negative 57.6 percent and 78 of the 280 Fortune 500 corporations studied enjoyed at least one year in which they paid an effective tax rate of zero or less. In addition, the average effective tax rate for the entire group of corporations studied over three years was only 18.5 percent, compared to the statutory rate of 35 percent.”

If only those corporations were using their saved tax money to hire more workers at a living wage salary.

(Original Post)

Thu Nov 03, 2011 at 02:16 PM PDT

NetminderElite

I know this is probably old news for a lot of us, but if I get one person to realize this for the first time, I've achieved what I want.  If you are not aware, between 2008 and 2010, thirty large and wealthy American Corporations paid zero income tax.  As you read this post, think about how much income tax you paid this year.

       "(Reuters) - Thirty large and profitable U.S. corporations paid no income taxes in 2008 through 2010, said a study on Thursday that arrives as Congress faces rising demands for tax reform, but seems unable or unwilling to act.

        Pepco Holdings, a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied.

        The statutory U.S. corporate income tax rate is 35 percent, one of the highest in the world, but over the 2008-2010 period, very few of the companies studied paid it, said the report.  The average effective tax rate for the companies over the period was 18.5 percent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks."

From the actual report itself (.pdf file), the following thirty companies paid ZERO income tax, as well as receiving millions...oh wait, I meant billions in tax rebates from the government.

    (1) Pepco Holdings
    (2) General Electric
    (3) Paccar
    (4) PG&E Corporation
    (5) Computer Sciences
    (6) NiSource
    (7) CenterPoint Energy
    (8) Tenet Healthcare
    (9) Atmos Energy
    (10) Integrys Energy Group
    (11) American Electric Power
    (12) Con-way
    (13) Ryder System
    (14) Baxter International
    (15) Wisconsin Energy
    (16) Duke Energy
    (17) DuPont
    (18) Consolidated Edison
    (19) Verizon Communications
    (20) Interpublic Group
    (21) CMS Energy
    (22) NextEra Energy
    (23) Navistar International
    (24) Boeing
    (25) Wells Fargo
    (26) El Paso
    (27) Mattel
    (28) Honeywell International
    (29) DTE Energy
    (30) Corning

But what does it all mean?  Taking a closer look at these companies shows us the following industries.

- 14 Energy / Utility Companies
- 3 Transportation Companies
- 2 Healthcare Companies
- 2 Conglomerates
- Remaining in Chemicals, Communications, Advertising, Aerospace, Defense, Banking, Finance, and Toys

Do you think its any coincidence that there are so many energy companies on this list?  How about healthcare?  How about these giant conglomerates, like G.E. that are on this list?  And it's more than just these companies paying zero income tax, they are actually receiving money from the government to the tune of billions of dollars.

Take G.E. for example.  In 2010, G.E. had a profit of 4.2 BILLION dollars.  The government gave them tax breaks to the tune of 3.3 BILLION dollars.  This gave them an effective tax rate of -76.6%.  Seem fair to you?  What was your tax rate?

How about an oil company?  In 2009, Exxon-Mobil had a profit of 2.5 BILLION dollars.  The government gave them tax breaks to the tune of 950 million dollars.  This gave them an effective tax rate of -38.3%.  Seem fair to you?  What was your tax rate?  How much were you paying per gallon of gasoline in 2009?  How much did that affect your life?

Oh I know!  How about the company that held our country at gunpoint?  In 2008, Goldman Sachs had a profit 4.9 BILLION dollars.  The government gave them tax breaks to the tune of 786 million dollars.  This gave them an effective tax rate of -16%.  Seem fair to you?  This doesn't even include the bailout funds.  Or all the foreclosed homes.

How could I forget about healthcare!  In 2009, the for profit healthcare group Tenet Healthcare had a profit of 193 million dollars.  The government gave them tax breaks to the tune of 53 million dollars.  Tax rate of -27.3% anyone?  Tenet operates 139 for profit health centers in the United States.  They've been involved in psychiatric fraud, medicare fraud, unnecessary heart surgery scandal, and Hurricane Katrina scandal.  So it seems only fair that they receive money from the government.

*

See where I'm going with this?  How is it that the rest of us, the 99%, have to see our jobs destroyed (sorry, I meant, "Management wanted to curtail redundancies in the human resources area, so many people are no longer viable members of the workforce" - thanks George Carlin), our pensions destroyed, our retirement destroyed, and then our social safety nets destroyed?  And then watch as that money, OUR tax money, given away to the 1%?  This is purely and simply reverse Robin Hood!

This is why people are fed up.  This is why people are protesting.  The 99% are slowly losing everything they've worked so hard for, while the 1% are bleeding this country dry all in the name of their corporate profits and CEO pay.  You want healthcare?  Sorry, government tax break for the corporate 1%.  You want affordable gasoline?  Sorry, government tax break for the corporate 1%.  You want to heat your home in the winter?  Sorry, you have to go broke so the government can give its tax breaks for the corporate 1%.  You want your labor to be valued by forming a union?  You know, the same labor that created this wealth?  Sorry, aint happening.

And so it goes.  On, and on, and on, and on...

It's infuriating.  If you have time, read the report, however I warn you its 71 pages of infuriating material.  I will blog about parts of this report more.

Finally, to end this post...

       Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.

        "But that does not mean that low-tax corporations bear no responsibility ... The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support," the report said.

 Don't let these people lie anymore.  Don't believe anything they say anymore.

