Friday, August 15, 2008

Shuffling Those Walnut Shells

Maybe it's a sign of my advancing years but I still have an image of the traditional conman at the local carnival, egging on his victims to pick the walnut shell the token was hiding under. Of course, while shuffling, he'd made you think you had seen which one had the token under it, and picked that one, while he'd shifted the token and you never won. It's an old trick but one that U.S. corporations are sure you'll fall for again, and again, and again.

The U.S. corporate tax rate is the highest in the OECD (Organization for Economic Cooperation and Development). McCain insists that if we just lower the tax rate, business will boom, and of course not go offshore anymore. Fooled you! In actuality, U.S. corporations pay the least of any of the OECD nations. Those tax cuts, such as the one that makes offshoring jobs pay off, make it possible for most of U.S. corporations to avoid taxes altogether.

About two-thirds of U.S. companies and foreign firms doing business in this country paid no federal income taxes from 1998 to 2005, according to a study by the Government Accountability Office. Sen. Byron Dorgan, D-N.D., called the report "a shocking indictment of the current tax system."

To be sure, many of the nonpayers were small or new companies that probably made no money. But the report said that about a quarter of large corporations - ones that had more than $250 million in assets or $50 million in gross receipts - paid no taxes. In 2005, for instance, 3,565 large U.S. companies and 998 large foreign-owned companies operating here did not pay any income taxes.

The report neither identified any companies nor specified how they avoided tax liability.

There are numerous legal ways a corporation can duck taxes. The most obvious one: If you don't make money, you don't have to pay taxes. Companies also can write off previous years' losses, get tax exemptions for a plethora of expenses, use R&D credits, even wipe out tax liability when their employees exercise stock options.

But corporations can do a lot of creative accounting to "lose" money - and sometimes that can cross the line.

One such practice identified by the report is "transfer pricing abuse." Essentially, that means shuffling money among corporate subsidiaries by charging pumped-up fees for goods and services instead of market-rate "arms-length" prices.

Adam Hughes, director of federal fiscal policy at OMB Watch, a nonpartisan government accountability watchdog, explained how transfer pricing works.

"A company will incorporate offshore where there are no taxes," he said. "That (parent) company charges the U.S. company lots of money for things like the trademark for the company logo. The U.S. company says, 'I made $50 million, but my stupid parent company charged me $50 million for the logo.' The U.S. company gets to deduct the royalty fees as an expense and move profits to the parent company offshore in a tax-free haven."
From 2000 to 2005, revenue from federal and state corporate income tax averaged 2.2 percent of the U.S. GDP, compared to an average of 3.4 percent in 30 of its trading-partner countries, according to the Treasury Department.

Individuals paid 80% of the taxes paid in the U.S. when this occupied White House began its maladministration. It's a much higher proportion now. You are supposed to vote for your best representative, but it's hard to choose which that would be when the government in power is promoting lies through its agencies, which are supported by your tax dollars.

The coming election is a last desperate attempt to keep stealing the public blind. All stops are out to keep the blindness infecting voters by Big Lies. The fight to lower corporate taxes is a big indication of who knows the truth and tells the lie, and McCain's campaign is counting on fooling you for its continuing profits.

157 more days.

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