Taxes.
I hate them and you hate them but we somehow manage to pay them. As a single person with no kids, no dependents, no house with a mortgage, and making a decent salary, I probably pay more than my fair share. But, that doesn’t compare to what corporations pay…or does it? We’d like to think that large corporations making millions and millions of dollars every year have no problem dropping a little summin’ summin’ into the hat of Uncle Sam every now and then, but you and I are being fooled. While the Federal tax rate for corporations is always quoted at being 35%, unless you’re a small business without a gang of accountants behind you, many corporations are not paying anywhere near that amount. If you think that Bernie Madoff had a good scam going, wait until you see the top companies paying no taxes.
Large loopholes exist in the tax laws like Swiss cheese sitting on a strainer. Large corporations exploit these loopholes for their gain, and I can’t even say that I blame them. Some of these companies are so clever that they not only not pay taxes, but they manage to get tax rebates back from the government! I overpaid my New York State taxes $32 and it took them months to issue me a check. One major loophole that corporations love to exploit is the making-the-profits-disappear act by shifting money around the globe, often into tax havens like the Cayman Islands and Hong Kong.
According to a February NY Times report, “of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate — both federal and otherwise — of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent. ” Ouch! I pay more than 10 percent in taxes every single year without fail. Heck, New York City’s, sales tax alone is inching towards 9 percent. The real winners manage to pay close to nothing at all in taxes, and get away with it. Wesley Snipes, you had the wrong accountant dude.
I’m going to criss-cross across a couple of different tax years here because some of these guys would make a list every single year. They are just that good at avoiding taxes. In order of no importance, I present you the best tax dodgers in America.
The Best of the Worst
- My good buddies at Bank of America has to be first because I love them. In 2010, they managed to get a $1.9 billion tax refund from the IRS, even though they made $4.4 billion in profits AND received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion. Their accountants need to get some serious raises. I bow to your expertise. But don’t worry, your competitor Wells Fargo, which took $107 billion in bailouts, paid nothing in taxes either that year. Oh, and Goldman Sachs was close behind at a measly 1.1% of its profits. The Banksters had a hell of a party with Federal money and the IRS was the belle of the ball for a couple of years.
- Exxon Mobil made $19 billion in profits in 2009. Exxon not only paid no federal income taxes, it actually received a $156 million rebate from the IRS, according to its SEC filings. It saved money by stashing cash in places like the Bahamas and Singapore and of course by claiming an oil and gas manufacturing tax deduction. In fact, because of those deductions you can add companies like Chevron; Valero Energy; ConocoPhillips; NRG Energy, Inc; Xcel Energyand others to the list since they all paid less than 5% of their profits towards taxes. It pays to be in energy. Or doesn’t pay. You know what I mean.
- Boeing won a $35 billion contract from the government to build 179 airborne tankers, but although it made $10 billion in profits from 2008 to 2010, it too paid no taxes, again thanks to foreign tax havens. That’s ZIPPO people.
- Carnival Corporation, the cruise line people had a pre-tax (if you can all it that) income of over $11 billion from 2005 through 2009 but paid only $126 million or 1.12% in taxes thanks again to the handy dandy tax havens. Lobster buffets for everyone!
- Over the same period General Electric made close to $26 billion in profits in the United States, and received a nice refund check of $4.1 billion from the IRS. Does someone deliver that in person with the big fake check like they do when you win the lottery?
- How do you like the internet giants Amazon and Google? Would you like it them less if you knew that both of their tax rates worked out to less than 5%? Google one upped Amazon by paying only 2.3% of its income in taxes in 2010 while Amazon had to suck it up and pay 4.3% over the over the five years from 2004 to 2009. Smarty pants Google shifts most of its income through Ireland and Netherlands on to tax haven to Bermuda. Amazon, you need to get with the program!
- Rupert Murdoch’s practices what Fox preaches since News Corporation, pretty much avoids paying any American taxes since it’s really good at juggling money through its 152 subsidiaries in tax havens from the British Virgin Islands to Hong Kong. How very patriotic of you.
In some companies’ defense I will say that they might have carried over losses from years before to mitigate their taxes during the current year. Companies with long-term research projects tend to do that since they might lose money for a number of years before coming out with a blockbuster product. This is why I left off drug companies. The way in which they do business is materially different than others.
I know that you’ll say that we need low tax rates to keep jobs here in America, but what we’ve seen is that no matter how low the rates are, smart companies will simply shift their cash to the next cheapest country to do business and save on taxes. Plus, there are plenty of companies paying their fair share. While the debate might rage about Walmart’s ability to kill small businesses, no one can deny that they pay a fair amount in taxes. In fact, a study by Capital IQ found that Walmart, Starbucks and others paid more than the S&P 500’s average tax rate of 32.8%.
I have heard the argument that creative accounting is necessary for companies to be competitive within the U.S. I won’t argue that the corporate tax rate isn’t high. While the rest of the world has lowered its corporate tax rate, the U.S. has raised it rates according to the graph below (click to enlarge). We can argue about whether this is helping the U.S. to lose jobs to overseas markets, but what I am absolutely sure of is that no corporation making billions of dollars off the backs of American consumers should be allowed to walk away without paying something at least equal to what I pay in sales tax every day.
