In 1983 NY hotel-chain-owning billionaire Leona Helmsley said, "We don't pay taxes. Only the little people pay taxes..." As our country migrates from democracy to plutocracy, this more and more appears to be official policy. Again and again we see tax cuts for the wealthy few, tax breaks and subsidies for the big corporations that operate as fronts for those wealthy few, and budget cuts for the things We, the People (government) do to empower and protect each other. Just a few weeks ago we watched as an extension of the Bush tax cuts and a huge cut in the estate tax rate was pushed through. Now we watch as the discussion turns to cuts in Social Security and the rest of the so-called "safety net."
Another indicator of plutocracy (government of, by and for the wealthy) is impunity for those at the top. Leona Helmsley actually went to jail for tax evasion. Even as recently as the early-90s Savings and Loan Crisis our government investigated, prosecuted and jailed more than a thousand bad actors for fraud and other crimes. This time, well... not so much. Well ... actually not at all. Times have changed. Don't look back. Deal with it. Suck it up. Let's all get on the same team and keep this ball moving forward down the field at the end of the day. Whatever. Hey, look over there!
Today's Plutocracy Indicator
From the New York Times, "G.E.'s Strategies Let It Avoid Taxes Altogether":
The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
So not only did GE, the highly-profitable recipient of federal contracts and bailout money, not pay taxes, we paid them $3.2 billion!
Revolving Door Writes The Loopholes
How does GE accomplish this? By taking advantage of the "revolving door" where people move back-and-forth from government agencies to the corporations those agencies are supposed to oversee. From the NY Times story:
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.'s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world's best tax law firm. Indeed, the company's slogan "Imagination at Work" fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.
Congressional staffers they write the loopholes into the laws. Then they go to their reward at corporate headquarters for very high pay. Then they go work in the agencies to make sure the rulings go their way. They then go collect again. It is a lucrative game. They're the winners -- they call themselves "producers." We're the losers -- they call us ... "losers."
Who Really Benefits?
The use of the general term "corporations" to describe the beneficiaries of these policies is really a smokescreen that masks the fact that really a very few people are benefiting. Yesterday's post, "Lobbyists Admit Corporate Tax "Holiday" Didn't Work, But Demand It Again", pointed out that it is a very few actual people that we are really talking about here:
Corporate wealth is really just personal wealth, held at arms length from the person to mask what is going on. The wealthiest 1% own 50.9% of all stocks, bonds, and mutual fund assets. The wealthiest 10 percent own more than 90 percent. The bulk of us own less than 1 percent. When you hear about "corporate" holdings, think about this chart from the Working Group on Extreme Inequality:
At The Expense Of The Rest Of Us
These benefits accrue to the wealthy few at the expense of the rest of us. What many people don't understand is that it is also at the expense of other companies. Our infrastructure and public structures -- roads, education, courts, customers -- are the soil in which good companies can grow. When tax dodgers are able to avoid contributing to our communities and country, the overall environment for the rest of our businesses deteriorates and our worldwide competitiveness declines. We see it all around us every day.
For all the benefits huge multinational companies like GE get from We, the People -- subsidies, contracts, bailouts, tax breaks and customers, they aren't very rateful and certainly are not about to give anything back. Barry Ritholtz at The Big Picture writes:
Yet another reason why you don't bailout companies whose inability to manage risk allowed themselves to become destroyed: They not only do not deserve to continue with the same management/shareholders/creditors who all created the insolvency in the first place, but they are ungrateful bastards as well.
Even tax-cutter Ronald Reagan balked when he learned that GE (for which he had been spokesman) didn't pay its taxes. From the NY Times story:
In the mid-1980s, President Ronald Reagan overhauled the tax system after learning that G.E. -- a company for which he had once worked as a commercial pitchman -- was among dozens of corporations that had used accounting gamesmanship to avoid paying any taxes.
"I didn't realize things had gotten that far out of line," Mr. Reagan told the Treasury secretary, Donald T. Regan, according to Mr. Regan's 1988 memoir. The president supported a change that closed loopholes and required G.E. to pay a far higher effective rate, up to 32.5 percent.
Isaiah Poole, in Rewriting Eric Cantor's Cant On Jobs:
"So let's stop the demagoguery about overtaxed corporations and have a dialogue instead about a tax code that taxes all people fairly. A tax system in which a billionaire like Warren Buffett pays taxes at a lower rate than his secretary is not fair, and an unfair tax code, one that's riddled with loopholes, perverse incentives and ways to game the system, keeps us limping and unproductive."
Terrance Heath has been writing a series on The Truth About Tax & Spend Conservatism:
Public Campaign fact sheet titled, GE's Corporate Tax Dodging that begins:
General Electric spent $235.2 million in political money since 2000--paid no federal income taxes in 2008, 2009, and 2010.
and points out:
G.E. cut American jobs and exported them overseas.
The New York Times reports "[since] 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment."