Corporate tax payments have fallen from a rate of about 40% in the 1950s, to around 11% since 2008 – Congress creates tax loopholes and gets campaign donations in return.
The corporate tax system is on the verge of being organized crime. The Institute for Policy Studies found that 25 of the Fortune 500 U.S. companies paid their CEO more than they paid in federal income taxes.
There are many examples of companies taking advantage of legal ways to “launder” their profits to avoid federal and state taxes. For example, Apple is sitting on over $120 billion in cash reserves. A significant portion of that surplus is a result of the company paying just $3.3 billion in taxes on its reported profits of $34.2 billion in 2011 – a rate of 9.8%. A recent New York Times article explained how Apple sets up small offices in low-tax place like Nevada, Ireland, and the Netherlands. There is even a new accounting term the “Double Irish with a Dutch Sandwich” to describe the tax dodges employed by Apple and, as the word spreads, many other companies.
The list of companies that pay almost no taxes is longer than a Clint Eastwood monologue. For example, General Electric brought in $81 billion in profits during the last five years and received a $3 billion refund for “overpayments,” Verizon received a refund in spite of ringing up $48 billion in profits over the last five years. Boeing made a total of $21.5 billion in profits and got a small refund, and Kraft enjoyed a refund in spite of $13.5 billion in profits over five years. Just typing this paragraph makes me as cranky as John McCain.
The result is a laughably small corporate contribution to the common good. The Center for Tax Justice (which is a wonderful non-profit that I donate to) calculated that corporate taxes have fallen from 4% of the Gross National Product in 1965 to 1.3% in 2009. This amount is lower than the percentage in dozens of developed countries including Korea, Japan, England, Norway, Israel, Canada, and Turkey to pick a few off the list.
While the nominal federal tax rate on corporate profits is 35%, no major corporations pay at that level. Since the 1970s, when business lobbying activity became a major force, Congress has created a growing pile of tax breaks for every industry and business activity. The famous oil depletion allowance no longer makes headlines because it is now just one of hundreds of tax give-a-ways. Congressional leaders on key committees ensure a steady flow of campaign donations by making many of these tax breaks temporary – meaning they have to pass through committees and be voted on every two years.
The link to Congressional campaigns is filled with $$ signs. For example, Senator Max Baucus (D-Montana), Chair of the Senate Finance Committee, has raised $12 million over the last six years. $5,353,000 (43%) came from corporate Political Action Committees (PACs); $6,253,000 (50%) came from individual donations totaling more than $200 in any one year; $59,000 (1%) came from labor-related PACs; and $16,928 (0%) came from individual donations of less than $200 in any one year.
We can only imagine how many corporate tax cuts Senator Baucus has voted for in his 23 years on the Finance Committee. Have you give the Senator more than $200 this year? I don’t think you should be expecting a tax cut any time soon.