How do major U.S. corporations avoid paying taxes? Blame Congress.

Loophole Land: Time to Reform Corporate Taxes

By David Callahan
Ourfiscalsecurity.org

Many Americans were appalled when it was revealed recently that General Electric would pay no taxes for 2010, despite U.S. profits of over $5 billion.

But I doubt that there is a single top tax attorney or chief financial officer in the country who was all that surprised. You see, these people are denizens of Loophole Land – a very different place than W-2ville where most Americans live.

In Loophole Land, nothing is quite as it seems. Yes, there is a top corporate tax rate of 35 percent, but it is well understood that nobody actually pays that. On the contrary, many companies pay nothing at all. [Emphasis ours.]

How can this be?

For starters, Loophole Land has no national borders and so it is easy to shift money around in ways that avoid taxes. General Electric works all over the world, and under tax law, it isn’t taxed on its foreign profits as long as it says that it is reinvesting those profits abroad. Many companies become expert at shifting profits abroad to foreign subsidiaries in low-tax or no-tax nations. In 2008, Goldman Sachs, had 29 subsidiaries located in offshore tax havens and reported profits of over $2 billion. It paid federal taxes of just $14 million on those profits.

Loophole Land is also a place where past business losses are never, ever forgotten. So, for instance, if you run a giant conglomerate with a profit-hungry credit division that makes a lot of stupid loans to people who can’t pay them back, fear not: you’ll be able to write off those losses – in effect getting ordinary taxpayers to subsidize your gambling debts. General Electric is widely seen as a manufacturing company. But up to half of its profits during the Bush years came from its large consumer lending business, GE Capital, and that business suffered huge losses during the crash – reportedly $32 billion. Now we are all helping GE foot the bill for that unlucky streak.

(Continued here with charts.)

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Finally overcoming the fear of being labeled 'liberal', the media begin to report the truth on taxes

Super rich see federal taxes drop dramatically

(AP) – 13 hours ago

WASHINGTON (AP) — Still scrambling to file your taxes? You'll probably take little consolation in hearing that the super rich pay a lot less taxes than they did a couple of decades ago. And nearly half of U.S. households pay no income taxes at all.

The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.

There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.

(Continued here. See also "Super rich see federal taxes drop dramatically" from Salon.)

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Don't like taxes? Try living in the Congo

“Taxes are the price we pay for a civilized society.” — Oliver Wendell Holmes, Jr., Associate Justice, U.S. Supreme Court, 1902-1932

It’s April 15: How about a tax party?

By Nancy Larson Shapiro
Mankato Free Press

Nancy Larson Shapiro is an educator who directed Teachers & Writers Collaborative, a nonprofit in New York City for 30 years.

Having recently returned from a trip to West Africa, I am dismayed by the scenes of “tea partiers” railing against our government, sometimes with distressingly disrespectful signs and language, directed particularly at President Obama.

As I listen to their complaints, I think back to the days in the 1950’s and 60’s when I grew up in Mankato, Minnesota.

My mother raised three children with government support — the aid to dependent children she received after my father died of injuries suffered in World War II. My friends and I received excellent educations at Lincoln Elementary and Junior High and — the then only — Mankato High School, where we could also participate in sports and vocational and arts activities.

I recall a relative who was on the school board when the high school was built saying that the board consciously built a state-of-the-art facility for the baby boomers coming along (thank you!). Not only was the viola I played in the school orchestra provided by the school for free, the whole school experience was free — well, not really “free” of course (more about taxes later), but there were no fees to attend — as there are in many African countries, meaning that the poor remain uneducated.

Our education in Mankato continued in an array of community programs provided by nonprofit institutions — whose tax-exempt status helped keep them viable, providing a critical link between the private and public sectors — like the YMCA, clubs and churches. I left Mankato to attend Minnesota’s world-renowned public, land grant University of Minnesota, where the tuition was very reasonable.

These memories bring me back to today’s anti-government protesters, who seem to think they can handle their own and the country’s needs individually and who clamor against taxes, claiming our government does nothing for us. For them, I would suggest a trip to the Republic of Congo. Money is not the problem in the Congo, which collects millions of dollars a day from oil companies paying for drilling rights. Very little of that money, however, goes to build infrastructure or to benefit the people, while the country’s president is one of the largest landowners in France.

In the Congo I walked on the dirt streets — only a few roads are paved — or drank my bottled water — most people have no running water; they must wait for a truck carrying potable water — or watched the glow of kerosene lamps — most people have no electricity — or stared at the garbage piled high or burning beside the road, or talked with a man who had been jailed for trying to expose the corruption in the country.

I began composing a mental list of what we take for granted in the U.S.

We turn on a faucet for drinkable water; we can travel all over this vast country on excellent highways; we have good public schools in most communities; we have sewer systems and trash collection and disposal; we have public libraries; we have philanthropic organizations that provide myriad free programs.

We have an almost infallible electrical grid that provides electricity to almost everyone; we have the most up-to-date technological capacity to run millions of cell phones and computers; we have bridges, tunnels, subways, buses, trains, planes that provide efficient and often low-cost transportation; we have local parks and playgrounds; we have a vast national park system that preserves the planet’s natural wonders; we have a Constitution that protects our rights, including the freedom to protest against our own government; we have the security provided by civilian and military law enforcement. And, yes, we have government programs to help the poor, such as food stamps and school lunches, to aid special groups such as returning war veterans, and to assist just about everybody such as Social Security, Medicare, and, perhaps now, health care.

Warren Buffet points out that American businesses owe much of their success simply to being located in this highly functioning country.

While no one relishes paying taxes, it may help to keep some of the returns we get for our tax investments in mind.

Oliver Wendell Holmes, Jr. — who willed his estate to the U.S. government — said, “Taxes are the price we pay for a civilized society” — the saying now atop the Internal Revenue Service building.

I say that true patriotism begins with respect, with a recognition of the vital role a responsible government plays in all our lives and with a willingness to pay our fair share.

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