As I See It: Darwin vs. Zuckerberg
March 11, 2013 Victor Rozek
Most of what I know about Mark Zuckerberg I learned from Aaron Sorkin. Which is to say I’ve seen a dramatized version of his life where selected events have been massaged, embellished, or possibly invented for theatrical effect. But I don’t much care. Social Network was entertaining, and not being a Facebook user or stockholder, I have nothing invested in Zuckerberg. I don’t care if he’s awkward with women. I don’t care if he stabs friends in the back or screws business associates. And I don’t much care that he’s rich or lonely or the most inventive geek since Mr. Peabody created the Wayback machine. All I know for certain is that he can’t possibly have the flair for language that Sorkin gave him. And that I can forgive.
But what I do care about and can’t forgive is that the digital dauphin made a billion dollars in profit in 2012 and is not paying any taxes at all. In fact, he’s getting a big fat refund. And of course he’s not alone.
In a rare moment of candor about how the tax system works, the late billionaire hotelier Leona Helmsley let slip a truism privately shared by many of her economic class: “We don’t pay taxes. Only the little people pay taxes.” At one time, there was a reluctance to admit such things publicly, but once Helmsley stuck her finger in the eye of working people, what previously was kept from public view became a competitive sport among the wealthy.
According to Mother Jones, between 1992 and 2007, the tax liability for the 400 highest earners shrank by 37 percent even as their income rose by an astonishing 392 percent. Corporations fared even better.
Fierce lobbying, transfer pricing, offshore tax heavens, there is no shortage of crypto-commercial practices that contribute to reassigning the burden of taxation. Whatever coins you find under your couch cushions, consider their sum is more than ExxonMobil, General Electric, and Bank of America paid in taxes last year. Because they paid nothing at all. It is estimated that each year, up to $100 billion in revenues are lost. As a result, each decade a trillion dollars less is invested in the national infrastructure. And technology firms are among the most successful corporate tax evaders.
A big part of Microsoft‘s strategy (and everybody else’s) is to shift domestic income to various nations with low or no taxation rates. Once a dollar of profit winds it way to Bermuda via the Netherlands, which might be reached after a brief stopover in Ireland, it magically becomes only a fraction of its former self. Microsoft also benefits from having ex-employees in government who look after its interests. Ross Hunter ended a 17-year career with the software giant to become a state representative where he grew much more valuable to his former benefactors. Hunter championed a $100 million annual tax cut for Microsoft, and an estimated $1.25 billion tax amnesty. It’s nice to have generous friends who make laws especially for you.
Google, likewise, reports its income as originating in overseas tax heavens while insisting its costs originate at home. Last year, the company avoided about $2 billion in worldwide taxes by shifting nearly $10 billion in revenues (or 80 percent of its pre-tax profits) to a shell company in the search-engine capital of the world, Bermuda. Google chairman Eric Schmidt said he was “very proud” of the company’s tax avoidance schemes (although he preferred to call them “tax structures”).
LinkedIn hasn’t paid federal taxes in three years. The list goes on and one.
Back in 1993, Congress limited the amount of executive pay that could be deducted from pre-tax earnings. Companies got around that problem by substituting deductible stock options for base pay and not bothering to expense them, thus not only screwing the government but misleading investors as to their profitability. (It is estimated that one year, using this accounting slight-of-hand, Silicon Valley profits were overstated by 70 percent!) The reporting requirements were eventually fixed, but not the options gambit.
It’s the same gimmick Facebook used to avoid paying $559 million in federal taxes. The company wrote off hundreds of millions in stock options it issued to employees. Instead of paying taxes on $1 billion in profit, it will receive a $429 million tax refund from all those little people who do have to pay taxes.
Citizens for Tax Justice and the Institute on Taxation and Economic Policy did an exhaustive study on the tax-paying proclivities of 280 Fortune 500 companies. Between 2008 and 2010, 67 corporations enjoyed a tax rate of less than 10 percent. Thirty companies had a negative tax rate of -6.7 percent. Are you getting angry yet?
Aren’t you tired of the double standard, the loopholes, the hypocrisy, and the blatant unfairness of it all? Well, I am. And if the big boys get to cheat, we should be able to join them. Because, short of mobs with pitchforks and public beheadings, the only thing likely to move our purchasable Congress toward fairness is a massive tax rebellion.
Start with your very own off-shore company and secret bank account, just like Mitt Romney. It’s easier than you think and there are lots of companies on the Internet eager to help you. According to Adam Davidson, who tried it and then wrote about the process for the New York Times: “It takes 10 minutes to open an offshore account.” He picked a Canadian company “that works with the governments of Panama, the British Virgin Islands, and Belize.” For under $1,000 you can incorporate in Belize and get a nifty official-looking seal “to emboss legal documents.” For an additional $650, they’ll open a bank account for you in Singapore, a country that by law, “cannot gather information on foreigners’ bank accounts.” Isn’t that convenient? And for just $690 more, you can rent your very own “nominee” who would be listed as “the official manager and owner of your business, but would report to you under a secret power-of-attorney contract.”
There you go, it’s just that simple and, apparently, none of it is illegal. There are an estimated $4 trillion hidden in offshore financial centers, and there’s no reason why we shouldn’t add our 2 cents. OK, maybe there is a reason.
Darwin correctly believed that morality was an adaptation that evolved by natural selection operating at both the individual and the group level. From the time of early hunters and gatherers, groups that learned to collaborate became more successful than groups that did not. Collaboration often required subordinating individual interests to the greater good. Cultural mores and taboos had to be respected or the offender might be killed or cast out. Deliberate free-loaders could be excluded from the benefits of group membership.
Group evolution was and remains an essential component of human development and successful adaptations abound. The military, sports teams, corporations, religious factions, theatrical companies are all examples of groups whose members subordinate their individual agendas for the success of the whole. The nation is also a group and it bestows many benefits on its members, but its evolutionary progress has been mutated by the illusion money creates: namely that the wealthy have no further need of the group, and therefore no obligation to it.
In this model, there’s no obligation to pay taxes, no need to concern yourself with those who provide the food, or make the clothes, or build the cars and the roads they drive on, because all goods and services are purchasable. Those who pay taxes are fools, and those without sufficient purchasing power are deficient. Connections are lost. And with the loss of connection, comes a corresponding decline in morality.
Which brings us back to Zuckerberg. Looked at through the lens of group evolution, it is perhaps no accident that the man portrayed in Social Network as so disdainful of others would create a global communication system based largely on illusory connection.