Erin Burnett Defends Using Tax Havens: "Isn't It Your Obligation In This Country...To Pay As Little As You Can?" (VIDEO)

On this morning's Morning Joe, Erin Burnett reported on corporate tax havens, where American companies are stashing $700 billion in corporate wealth. But don't expect much outrage from the General Electric Infomercial Hour:

SCARBOROUGH: They tell me though it's all legal - ALL LEGAL.

BURNETT: Of course it is.

SCARBOROUGH: There's a big difference between tax avoidance and being an all out tax cheat.

BURNETT: That's right. Isn't it your obligation in this country - there is a tax code for a reason, to take advantage of every bit of it you can and pay as little as you can.

Look, there was a hint of the sarcastic on display. But at the root of this, is Burnett's suggestion that American companies are justified in relying on tax havens because corporate tax rates are so high, relative to those of other countries.

BURNETT: Everyone likes to say American companies tax dodge, and no doubt they do, and the tax system could use massive reform, I don't think anyone would debate that, but the average tax rate paid by American companies...as of last year, it was right up around 30-plus percent. They are supposed to pay 35%. The average in other countries is significantly lower. So that is something to think about when people talk about tax avoidance by major U.S. companies.

Is that something to think about? See, I would think about the fact that if you can expect corporations to avail themselves of tax havens when the rate is 30-plus-percent, there's no reason to believe they'll stop doing that if their rates get cut. So, close the loophole and capture the revenue.

During the presidential campaign, we heard from McCain surrogates on this matter all the time. How many times did Carly Fiorina suggest that it was unfair that U.S. companies weren't taxed like they are in Ireland? Naturally, you'd have to suspect that Fiorina was talking blarney, and so is Burnett. From Ben Furnas at Wonk Room:

Now, new IRS data shows typical American companies paid only 25.3 percent of their U.S. book income in federal corporate taxes in 2005, despite a statutory corporate tax rate of 35 percent, by using loopholes and shelters.

U.S. companies "reported about $1.35 trillion in pretax U.S. book income to their investors in 2005, but about $1.03 trillion to the IRS -- a difference of about 23%."

And if you take a look at Furnas' chart, you'll see that Ireland, the land of leprechauns and the world's Ideal Corporate Tax Rate, has a higher amount of corporate tax revenue as a percentage of their GDP. They're able to do this because they don't have the thicket of loopholes and shelters that U.S. companies use to not pay their taxes. So, Burnett has it right when she suggests the tax system needs massive reform. I just doubt that anyone who honestly believes that ones "obligation" is to pay as little tax as possible would cheer the closing of these loopholes.

WATCH:

RELATED:
In Praise of Irish Corporate Taxes [Matt Yglesias]

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Comments

[mtyshawl]

Erin missed the ethics class during College

[Phife Shaheed]

Plus it doesn't make sens what if everbody suceeded in fullfiling that so called obligation ie paying as little ta as possible?

[Pettit]

Want to lear how little of their share corporations pay? Watch I.O.U USA, a video put out by the US Comptroller where they explain the history of how we started accumulating debt during the Revolutionary War to today.
They show a pie chart of how little corporations pay. WE THE PEOPLE pay MOST of the taxes in this country.
Obama is right about the huge loopholes in the tax code!

[DuganS1]

The 500 companies in the S&P 500 earn about half their total profits abroad. Many of these companies earn upwards of 70% of their profits abroad. If you tax these companies at a higher rate they will not be able to grow as much, plus will need to cut costs to maintain their current levels of profitability, which means cutting American jobs. The US government confiscating money from corporations is not a recipe for economic growth. It will hinder economic growth. Just look at how the economy did after FDRs undistributed profits tax in 1937.. It was a disaster and companies halted investment and fired workers.

[IMissAmerica]

No one is saying they should be taxed at a higher rate, they just need to pay the current rate and not be able to take advantage of loopholes.

[dakotawoman]

Has to do with the concept of "shared sacrifice". No one wants to pay taxes, yet we all benefit from the physical infrastructure and social system and public ameneties taxes buy us all.

Now, I believe in fair taxes. However, fair, IMHO, doesn't necessarily mean an automatically progressive or regressive tax code, but rather a system that spreads the sacrifice around fairly.

It is obvious to all, no?, that the working poor, say those earning $20,000 to 30,000 are making a bigger share of sacrifice through sales taxes on food, utilities and other necessary services than those earning more, those who can spare it more without feeling a pinch?