(Original Post)

By Pat Garofalo on Nov 3, 2011 at 9:15 am

One of the driving forces behind the ongoing Occupy Wall Street protests is the fact that corporations have not been paying their fair share in taxes. A new report from Citizens for Tax Justice will no nothing to alleviate the protesters’ frustration.

CTJ looked at 280 companies, all of them members of the Fortune 500, and found that “while the federal corporate tax code ostensibly requires big corporations to pay a 35 percent corporate income tax rate, on average, the 280 corporations in our study paid only about half that amount.” And those who paid even half the statutory corporate tax rate paid far more than many of their competitors.

In fact, in the last three years, 78 corporations had at least one year where they paid no federal income tax at all, while 30 corporations paid not a dime over the entire three years. Those 30 corporations paid nothing, even though they made $160 billion in profits over that period:

    – Seventy-eight of the 280 companies paid zero or less in federal income taxes in at least one year from 2008 to 2010…In the years they paid no income tax, these companies earned $156 billion in pretax U.S. profits. But instead of paying $55 billion in income taxes as the 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they reported negative taxes (often receiving outright tax rebate checks from the U.S. Treasury), totaling $21.8 billion. These companies’ “negative tax rates” mean that they made more after taxes than before taxes in those no-tax years.

    – Thirty corporations paid less than nothing in aggregate federal income taxes over the entire 2008-10 period. These companies, whose pretax U.S. profits totaled $160 billion over the three years, included: Pepco Holdings (–57.6% tax rate), General Electric (–45.3%), DuPont (–3.4%), Verizon (–2.9%), Boeing (–1.8%), Wells Fargo (–1.4%) and Honeywell (–0.7%).

As CTJ’s report put it, “just as workers pay their fair share of taxes on their earnings, so should successful businesses pay their fair share on their success. But today corporate tax loopholes are so out of control that most Americans can rightfully complain, ‘I pay more federal income taxes than General Electric, Boeing, DuPont, Wells Fargo, Verizon, etc., etc., all put together.’ That’s an unacceptable situation.” And its one that lawmakers could fix, if they were willing to stand up to the nation’s biggest corporations.

(Original Post)

Christopher Bergin | Nov. 3, 2011 11:13 AM EDT

There's a report that's getting a lot of attention this morning that concludes that many large U.S. corporations paid little or no corporate income taxes between 2008 and 2010 even though they raked in millions of dollars. The report, prepared by the interest group Citizens for Tax Justice and the Institute on Taxation and Economic Policy, refers to these companies as "tax dodgers."

According to Webster’s Dictionary (definition 2), a dodger is “a tricky, dishonest person; shifty rascal.” Query: If you minimize your taxes, on behalf of your shareholders, by honestly applying the tax laws as they exist are you really a shifty rascal?

The report says that “the federal tax code ostensibly requires big corporations to pay a 35 percent corporate income tax rate.” No it doesn’t. It applies a maximum marginal tax rate of 35 percent on “so much of a [company’s] taxable income as exceeds $10,000,000” (IRC section 11). None of us pay the highest marginal rate on all the income we earn. Insinuating that corporations don’t pay their fair share unless they pay 35 percent in income taxes on all of what they earn isn’t, well, fair.

I have a lot of respect for CTJ. The folks there put out good stuff. But they always seem to need to go that extra mile with overblown headlines, such as accusing corporations of being shifty rascals. (CTJ is backed by labor unions.)

The real culprits here are the people who create all the tax breaks that corporations would be fools not to take advantage of. The CTJ report is quite correct in pointing out, “The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support.”

I would put it another way: Our tax code is for sale. Has been for years. And you and I have collectively elected the sellers.

So who’s really to blame? The ones who take advantage of the laws they lobbied politicians to enact or the ones who sold the rest of us out?

(Original Post)

Thursday 3 November 2011 - by Will Henley

Three quarters of major US corporations, including financial services firms, paid corporate tax below 30 per cent in the past three years owing to legal loopholes and state subsidies, according to a study of 280 firms.

Of the probed Fortune 500 companies, around a quarter paid tax...


(Rest behind paywall)

(Original Post)

Washington, D.C. (November 3, 2011)

By Michael Cohn, Accounting Today

The 280 most profitable U.S. corporations are sheltering half their profits from federal income taxes, and 30 of them paid less than zero in the last three years, according to a new study.

The study also found that 78 of the corporations paid no federal income tax in at least one of the last three years. The study, by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, expands on a preliminary report in June by the advocacy group that sparked controversy (see 12 Major Corporations Pay Less Than Zero in Taxes).

The average effective tax rate for all 280 companies in the study over the three-year period was 18.5 percent. For the period 2009-2010 it was 17.3 percent, less than half the statutory rate of 35 percent. Total tax subsidies given to all 280 profitable corporations amounted to $222.7 billion from 2008-2010. Thirty companies enjoyed a negative income tax rate over the three year period, despite combined pre-tax profits of $160 billion.

Wells Fargo topped the list of 280 U.S. corporations receiving the most in tax subsidies, getting nearly $18 billion in tax breaks from the U.S. Treasury in the last three years.

Pepco Holdings had the lowest effective tax rate of all the companies in the study, at negative 57.6 percent over the three year period.

The study was released at a time when many corporations are lobbying for lower corporate rates and a tax holiday on repatriated foreign profits.

