A Poorly Kept Secret About Big Businesses and Corporations: True Tax Dodgers

This past March, 60 Minutes aired a news feature with a look at U.S. Big Business and Corporations “as the world’s new corporate tax havens.” Tax shelters are actually old nothing new. Corporate tax dodging has been a poorly kept secret for decades. Big companies from the U.S. place their headquarters oversees sending revenues searching for the lowest tax rates possible. With the economic hardship this nation is facing along with a growing national deficit at both the federal and state levels. Now is the time to move our government towards solvency because assets in the billions each year meant for reserves is being sent and kept overseas.

U.S. Big Businesses and major Corporations claim that the corporate tax rate is too high. At 35% the U.S. is at the top of the list in the world market because American businesses take advantage of countless breaks and loopholes other countries generally do not offer. U.S. corporations pay only marginally more than other countries and some American corporations use aggressive strategies to pay less. A study done by the Government Accountability Office in 2008 found that 55 percent of United States companies paid no federal income taxes during at least “one year in a seven-year period it studied.”

Big Business and Corporations use the tax code as a way to hide high tax rates into subsidies, shelters and special breaks  becoming leaders in taxevasion, evading and dodging paying taxes now that has created a major implication for businesses, the economy and the federal budget that has the deficit at awhopping $14.7 trillion debt.

As President Barack Obama and Congress struggle to get the deficit down, one thing that is needed for sure is an increase in taxes on big businesses.President Obama, Congress and business leaders have been negotiating various proposals to cut the top corporate rate and to tighten tax laws because the U.S. is the only country in the world to tax its multinational corporations on their foreign earnings, but it allows companies to avoid paying taxes keeping profits overseas. This encourages companies to use accounting schemesshifting profits to lower tax countries outsourcing business oversees helping companies stay competitiveabroad in a bad American economy.

Companies that abide by the laws are being punished by this high tax rate, and companies that avoid taxes using loopholes are being rewarded by getting away paying taxes. Reports are that General Electric did not pay any federal income taxes in 2010 despite more than $5 billion in profits. No taxes paid.Cisco Systems, a multinational corporation headquartered in California, designs and sells consumer electronics, networking, voice, and communications technology services, has more than 70,000 employees and annual revenue of U.S. $ 40.0 billion as of 2010. Cisco has $40 billion “trapped” overseas because if it were brought back, it would be taxed.

It’s estimated that U.S. companies on foreign soil are holding more than $1.2 trillion overseas for tax reasons. If the federal government could change the tax code and tax Big Business and Corporations, present circumstances this alone would impact our economy lowering the deficit instantly. But until a change in thetax code system that money won’t budge.

The current U.S. corporate tax code is wastefuland has become “a diminishing source of revenue” according to the New York Times Business DayEconomy. Corporate taxes accounted for about “9 percent” of all federal revenue in 2010. At $191 billion, they were equal to 1.3 percent of the nation’s gross domestic product. (GDP) Reports are that most countries collect more from companies, “about 2.5 percent of output” than what U.S. businesses pay taxes on.

For the economy to transition and move out of debt, itis time to lower the corporate tax rate commit to a Big Business and Corporation tax system so companies declare their commitment to paying their fair share and bringing a significant amount of money back and reinvest in America.

Taxing companies shall not remain private or hidden offshores. In many cases, the estimates reported in a company’s financial filings with regulators overstate taxes paid in a year because they include deferred taxes or loopholes as an offset. Companies pay about a quarter of their profits in federal income taxes. Obama and Congressional members are discussing the tax rate to be lowered to about 25 percent and some tax breaks to be eliminated for both domestic andforeignU.S. businesses so that revenue remains unchanged in a way that ends up lowering the deficit.

Imagine what taxing Big Business and Corporations can do to the national deficit. My guestimation, a corporation business tax could generate $3.5 to $4.0 trillion in taxes each year for the next five years. This is based on a lower new tax code with a corporate tax and a wealthy individual tax lowering the deficit. According to Reuven S. Avi-Yonahan international tax lawyer who teaches at the University of Michigan. “All of the countries that have lowered their corporate rates in recent years, they still collected the same amount in revenues or more. This means that they were broadening the base of the profits that corporations were actually taxed on.”

Members of Congress contend that ending the breaks, subsidies and shelters in the corporate tax code could provide enough money to lower the rate several percentage points and still increase revenue. Earlier this year testimony before a Congressional committee about the need to cut the U.S. tax rate without ending tax breaks and shelters. A tax system that addresses today’s competitive driven global market.

If Congress, business leaders and the Obama administration pass a tax rate legislation before the 2012 election, by the election, a good size chunk of the federal deficit reduction would be in place provided they agree instead of the current back and forth bickering.

The first task at hand is to find the corporate tax dodgers oversees. When looking for corporate offices in Switzerland, all 60 Minutes found were tiny offices or just mailboxes as evidence of “headquarters” of these large corporations.

 

The opinion expressed in this commentary

article are solely those of Michael Coker

About the Author

Michael Coker

Conservative Political Writer, Contributor and Blogger, Founder secondopinionpundits – Political Web Magazine – Politically Opinion Based Facts