We live in a Plutocracy run by a Dumbocracy

What’s
Wrong Today


We know
many large multinationals pay no federal taxes, but did you know many of them don’t
pay State taxes either? Citizens for Tax Justice, (CTJ), has issued a new
report, Corporate Tax Dodging in the 50
States, 2008-2010. The Washington-based research group found that three
companies — Washington-based Pepco Holdings Inc. (POM), American Electric Power Co. (AEP) and DuPont Co. (DD)  — paid no state income tax in 2008, 2009 and
2010. These three companies were among 30 corporations listed as paying no
federal income tax in the same period in a study last month by Citizens
for Tax Justice, the institute’s sister organization.


CTJ’s study
profiled 265 consistently profitable Fortune 500 companies and found that 68 of
them (25%) paid no state corporate income tax in at least one of the last three
years and 20 of them averaged a tax rate of zero (or less) during the 2008-2010
period.


On
average, the 265 companies surveyed paid taxes at roughly half of the official
rate, costing states $42.7 billion in
revenue over the past three years, the study found.


Forty-four
states and the District of Columbia levy some form of
state corporate income tax. Ohio,
Nevada,
South
Dakota,
Texas, Wyoming and Washington don’t
have a tax. Overall, CTJ found corporations’ taxes were once 0.5% of State
Gross Product (a state’s equivalent of GDP) back in 1986. Now, corporate
taxes are only 0.28% of Gross State Product and the lowest contribution levels
since World War II.


One of the study
authors, Matthew Gardner, said regarding his findings: “these 265 corporations
raked in a combined $1.33 trillion in profits in the last three years, yet have
managed to shelter half or more of their profits from state taxes.”


This decline
in corporate tax receipts comes at a time when states are imposing layoffs and
slashing services to combat widening budget deficits. Overall, according
to Bloomberg, Gardner indicates that state-level revenue from corporate
taxes have been plummeting for the past 20 years, as tax-avoidance schemes have
become more sophisticated.  

So,
What’s Wrong?


Sorry, but we
live in a plutocracy run by a dumbocracy. This loss of
revenues does not come from corporate tax evasion, but from tax avoidance based
on sophisticated lobbying for changes to state law by corporate tax
departments.


So while the loss of revenue has something to do with corporate behavior,
it has much more to do with craven legislators in the individual
states, who buy into the threat that the job creators will take
their business elsewhere unless they get tax breaks. There are
many ways state
legislators have contributed to the tax receipts decline including voting for:

  • Shifting
    corporate taxation from property and payroll to sales, which generally yields
    lower taxes
  • The
    100% nowhere tax    .
    What corporations lobbied for, and got, is a tax on sales only in a state instead of overall business
    activity, or property and payrolls in the state. All a corporation has to do to
    pay zero taxes is to have their production in that state and all actual sales,
    out of that state.
  • The
    toys -r- us strategy    ,
    where corporations dump all of their trademarks, copyrights, patents, logos
    into a separate holding company that is then incorporated in a tax haven. Then,
    that newly incorporated holding company charges royalties to the other
    companies’ holdings to use their own logos and trademarks, copyrights and
    patents. This creates a massive tax-deductible business expense, charging
    yourself fees for using your own
    intellectual property    . This is why corporations move various patents,
    copyrights and trademarks into special purpose vehicles, incorporated in the
    Caymans, Delaware and so on. 


But, how
can we ask our fine corporations to pay more in taxes? After
all, they are creating jobs for you and me. 

Sure they
do, and some of those jobs are in the US.


Sorry, but the data shows that it’s mostly jobs for
Mexican nationals, jobs for Chinese nationals, jobs for Indian nationals. 
In fact, our MNC’s are doing more to bolster the economies of India, China, and
Mexico right now than they are doing to help US middle class taxpayers. 


And you think that corporations
should contribute MORE to our economy?


That would just
be Wrong!

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