“Our study provides proof that too many corporations are already being coddled by our tax system,” said Citizens for Tax Justice director Robert McIntyre, the report’s lead author.

Some companies within sectors fare worse than others, the study found. For example, the report found that FedEx paid a 0.9 percent tax rate over the three-year period, while its competitor, UPS, paid a 24.1 percent rate.

While retailers and wholesalers in the study generally pay average effective tax rates of about 30 percent, online commerce giant Amazon.com paid a rate of only 7.9 percent on its $1.8 billion in profits from 2008 to 2010.

Financial services companies received the largest share (16.8 percent) of all federal tax subsidies over the last three years. More than half of the federal corporate tax subsidies for companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas and pipelines.

The top 10 defense contractors saw their combined tax rate decline from 19.3 percent in 2008 to a mere 10.6 percent rate in 2010.

U.S. corporations with significant (10 percent or more of their total worldwide profits) foreign profits paid tax rates to foreign countries that were almost a third higher than the taxes they paid to the IRS on their domestic profits.

Most of the corporations do not release their tax returns. Instead the study relied on the annual reports and 10-K forms filed by the corporations with the Securities and Exchange Commission, which often include information on the tax liabilities and benefits claimed on their financial statements. These can differ from the actual tax returns they file with the IRS, however, and many of the companies pay other types of taxes, such as state and payroll taxes.

(Original Post)

November 3rd, 2011 05:05pm

by Wayne Faulkner

The corporate tax rate is 35 percent. But an examination of 280 of the nation’s largest corporations suggests that many aren’t paying anything close to that, reports CNNMoney.

The report was issued by Citizens for Tax Justice and the Institute on Taxation and Economic Policy. It painted the corporate tax code as wildly inefficient, filled with loopholes and subject to the influence of lobbyists, CNNMoney said.

(Original Post)

By Clifford Drake, Published November 3, 2011

In a new study released by the Citizens for Tax Justice, a left leaning think tank, 30 of the 280 Fortune 500 companies studied paid absolutely no corporate tax, even though the current American corporate tax rate is 35%. This proves to be approximately 10% of the companies studied with an additional 28% of companies studied paying absolutely no federal income taxes. This is possible through all of the extensive tax breaks and loopholes offered, even to the point that many companies are in fact paid when recording astonishing profits. Is this sensible policy, a policy which rewards winners with additional encouragement, or just plain illogical?

To illustrate the point, the 28% of companies studied which paid no federal income taxes were actually reporting negative tax rates to the tune of $22 billion out of a $156 billion profit. That’s 14% return for having a good year, astonishing as conservatives complain of “class warfare” To quote Richard Wolff of The Guardian, if this is class warfare, “the super-rich won the war.” Yet even with these numbers, it appears as though the front running republican candidates continue to try and provide a “flat tax” code, something that to any economist spells a tax break.

As I have remarked before, it would certainly be a relief to have a more simplified tax code to resolve these dilemmas. Yet the simplification is not to give up on taxing corporations and instead provide a cheaper rate. These companies are not going to continue hiring if given tax breaks – it is a fact that has been demonstrated over and over again as politicians continue to try and shove it down the American consciousness. In fact, with massive lay-offs to satisfy investors, the opposite may even prove to be the reality.

In the end, it all boils down to a philosophical principle. If people do not want to aid the “losers” of our economic system, it makes little to no sense to give a cookie every time a company scores a profit: believe me, they’re happy enough. A simple elimination of these tax breaks could provide a huge stimulus to our debt dilemmas, something that I can only hope the super-committee has realized by now. Alas, success may pay, but that doesn’t mean taxpayers need to continue to pay them.

(Watch Video on You Tube)

Citizens for Tax Justice and the Institute on Taxation and Economic Policy reviewed 280 Fortune 500 companies and found that on average they paid about half of the 35% federal income tax rate. 30 corporations had a negative rate, i.e. they received. Guest host Brian Unger breaks it down with Jayar Jackson on The Young Turks.

(Watch Video on You Tube)

The Alyona Show

So the Herman Cain maybe or maybe not sex scandal continues on, thanks to the mainstream media. We'll they're busy with the he said she said finger pointing we'll fill you in on a new report that you need to know about. We've told before that Bank of America and Exxon Mobil paid no income taxes in 2010. Now a new report from Citizens for Tax Justice highlights just how much the biggest companies dodge their taxes and exploit various loopholes and subsidies. They found that on average, those 280 companies only pay half of the 35% corporate tax rate.

(Watch Video on You Tube)

The Alyona Show

We've learned from the Citizens for Tax Justice Report that some of the largest companies in this country, which are in fact some of the largest companies in the world don't pay income taxes. Or at least haven't for the last 3 years, despite raking in billions. This is part of the reason they're occupying in different cities, and trying to get their voices heard. Former Governor of Louisiana and Republican Presidential Candidate Buddy Roemer discusses.

(Original Post)

By Emily Knapp

November 03 2011

Thirty large and profitable U.S. corporations paid no income taxes in 2008 through 2010. Furthermore, many Fortune 500 companies paid a fraction of the statutory U.S. corporate income tax rate during that time.

Hot Feature: Banks are at the Drawing Board to Fill Gap for Nixed Fees

According to a study of 280 U.S. corporations, all of which are Fortune 500 companies, the average tax rate for some of the nation’s strongest businesses was just 18.5%, almost half of the statutory U.S. corporate income tax rate of 35%. Pepco Holdings (NYSE:POM), a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6%.

