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  • As I See It: Shared Sacrifice

    April 11, 2011 Victor Rozek

    Corporate facilities are nothing if not spacious. Whether they are housed in towering skyscrapers, or spread out in campus-style configurations, the space required to accommodate a global corporate headquarters can be measured in acres. What, then, can be made of the magical structure known as Ugland House? It may only be a modest four-story building but, with a little fiscal slight-of-hand, it can become home to a countless number of corporations. Conveniently located in the larcenous Cayman Islands, Ugland House hosts not five, not 50, not even 500 companies, but an astonishing 19,000 global corporations.

    Anyone inquiring about these companies will find little evidence of their existence. Companies have no offices here, no desks, no computers. In fact, the facility offers only one service, indispensable to aspiring profiteers: Ugland House serves as a very expensive mail drop, and exists solely for the purpose of tax evasion. Think of it as an offshore help desk for the unethical.

    And so very helpful it is. Ugland House alone launders about $100 billion in taxes that would otherwise be due the U.S. Treasury.

    As we enter another tax season, and IT professionals look forlornly at the federal tax withheld on their W-2s, they have good reason to be skeptical of the system that punishes working people while granting immunity to corporations that profit handsomely from their labors.

    Officially, the corporate tax rate is 35 percent and the political right, which has never met a corporate practice it didn’t defend, is always hyperventilating about lowering it. But very few companies actually pay 35 percent, and many pay nothing at all. Some do even better. The world’s largest corporation boasts a negative tax rate–a fact you won’t hear reported on NBC because this company owns NBC.

    Chuck Collins, senior scholar at the Institute for Policy Studies, discloses: “Recent filings show that in 2010, General Electric reported global profits of $14.2 billion, claiming $5.1 billion from U.S. operations.” Not only did it manage to pay zero taxes, but American taxpayers–generous souls that we are–actually paid G.E. another $3.2 billion. In fact, “between 2006 and 2010, General Electric told their shareholders they had $26.3 billion in profits, but paid no U.S. taxes.” And during that time they pocketed “$4.2 billion in rebates, so their effective U.S. tax rate was negative 15.8 percent.”

    Where do we sign up for that program?

    The answer is, we can’t, but most corporations can and do. Take the banksters who orchestrated the meltdown of the economy. Bank of America wasn’t timid about robbing taxpayers twice. After receiving “$336 billion in government bailout funds,” B of A didn’t contribute a single penny to the cost of running the country in 2009 or 2010. It claims to have lost money. But no one really knows, says Collins, because the bank has “over 115 subsidiaries in tax secrecy jurisdictions.” In the tiny Cayman Islands alone, B of A has 59 subsidiaries, another 15 in Luxembourg, and another 14 in Ireland.

    Boeing depends on U.S. government taxpayer-funded contracts (and in fact received one worth $35 billion in February), but between 2008 and 2010 it paid nothing, nada, nix, zero, zilch, on $9.7 billion in profits.

    Wells Fargo, Citigroup, Mattel, Dow Chemical, Hewlett-Packard, Cisco Systems, Verizon, Boeing, etc., etc. all play the same game, pretending their profits are made in foreign countries–some no bigger than a handful of volcanic rocks in the middle of a vast ocean–and are therefore immune from taxation.

    And what do corporations do with their offshored loot? “Federal Express reported over $1.9 billion in U.S. profits,” but over the last two years enjoyed an “effective tax rate of .05 percent.” It took some of its windfall and spent nearly $42 million lobbying Congress for even more tax breaks. Collins reports FedEx has 21 subsidiaries in tax havens including three in the Cayman Islands. It probably delivers lots of mail to Ugland House.

    Corporate apologists notwithstanding, offshore tax shelters are clearly unethical, made legal only by a purchasable Congress. The practice undermines a key democratic value: the notion of shared sacrifice. It was Oliver Wendell Holmes, Jr. who famously said: “Taxes are the price we pay for a civilized society.” But increasingly, corporations are intent on benefitting from the commons, but contributing nothing to their upkeep.

    FedEx drives its trucks on public roads maintained by taxpayer dollars. Software providers (among others) rely on the legal system to enforce intellectual property laws. If a business is robbed, a publicly funded police department will investigate. If a gas station ignites, it will not be Cayman Island’s finest who put the fire out. Every company doing business in the U.S. benefits from employees who graduated with degrees from public universities. Every company that uses natural resources, depletes the commons. Tax evasion is not a clever accounting practice, it is a betrayal of corporate obligations to society, a betrayal of the nation.

    Apologists will claim that forcing corporations to pay their fair share will kill jobs. But let’s be clear, says Collins. “The patriotic businesses that currently pay their taxes and have to compete against these tax dodgers are the employers we want. It undercuts U.S. jobs for domestic banks, retailers, and manufacturers to have to compete against companies that can game the tax system.”

    And there are companies honorable enough to contribute to the general welfare. Home Depot, Walgreens, CVS, Kohl’s, Best Buy, Humana, Medco, Wellpoint, and United Health are among the companies that paid their fair share. They deserve our support.

    Collins argues correctly that “tax havens cost us all.” When you combine tax avoidance by wealthy individuals and multinational corporations, “tax havens cost the Treasury as much as $123 billion a year. Responsible businesses and individual taxpayers like us pick up the slack to pay for the services all of us use.”

    The country isn’t broke, and states are not insolvent. Services need not shrink; education and healthcare budgets can be restored. Teachers, policemen, and firefighters need not be laid off. To starve the government and then claim it doesn’t work is disingenuous. Tax loopholes simply need to be closed.

    At the mere suggestion, Wall Street and its Congressional stooges will be apoplectic, spouting dire warnings of the end of life as we know it. So is the squeeze worth the juice? The answer is yes. Not coincidentally, the estimated $123 billion that the ultra-wealthy and corporations shelter overseas approximately equals the aggregate deficit reported by bankrupt states.

    There is a great deal of backlash against taxation in this country, and with good reason. It’s not how much tax you pay but what you get for your tax dollars.

    Denmark has a tax rate of over 50 percent, yet in a comprehensive global study its citizens reported being the happiest on earth (the U.S., incidentally, ranked 23rd). Their education, healthcare, and retirement are essentially pre-paid. Danes spend more money on children and the elderly than any other nation. Their citizens feel secure. As a result, their lives are stripped of needless worry and stress. An unintended consequence of the Danish system is that people tend to pick careers based on their passion rather than income or status. They spend more time with their families, more time doing what gives their life meaning. Flotillas of homeless do not wander Danish cities. And Danes report having a high level of trust in each other and their government. They understand that a civilized society needs to be nourished, and they want to leave no one behind.

    Oliver Wendell Holmes, Jr., was a man who not only understood the necessity for taxation, but actually walked his talk. In his will, Holmes left his residuary estate to the United States government.

    But then, Holmes loved more than his country. He loved its people.



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Volume 20, Number 13 -- April 11, 2011
THIS ISSUE SPONSORED BY:

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Table of Contents

  • IBM’s Power-Based SmartClouds on the Horizon
  • ITG Says IBM i + DB2 for i Still Offers Lowest TCO
  • COMMON: The Blues Play Well in Minneapolis
  • As I See It: Shared Sacrifice
  • Marcus Dee, CEO of looksoftware: 1960-2011
  • Reader Feedback on AS/400 i Mystery Solved–Again?
  • SMBs Growing More Confident About IT Budgets and Plans
  • Taiwan Gets Its Own Power Systems Lab
  • Storage Software Sales Recover Well in 2010
  • Rimini Street Sets New Financial Highs

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