And that those same working poor folks will feel a greater impact from an income tax payment of say $5,000 compared to a more wealthy individual, earning say $250,000 would "feel" the sacrifice of $10,000 in taxes. For the poorer family, it might mean the difference between replacing a carbon emitting old beater car to get a cleaner,more efficient one --something that benefits us all. Whereas, the more wealthy sacrificing $10,000 out of an income at or over $250,000, will not effect their lifestyle (and the public health) nearly as much.

It is a matter of equal sacrifice, not equal amounts of tax.

[goodneighbor420]

yep, Econ 101---regressive tax: A tax that takes a higher percentage of low incomes than high ones. Sales taxes, especially on food, clothing, medicine, and other basic necessities are widely cited as examples of regressive taxes

[bannorhill]

And Obama proposes a cap & trade tax that will make it worse.

[RustyPatina]

Dodge v. Ford legalized corporate greed. The modern corporation (by law) exists only to make money for its shareholders. Don't expect it to have a conscience or any sense of obligation. However, if its ability to make profits is threatened by any foreign power, it will expect you to go to war and give your life in its defense.

[aaronr2000]

I may take some heat for this but I didn't see her statement as being as apalling as the headline suggests. She's not suggesting companies should game the system but that it's human nature to take advantage of loopholes and provisions that benefit you. The trick is to close the loopholes so that "as little as possible" is no longer synonymous with getting away scott free or not paying your fair share.

[Hallucinocynic]

I'll try again.

Those on the right can't get their minds around the fact that most of us don't HATE the corporate world, that many of us, in fact, participate in that world. This is because the right wing mindset is embedded in black and white and incapable of gradient reasoning.

The bulk of companies in the US DO pay their share of taxes. But we want full corporate tax participation from all enterprises that do business in the US. And this notion that it's expected that everyone will try to dodge paying their mandated share - or avoid, at all costs, making any financial contribution to the general coffers is purely anti-American. To CHAMPION this behavior is anti-American.

The equation remains simple: tax resource is collected and converted to services identified by elected representation. No taxes = no services.

[martinfrosa]

Yes, US corporations take advantage of legal tax loophoes so somehow they are evil? How about the tax-evading rock star, Bono, who relocated his music-publishing business from Ireland to the Netherlands to shelter songwriting royalties from taxes? Maybe he is evil too?

[Clayton139]

Every One including Bono (a disservice to Ireland) should have to pay there Taxes ! Bono has hidden that fact !

We the average Americans have too and the average people among countries with legitimate Governments have to do so also.

We need Regulation, New straight forward Simpler Tax Codes, and Transparency, Transparency, Transparency !

The more powerful you are and the bigger you are (with Lobbyist or PR firms) you can get away with it ! - It has got to stop !

[imelik]

Irrelevant point because:

1) Bono is Irish, not American. Remember, this debate is about American companies and citizens.

2) Bono has donated millions of dollars and years of time aiding the poor and sick in Africa and elsewhere. So I'm willing to cut him slack. Same as with Buffett and Gates.

[Clayton139]

Fair point on Bono.
Gates and Buffet ?

They all didn't donate millions till they got RICH themselves.
Buffet trades paper for short term profit as of late.
Look at all the time Microsoft was in court for money.

The Tax Code is still unfair though !

[InLosAngeles]

There is a box on your tax return to check if you would like to elect to pay more than your "fair" share to the IRS. Has anyone here stepped up to that level of "morality"?

[DuganS1]

Most these companies generate 50-80% of their profits oversees. Many have manufacturing facilities oversees that manufacture for those oversees markets and would become uncompetitive with higher tax rates than the competition. Many of these companies own stores oversees -like YUM brands which owns KFC - and why should they pay higher taxes for those profits. It would simply result in them opening less stores. Some companies like Coke and Johnson and Johnson and Amgen make over half their money oversees and it's not because they are have been moving manufcturing facilities oversees to ship back here, far from. Some of them in the technology space like Seagate might go out of business with higher costs, as their Asian competitors would have much lower tax costs. Some companies, if taxes are increased, will simply sell off assets or write them down. The thing with this issue is that the vast majority of people don't understand it.

[formerprosecutor]

I understand that if I, as an individual US citizen, go overseas and work, I still have to pay US taxes on my income because of my citizenship. So why shouldn't US companies have to do so?

[DuganS1]

Not necessarily. If you're over for more than a certain number of months you don't pay US income tax. Many military members, for example, reenlist oversees so they don't have to pay taxes on their large reinlistment bonuses.