Citizens for Tax Justice and the Institute on Taxation and Economy Policy put together the data. Their report identified General Electric (NYSE:GE), Paccar Inc. (NASDAQ:PCAR), PG&E Corp. (NYSE:PCG), Computer Sciences Corp. (NYSE:CSC), and NiSource Inc. (NYSE:NI) as being among the thirty companies paying no taxes during the three-year period, during which all of the 280 corporations studied by the two think tanks were profitable.

Despite the seeming inconsistency, the report acknowledged that corporations can rightly say that the loopholes that collectively saved them billions of dollars were perfectly legal. “But that does not mean that low-tax corporations bear no responsibility…The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support,” the report said.

But corporations are still pressing Capitol Hill for more tax breaks, including a tax holiday allowing them to repatriate overseas profits at a reduced tax rate. Meanwhile, the congressional “super committee” tasked with finding at least $1.2 trillion in additional budget savings by the day before Thanksgiving is so far deadlocked, with Republicans refusing tax hikes and Democrats defending social programs.

Suggesting a solution, the report refers back to the 1986 tax reform pushed through by President Ronald Reagan, a Republican, who approved the largest tax increase in U.S. history, largely by ending tax breaks while cutting individual tax rates. “Reagan solved the problem” much like that Congress is currently facing “by sweeping away corporate tax loopholes,” said the report, which was co-authored by Citizens for Tax Justice chief Robert McIntyre. His research twenty-five years ago played a key role in convincing Reagan that reform was needed.

One of the biggest tax breaks enjoyed by corporations is accelerated depreciation, which lets them write off equipment faster than it actually wears out. Deductions on executive stock options, tax breaks for research and development, and tax breaks for making products in the U.S. rather than overseas all save corporations money. Offshore tax shelters also play a role.

Before the Reagan reform, the average effective corporate tax rate was about 14%, afterward climbing to 26.5% in 1988. But as companies found their way around the reforms, the effective rate fall back down to about 17% by 2002-2003. However, this time around, taming corporate tax breaks alone won’t solve the problem. Such breaks cost the government about $102 billion in lost revenue a year, only a fraction of the estimated $1.3 trillion federal deficit.

Don’t Miss: Productivity in U.S. Climbed 3.1% in Third Quarter

Tax breaks that benefit individuals far outweigh corporate loopholes in terms of lost revenues. The mortgage interest tax deduction along is worth $104 billion. Still, the report maintains that, “If we are going to get our nation’s fiscal house in order, increasing corporate income taxes should play an important role.”

(Original Post)

WASHINGTON -- Pepco tops a list of 30 major companies paying no income taxes from 2008 to 2010.

According to a report from Citizens for Tax Justice and the Institute on Taxation, the utility company had the lowest effective tax rate in the nation: negative 57.6 percent.

Pepco said in a statement that it pays all required taxes and follows the rules on tax requirements.

The report also lists General Electric Co., PG&E and Boeing as non-taxpayers.

Reuters reports that the statutory corporate income tax is 35 percent, but very few companies in the study paid it during the three-year period.

(Original Post)

A report on corporate taxation released Thursday calls out Bellevue-based truck maker Paccar and more than two dozen other major corporations for paying no net federal income taxes over the past three years, despite being profitable each of those years.

By Drew DeSilver

Seattle Times business reporter

Paccar had an effective U.S. tax rate over the 2008-10 period of -30.5 percent, the third-lowest among the 280 companies studied, according to the study by the advocacy group Citizens for Tax Justice (CTJ) and an affiliated group, the Institute on Taxation and Economic Policy (ITEP).

The report also called Boeing one of the nation's largest corporate recipients of government tax subsidies, with nearly $3.6 billion in the 2008-10 period.

The report comes as the nationwide Occupy movement has focused attention on corporate influence on government, and as the congressional supercommittee searches for a consensus plan to reduce the yawning federal budget deficit.

While the statutory federal corporate income-tax rate, 35 percent, is one of the highest in the world, few companies pay anything close to that. Of the 280 companies analyzed by CTJ and ITEP, only 72 had effective U.S. three-year tax rates above 30 percent.

The two groups did not accuse companies of outright cheating on their taxes. On the contrary, they reported, "the loopholes and tax breaks that allow low-tax corporations to minimize or eliminate their income taxes are generally quite legal."

The report pegged Boeing's effective U.S. tax rate over the past three years at -1.8 percent.

In a statement, Boeing said it had made "substantial investments" in manufacturing capacity and new-product development that were "incentivized specifically by federal tax laws ... to help stimulate the economy and create and maintain new jobs." The company has added more than 10,000 workers this year, including more than 7,000 in Washington state.

Ulrich Kammholz, Paccar's assistant treasurer, declined to comment on the report, other than to point out that the company's cash tax payments were $452 million in 2008, $67.3 million in 2009 and $82.9 million last year.

However, neither Kammholz nor Paccar's regulatory filings say anything about how much of that cash was paid to foreign countries as opposed to the United States or specific states, or how much of those payments was based on current-year profits.

A review of Paccar's filings does suggest some reasons why its U.S. effective tax rate has been so low.

For one thing, most of Paccar's revenue and pretax income is generated overseas. Over the 2008-10 period, just 37.6 percent of Paccar's revenue — and 15.7 percent of its taxable income — was domestic; the company paid foreign tax at an effective rate of 24.8 percent.

The company also benefited from the research-and-development tax credit and a deduction for the value of exercised stock options. The report estimates that those two provisions reduced Paccar's U.S. taxes by an aggregate $13 million and $11 million, respectively, over the three-year study period.

Companies with negative effective tax rates can get refunds on taxes paid in previous years, by "carrying back" excess deductions or credits.

The study looked at the "current" portion of each company's income-tax expense — what it owes (or is owed) under the tax laws each year.

But because tax laws and accounting standards have different rules on when income should be recognized, much of a company's tax expense may be listed as "deferred" until some point in the future. Paccar, for instance, recorded a $202.7 million income-tax expense for 2010; $46.3 million of that was deferred.

The study found widely varying tax rates among companies in the same industry. Nordstrom, for instance, had a three-year effective tax rate of 37.1 percent, while the corresponding rate for competitor Macy's was just 12.1 percent.

Matthew Gardner, co-author of the report, said such disparities "raise questions about whether the tax system is interfering with the workings of the economy," by giving some firms an unfair edge over their rivals.

And some large companies, including Microsoft, were excluded from the study because the researchers found the way they allocated pretax income between the United States and overseas "obviously ridiculous."

Microsoft, for instance, runs much of its business through operations centers in Ireland, Singapore and Puerto Rico, where taxes are lower. That's why the company reports more than two-thirds of its pretax income as "international," even though more than half its sales occur in the United States.

The maneuver allowed Microsoft to slice nearly half off the statutory 35 percent tax rate.

Gardner also said policymakers should require companies to disclose more information about the taxes they actually pay, rather than accounting-based data that may obscure more than enlighten.

"It's pretty disturbing just how little the public or Congress knows about who is paying, how much they're paying and to whom," he said. "No matter what you want to do with reform, better disclosure is something Congress should be talking about."

(Original Post)

10:27 PM, Nov. 3, 2011

Written by Spencer Dennis

OLIVUE — It wasn't a strike, and it wasn't a protest.

As the Occupy movement seems to gain steam, local supporters are branching out and digging in.

"This is a barbecue," said Donald Bush, a supporter of Occupy Staunton who, along with Verizon union workers, was one of about three dozen who attended the "Unify Main Street" event on Thursday at the Verizon plant in Jolivue. "This is only going to grow. We don't know where it's going to go, but it's going to grow.

"We want our middle class back."

Verizon union workers, who are working under an extension of their previous union contract with Verizon while continuing talks to negotiate a new contract, attended with their families, their red "CWA Local 2204" shirts, their grills and their populist, middle-class message.

"We need to show Verizon that we aren't going anywhere, and we need more events like this," union President Chuck Simpson said, addressing the crowd. "This is all about corporate greed. It would be different if Verizon were losing money, but they aren't."

Verizon has seen its profits drop in recent years, but still reported more than $10 billion in net income in 2010, when company Chairman Ivan Seidenburg earned $18.2 million.

Those numbers don't sit well with workers who have been asked to accept cuts in benefits in recent negotiations.

"Money rules," said Joedy Drulia, a Verizon engineer for 14 years. "Those with the money make the rules."

Union representatives also believe that Verizon and other major companies are not paying their fair share while the middle class is being asked to make sacrifices and pay more.

"How 'bout that one percent giving their fair share?" Simpson asked the crowd. "How about CEOs chipping in?

"They're not, because they don't have to."

Despite its profitability, Verizon had a negative tax liability of $703 million in 2010, meaning they actually made money after filing taxes, according to a report released by Citizens for Tax Justice, a nonprofit with strong union support, and the Institute on Taxation and Economic Policy. A copy of the report was circulated at the event.

"The new CEO (of Verizon) makes $56,000 a day," Simpson told his audience, many of whom earn less than that in a year. "We're sick of it, we're tired of it, and we're not taking this crap anymore!"

(Original Post)

Average tax rate for 280 companies in study was 18.5 percent - less than half the statutory rate of 35 per cent

Total tax subsidies given to all corporations in report amounted to $222.7 billion from 2008 to 2010

Wells Fargo tops the list, getting nearly $18 billion in tax breaks from the U.S. treasury over the last three years

By Daily Mail Reporter

Last updated at 10:54 PM on 3rd November 2011

Thirty large and profitable U.S. corporations paid no income taxes from 2008 through to 2010, despite making combined pre-tax profits of $160billion, a report out today said.

A comprehensive analysis of 280 corporations on the Fortune 500 list found that their tax subsidies amounted to $222.7bn in the last three years.

The report, from Citizens for Tax Justice and the Institute on Taxation and Economic Policy, arrives as Congress faces rising demands for tax reform but seems unable or unwilling to act.
Under half: Corporations are paying far less income tax as a percentage than the statutory rate of 35 per cent, shown in graph of 2008 totals

Under half: Corporations are paying far less income tax as a percentage than the statutory rate of 35 per cent, shown in graph of 2008 totals
Sliding: The 2009 graph shows how corporations started paying less tax, with the industrial machinery industry hitting negatives

Sliding: The 2009 graph shows how corporations started paying less tax, with the industrial machinery industry hitting negatives

Minimal input: Four major industries paid less than 10 per cent tax in 2010

Minimal input: Four major industries paid less than 10 per cent tax in 2010

Pepco Holdings Inc, a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 per cent, among the 280 Fortune 500 companies studied.