[dagdavid]

I think it is you who does not understand the issue. A US company that makes billions of dollars could be paying ZERO tax on the off shore haven income while a $50,000 blue collar worker is paying 30% of his income. The worker is paying more, not proportionally, but MORE because he pays and the corporation does not.

Additionally, the taxes are NOT being INCREASED, the tax rate stays exactly the same it just that the corps will actually have to PAY IT!

[DuganS1]

Most households making $50k a year pay very little to no federal income tax at all. Second of all, this is not a fairness issue. This is an issue of competitiveness. If these companies abroad pay income tax to the foreign country they're based in as well as to the US, then they will be much less competitive than other companies in that foreign market. This is why the bill is unlikely to pass.

[bannorhill]

A single person making $50,000 with no deductions would pay $8850 in taxes or 17.7% NOT 30%. Look it up in your 1040 tax forms.

[dagdavid]

tax HAVENS not legitimate overseas businesses

[DuganS1]

Tax havens are only a small part of this bill.

[Hallucinocynic]

"It would simply result in them opening less stores..."

The marketplace does not operate in a vacuum. If they open less stores, or NO stores - or if they CLOSE DOWN all current operations - someone else will step in to provide a product that the public wants.

If companies choose to earn their income in foreign markets that's fine. If they want to participate in THIS market, they must pay the price to do so. Suggesting that we'll starve to death due to a lack of KFC, isn't much of an argument. Competitive businesses, run by imaginative management, can do very well in this country even while paying taxes. Really, the argument comes down to labor costs - technicians in Asia earn far less than their American counterparts - whose standard of living is considerably greater than anywhere in Asia - and QC is still very much an issue. The fact is, dodging a tax burden isn't nearly as easy as relocating a manufacturing site to where the labor costs are 1/5th as steep.

The tax benefits provided by offshore havens like the Caymans won't be of much value if the market is closed to a business relying on those benefits.

[DuganS1]

YUM brands has already saturated the US market with KFCs and Pizza Huts. They need to go abroad to continue to grow. The same is true with Proctor & Gamble, Johnson & Johnson, Coca Cola, and countless other US companies. This is not an issue of moving jobs oversees, not at all. This is purely a political issue.

[formerprosecutor]

"only little people pay taxes" Leona Hemsley

[bannorhill]

"Leona go directly to jail" US Government.

[femonfire]

Let us hope the IRS audits Erin next.

[formerprosecutor]

The average working class person has a couple of tax loopholes: they call him "Daddy". Though they consume more than they prduce ( Not a avery GOOD loopholes)

Then we can take that deduction for home mortgage Interest. WoooHOOO! Which , of course we paid , out of pocket.
Wait a minute, these aren't loopholes at all! But merely deductions. Loopholes ?, Loopholes....?

Well, If I am over 65, blind , and have minor children I may get a tax break, but wow, look at allthe problems I have.

Now why aren't my loopholes as attractive as the corps. ?

[drklassen]

One could consider IRA's, 401k, 403b, medical tax-save accounts, and education savings accounts as "loopholes­"---places you can shove pre-tax dollars to avoid paying taxes on them. Of course, for us regular folks, we'll have to pay the tax eventually (the first three examples) OR we have to spend the money in specific ways (and within a specific time, or lose it!). So, yeah, no real loopholes.

That a PO Box in the Caymen's counts as a "subsidiary" is, in my estimation, criminal and ought to be prosecuted as tax fraud, not taking advantage of a loophole.

[formerprosecutor]

Of course this has been a problem since there was a tax code; anywhere, this says it pretty good:



“My Lords, of recent years much ingenuity has been expended in certain quarters in attempting to devise methods of disposition of income by which those who were prepared to adopt them might enjoy the benefits of residence within this country while receiving the equivalent of such income without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which may point out that, however elaborate and artificial such methods may be, those who adopt them are “entitled” to do so. There is, of course, no doubt they are within their legal rights, but that is no reason why their effort, or those of the professional gentlemen who assist them in the matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship.”

Lord Simon, L.C., Latilla v Inland Revenue Commissioners (1943)

[GabrielNW]

Huh. Well, that's new. I've heard it posited as a 'right' to take advantage of whatever dodges and ploys were available to avoid paying taxes, but never 'an obligation'. So by that rationale, I suppose, shortfalls should come down to being paid by those who make too little to take advantage of those loopholes - and that's their (or, I should say OUR) obligation, hm? Interesting.