The statutory U.S. corporate income tax rate is 35 per cent, one of the highest in the world; but over the 2008-2010 period, very few of the companies studied paid it, said the report.

The average effective tax rate for the companies over the period was 18.5 per cent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks.

 
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Their report also listed General Electric Co, Paccar Inc, PG&E Corp, Computer Sciences Corp, Boeing Co and NiSource Inc as among the 30 that paid no taxes.

Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.

'But that does not mean that low-tax corporations bear no responsibility. The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support,' the report said.

Some of the 30 companies disputed the report's findings.
DIRTY 30: THE COMPANIES WHICH PAID NOTHING IN INCOME TAX OVER THE LAST THREE YEARS DESPITE POCKETING BILLIONS IN PROFIT

Company / 2008-10 Profits ($ millions) / 2008-10 Taxes ($ millions) / Effective 2008-10 Rate
Pepco Holdings $ 882 / $ -508 / -57.6%
General Electric 10,460 / -4,737 / -45.3%
Paccar 365 / -112 / -30.5%
PG&E Corp. 4,855 / -1,027 / -21.2%
Computer Sciences 1,666 / -305 / -18.3%
NiSource 1,385 / -227 / -16.4%
CenterPoint Energy 1,931 / -284 / -14.7%
Tenet Healthcare 415 / -48 / -11.6%
Atmos Energy 897 / -104 / -11.6%
Integrys Energy Group 818 / -92 / -11.3%
American Electric Power 5,899 / -545 / -9.2%
Con-way 286 / -26 / -9.1%
Ryder System 627 / -46 / -7.3%
Baxter International 926 / -66 / -7.1%
Wisconsin Energy 1,725 / -85 / -4.9%
Duke Energy 5,475 / -216 / -3.9%
DuPont 2,124 / -72 / -3.4%
Consolidated Edison 4,263 / -127 / -3.0%
Verizon Communications 32,518 / -951 / -2.9%
Interpublic Group 571 / -15 / -2.6%
CMS Energy 1,292 / -29 / -2.2%
NextEra Energy 6,403 / -139 / -2.2%
Navistar International 896 / -18 / -2.0%
Boeing 9,735 / -178 / -1.8%
Wells Fargo 49,370 / -681 / -1.4%
El Paso 4,105 / -41 / -1.0%
Mattel 1,020 / -9 / -0.9%
Honeywell International 4,903 / -34 / -0.7%
DTE Energy 2,551 / -17 / -0.7%
Corning 1,977 / -4 / -0.2%
TOTAL: On $160.341 billion in profits, they paid $ -10.742 billion in taxes, for an average effective tax rate of -6.7%


Collections down: 78 of the 280 companies surveyed paid no federal income tax in at least one of the last three years

Collections down: 78 of the 280 companies surveyed paid no federal income tax to the IRS, headquarters pictured, in at least one of the last three years

A Pepco spokesman said it 'pays all its required taxes.'

Boeing paid its taxes 'between 2008-2010 ... Our effective income tax rate was 26.5 percent, 22.9 percent, 33.6 percent in 2010, 2009, 2008,' said a spokesman for the aerospace group.

As Congress and the Obama administration struggle with a sluggish economy and high deficits, corporations are pressing Capitol Hill for more tax breaks and a lower corporate rate.

Taxes are on the agenda of the congressional 'super committee' tasked with finding at least $1.2 trillion in additional budget savings by November 23, but it is so far deadlocked across a familiar divide - Republicans refusing any tax increases, Democrats defending social programs.

On Tuesday, a panel of budget experts warned super committee members they would fail the country if they did not meet their goal. Financial markets have been waiting for many months for signs that Washington can get its financial house in order, but few have been forthcoming.

The report referred back to the 1986 tax reform pushed through by President Ronald Reagan, a Republican, who approved the largest corporate tax increase in U.S. history, largely by ending tax breaks, while cutting individual tax rates.
Tax-dodge? Wells Fargo tops the list of 280 U.S. corporations receiving the most in tax subsidies, getting nearly $18 billion in tax breaks from the U.S. treasury in the last three years

Tax-dodge? Wells Fargo tops the list of 280 U.S. corporations receiving the most in tax subsidies, getting nearly $18 billion in tax breaks from the U.S. treasury in the last three years

'Reagan solved the problem by sweeping away corporate tax loopholes,' said the report, which was coauthored by Citizens for Tax Justice chief Robert McIntyre. His research 25 years ago played a key role in convincing Mr Reagan reform was needed.

The industrial machinery business enjoyed the lowest effective tax rate during the study period, while the highest rate was paid by healthcare companies, the report said.

'Big Business is getting away with taxation murder,' said Frank Knapp, vice chairman of the American Sustainable Business Council, a progressive business coalition.

'They pay little or no taxes on massive U.S. profits and then have the gall to lobby for a tax holiday to 'repatriate' profits they have stashed offshore.'

What are some of the tax breaks that corporations enjoy? One big one is accelerated depreciation that lets them write off equipment faster than it actually wears out.

Deductions on executive stock options help. So do tax breaks for research and development and for making products in the United States instead of overseas. Offshore tax shelters play a role, too.

Power group Duke Energy Corp was one of the 30 companies listed as paying no income taxes in 2008-2010.
AT&T was another top tax subsidy recipients with $14.5 billion

Big profits: AT&T was another top tax subsidy recipient with $14.5 billion

Chief Executive James Rogers told Reuters that Duke cut its taxes thanks to accelerated depreciation, which he said helped the company build new plants and hire construction workers.

Rogers is a frequent spokesman for a coalition of large multinationals seeking a tax break that would let them bring foreign profits into the United States at a reduced tax rate.

Others among the 30 companies included power producer American Electric Power Co Inc (AEP), chemicals company DuPont and toymaker Mattel Inc.

Like Duke, AEP said it benefited from accelerated depreciation. A Mattel spokesperson said the report's claims were inconsistent with the company's public financial filings.

'DuPont complies with all tax laws and regulations in every jurisdiction in which it operates,' said a DuPont spokeswoman.

The average effective corporate tax rate, as calculated by McIntyre's group, was about 14 percent before the Reagan reforms; afterward it shot up to 26.5 percent in 1988.

As companies found their way around the reforms, the effective rate fell back to about 17 percent by 2002-2003.

Unlike in Reagan's time, taming corporate tax breaks alone will not solve the deficit problem. Such breaks cost the government about $102 billion in lost revenues in 2011, a year when the federal deficit was an estimated $1.3 trillion.

Corporate loopholes are dwarfed by tax breaks that benefit individuals, such as the mortgage interest tax deduction -- a middle class sacred cow, on its own worth $104 billion.

Still, said the report: 'If we are going to get our nation's fiscal house in order, increasing corporate income taxes should play an important role.'

(Original Post)

By AUBREY COHEN, SEATTLEPI.COM STAFF
Published 09:53 p.m., Thursday, November 3, 2011

Boeing has paid less than nothing in taxes on its billions of dollars in profits over the past three years, according to a new report.

But Boeing disputes the accounting, saying it paid hundreds of millions in taxes from 2008 through 2010.

"We're following the rules, we're paying our taxes and we're investing in the future," spokesman Charles Bickers said.

First the report, by the Citizens for Tax Justice & the Institute on Taxation and Economic Policy. The authors say the average effective rate among the 280 profitable Fortune 500 companies it examined was just 17.3 percent in 2008, 2009 and 2010, less than half the actual corporate tax rate of 35 percent.

"(W)e, like most Americans, want our businesses to do well. In a market economy, we need managers and entrepreneurs, just as we (and they) need workers and consumers," the authors wrote. "But we also need a much better balance when it comes to taxes. Just as workers pay their fair share of taxes on their earnings, so should successful businesses pay their fair share on their success.

"But today corporate tax loopholes are so out of control that most Americans can rightfully
complain, 'I pay more federal income taxes than General Electric, Boeing, DuPont, Wells
Fargo, Verizon, etc., etc., all put together.' That's an unacceptable situation."

The authors aren't accusing companies of doing something illegal. Rather, they say these powerful players are shaping the law to their advantage.

"Corporate apologists will correctly point out that the loopholes and tax breaks that allow low-tax corporations to minimize or eliminate their income taxes are generally quite legal, and that they stem from laws passed over the years by Congress and signed by various Presidents. But that does not mean that low-tax corporations bear no responsibility for their low taxes," the report says. "The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support."

As for Boeing, the report says the company paid an effective tax rate of -1 percent, -9.1 percent and -0.1 percent, respectively in 2008, 2009 and 2010, while making profits of nearly $3.8 billion, $1.5 billion and $4.5 billion. That adds up to an effective rate of -1.8 percent, or -$178 million, over the three years.

Boeing pointed to its 2010 annual report, which says the company paid an effective rate of 33.6 percent in 2008, 22.9 percent in 2009 and 26.5 percent last year, including federal, state and foreign taxes. But, in a sign of just how convoluted corporate accounting can be, the same page of the report lists net income tax payments of $599 million in 2008, -$198 million in 2009 and $360 million last year.

How can a refund of $198 million in 2009 square with a reported effective rate of 22.9 percent? It all has to do with how accounting rules tally things differently for different purposes. Such rules muddy efforts to figure out what's really going on.

In another sign of how confusing this all is, the nonprofit Institute for Policy Studies cited a Boeing tax figure of $13 million in 2010 in a recent report listing the company as one of 25 large corporations paying their chief executives more than Uncle Sam. Boeing also disputes that amount, noting, among other things, that it received a $371 million tax settlement from the IRS last year.

Boeing's annual report shows tax credits for such activity as research and development, and deferrals for such spending as employee healthcare and pensions in 2008, 2009 and 2010. Bickers defended this via email Thursday, saying:

Over that period — even at the depths of the recession — Boeing made substantial investments in our U.S. manufacturing capacity, in the retirement security of our employees (funding our pension plans) and in the development of innovative new products. Many of those investments are incentivized specifically by federal tax laws (reducing our tax liability) to help stimulate the economy and create and maintain new jobs – which is exactly what we have done: Boeing has added more than 9,000 direct jobs in the U.S. this year alone, which also has created many thousand more jobs indirectly.

(Original Post)

4:52 pm November 3, 2011, by Christopher Seward

General Electric Corp. caught a lot of heat this year after it was revealed the company paid no federal taxes on billions in profits, but a citizens tax reform group says it wasn’t the only one taking advantage of favorable tax loopholes.

Wells Fargo and Verizon Communications are also on a list with 27 other Fortune 500 corporations that paid no federal taxes in 2008, 2009 and 2010, according to Citizens for Tax Justice.

In a study on how corporations use federal tax loopholes to pay little or no taxes, the tax reform group said a study of 280 of Fortune’s 500 largest corporations found 30 paid no income tax during the three-year period.

Combined, the 280 companies had pretax U.S. profits of $1.4 trillion during the period, the study said.

While the official tax rate for corporations is 35 percent, the study found the effective rate for all 280 companies averaged 18.5 percent for the period. Calling it “good news”, the group said 71 companies, or 25 percent of the total, paid an effective rate of more than 30 percent.

Citizens for Tax Justice insists it’s not “an anti-business” report. “But we also need a much better balance when it comes to taxes. Just as workers pay their fair share of taxes on their earnings, so should successful businesses pay their fair share on their success. But today corporate tax loopholes are so out of control that most Americans can rightfully complain,“ the group says in the report.

The group is pushing an argument heard often from President Barack Obama and Democrats. Critics, however, say a much more tax-friendly environment is needed for businesses to create much-needed jobs here at home instead of shipping those jobs overseas.

In addition to GE, Wells Fargo and Verizon, other well-known corporate names making the list of those who paid no taxes include Boeing, Mattell, Honeywell International, Tenet Healthcare, Corning and Duke Energy. The complete list and study can be found here.

Christopher Seward

(Original Post)

Published: Thursday, November 03, 2011, 2:58 PM     Updated: Thursday, November 03, 2011, 9:36 PM
Troy Reimink | The Grand Rapids Press By Troy Reimink | The Grand Rapids Press

How's this for a blood-boiler: A new report from Citizens for Tax Justice and the Institute on Taxation and Economic Policy identifies 30 corporations who payed an average income tax rate of less than zero during the past three years.

The groups' study of tax filings by the nation's 280 most profitable corporations reveals 78 of them had at least one tax-free year from 2008-2010 thanks to federal subsidies. The 280 companies during this period paid an average of 18.5 percent of their income in income taxes, which is about half the federal rate.

Washington, D.C.-based utility firm Pepco Holdings paid the lowest tax rate during the period, negative 58 percent. The list of companies paying zero or less-than-zero income taxes all three years includes three Michigan firms: Detroit-based DTE Energy, Jackson-based CMS Energy and Ann Arbor-based freight and logistics company Con-way.

Other well-known firms on that list include General Electric, DuPont, Verizon, Boeing and Wells Fargo. Many of the corporations dispute the accuracy of the groups' findings.

Some other notable facts from the report:

• Corporate income tax as a percentage of GDP has declined steadily since 1960.

• About a quarter of the top 280 companies paid the 35 percent tax rate. Another quarter paid less than 10 percent.

• The financial services industry received the largest share of federal tax subsidies.

• Companies with significant overseas profits tend to pay higher tax rates in other countries than they do here.

(Original Post)

By CHRIS COURSEY
THE PRESS DEMOCRAT
Published: Thursday, November 3, 2011 at 11:52 a.m.
Last Modified: Thursday, November 3, 2011 at 11:52 a.m.

The inequality of our economy is occupying our thoughts these days, and for good reason.

No matter what your feelings are about the folks protesting on Wall Street, Santa Rosa's First Street and main streets throughout the land, all of us should take note of two recent news stories about The Way Things Work in America.

Number one: The rich really do get richer, and the poor — by comparison — get poorer.

Number two: Corporations may be people when it comes to funding political campaigns, but a lot of corporations don't pay a dime in federal taxes, as most people do.

Bear with me here while I lay out some numbers. Hard data isn't nearly as fun as slogans and sound bites, I know, but it can be very revealing. And the data in these two recent reports reveals that all of us — or maybe close to all of us, maybe 99 percent — should be concerned about the direction our country is taking.

Last week, the non-partisan Congressional Budget Office reported that the top 1 percent of earners more than doubled their share of the nation's income over the past 30 years. More specifically, average inflation-adjusted after-tax income grew by 275 percent for the 1 percent of Americans with the highest incomes. Meanwhile, the bottom 20 percent of earners saw their income grow by just 18 percent from 1979 to 2007.

The 60 percent in the middle saw income growth of less than 40 percent, while the 19 percent just under the top muddled through with income growth of 65 percent.

This kind of economic disparity doesn't just happen naturally; it's the result of policy. The CBO report notes that federal revenue generation has shifted away from progressive income taxes and toward less-progressive payroll taxes, with the burden falling on the middle class and poor. Other policies, such as Social Security payments that are distributed regardless of income, exacerbate the disparities.

Keep these numbers in mind the next time you hear someone talking about the 1 percent and the 99 percent. It's not just hyperbole; there really is a difference.

On the corporate front, a report by Citizens for Tax Justice and the Institute for Taxation and Economic Policy reiterated what many of us already know: A lot of America's biggest companies pay no federal taxes at all, and many of them actually receive a net subsidy from the taxpayer.

The report examined the finances of 280 corporations and found that more than 10 percent either paid no taxes at all, or used loopholes to wind up with negative tax rates (essentially subsidies).

Corporations routinely complain about their tax rate of 35 percent in the federal tax code. But more than a quarter of the companies studied paid a rate of less than 10 percent. And some very big ones paid much less: General Electric, AT&T, Verizon and Wells Fargo all received taxpayer-funded subsidies, the report said.

Overall, the companies studied in the report earned almost $1.4 trillion, and received $223 billion in subsidies.

Class warfare? You bet. And guess who's losing?