Why You’re Paying Too Much In Taxes Today: Because Everyone from the Ultra-Rich to Illegal Immigrants Pay Nothing … Or Get Tax Refunds

http://www.washingtonsblog.com/2014/04/youre-paying-much-taxes-today-everyone-ultra-rich-illegal-immigrants-pay-nothing-get-tax-refunds.html

Economics professor and former Secretary of Labor Robert Reich notes:

Many millionaires pay a lower federal tax rate than many middle-class Americans.

Some don’t pay any federal taxes at all.

***

Some also take advantage of tax loopholes that let them park some of their earnings in offshore tax havens like the Bahamas or the Netherlands Antilles.

***

Put these all together and you see why Warren Buffet, the second richest person in America, pays a lower tax rate than his secretary, as he readily admits.

State and local taxes are even more regressive. The poorest fifth of Americans pay an average state and local tax rate of over 11 percent, while the richest fifth pay only 5.6 percent. This isn’t small change. State and local taxes account for about 40 percent of all government revenues.

Pulitzer prize winning reporter David Cay Johnston reports that – in 16 states – giant companies pocket your “state income taxes”.

This includes foreign corporations.

Workers are never informed that their “state income taxes” are being pocketed. And states often refuse to make this information public, claiming that it is “proprietary information”.


In addition, big companies use a variety of international scams to avoid taxes:

The Washington Post notes:

About two-thirds of corporations operating in the United States did not pay taxes annually from 1998 to 2005, according to a new report scheduled to be made public today from the U.S. Government Accountability Office…

In 2005, about 28 percent of large corporations paid no taxes…

Dorgan and Sen. Carl M. Levin (D-Mich.) requested the report out of concern that some corporations were using “transfer pricing” to reduce their tax bills. The practice allows multi-national companies to transfer goods and assets between internal divisions so they can record income in a jurisdiction with low tax rates…

[Senator] Levin said: “This report makes clear that too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States.”

Indeed, as … Johnston documents, American multinationals pay much less in taxes than they should because they use a widespread variety of tax-avoidance scams and schemes, including:

  • Selling valuable assets of the American companies to foreign subsidiaries based in tax havens for next to nothing, so that those valuable assets can be taxed at much lower foreign rates
  • Pretending that costs were spent in the United States, so that the companies can count them as costs or deductions in the U.S. and pay less taxes to the American government
  • Booking profits as if they occurred in the subsidiary’s tax haven countries, so that taxes paid on profits are at the much lower safe haven rate
  • Working out sweetheart deals with certain foreign governments, so that the companies can pretend they paid more in foreign taxes than they actually did, to obtain higher U.S. tax credits than are warranted
  • Pretending they are headquartered in tax havens like Bermuda, the Cayman Islands or Panama, so that they can enjoy all of the benefits of actually being based in America (including the use of American law and the court system, listing on the Dow, etc.), with the tax benefits associated with having a principal address in a sunny tax haven.
  • And myriad other scams

And see this.

Indeed, some of the world’s biggest companies not only dodge all taxes, they actually enjoy a negative tax rate … where they are paid money by the U.S. government.

Daily Beast points out:

After taking advantage of credits, exemptions, and offshore tax havens, U.S. corporations get away with paying an average of less than 13 percent, according to the Government Accountability Office. What’s more, the GAO found that more than half of them reported owing no federal taxes in at least one year between 1998 and 2005.

According to a study by the advocacy group Citizens for Tax Justice (CTJ), 26 Fortune 500 corporations paid no federal corporate income tax over the most recent five-year period. In fact, according to CTJ, they generated so many tax breaks that they reported negative taxes and often received a rebate check. As procrastinators rush to post offices and computers to file by deadline, let us pause—in anger, jealousy, or admiration—to recognize the corporations who manage to avoid the taxman.

The World’s Richest Hide $31 Trillion Dollars to Avoid Taxes

A new report from the former chief economist at the prestigious McKinsey firm – an expert on tax havens – concludes that

The Guardian notes:

A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together ….

James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.

He shows that at least £13tn – perhaps up to £20tn [i.e. $31 trillion dollars] – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy”.

***

The detailed analysis in the report, compiled using data from a range of sources, including the Bank of International Settlements and the International Monetary Fund, suggests that for many developing countries the cumulative value of the capital that has flowed out of their economies since the 1970s would be more than enough to pay off their debts to the rest of the world.

***

“The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments,” the report says.

The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry’s calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world’s population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.

“These estimates reveal a staggering failure: inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people,” said John Christensen of the Tax Justice Network. “People on the street have no illusions about how unfair the situation has become.” [Remember that rampant inequality destroys economies. And conservatives or liberals are both offended by it.]

Al Jazeera reports:

Rich individuals and their families have as much as $32 trillion of hidden financial assets in offshore tax havens, representing up to $280bn in lost income tax revenues, according to research published on Sunday.

The study estimating the extent of global private financial wealth held in offshore accounts – excluding non-financial assets such as real estate, gold, yachts and racehorses – puts the sum at between $21 and $32 trillion.

***

John Christensen of the Tax Justice Network told Al Jazeera that he was shocked by “the sheer scale of the figures”.

“What’s shocking is that some of the world’s biggest banks are up to their eyeballs in helping their clients evade taxes and shift their wealth offshore,” said Christensen.

“We’re talking about very big, well-known brands – HSBC, Citigroup, Bank of America, UBS, Credit Suisse – some of the world’s biggest banks are involved… and they do it knowing fully well that their clients, more often than not, are evading and avoiding taxes.”

Much of this activity, Christensen added, was illegal.

***

The research estimates that since the 1970s, the richest citizens of these 139 countries had amassed $7.3 to $9.3 trillion of “unrecorded offshore wealth” by 2010.

Private wealth held offshore represents “a huge black hole in the world economy,” Henry said in a statement.

Either Eliminate Taxes – Or Tax Fairly – But Don’t Allow Fraud to Rob the Middle Class Blind

Some say that we could eliminate all taxes if we take away from the big banks the monopoly power to create credit, so that the government doesn’t have to pay trillions on interest for that credit.

Some say that income taxes are illegal, because they were never ratified by the states.

Some say that – since more than half of all government discretionary spending goes to imperial wars of adventure and most of the rest is thrown at the big banks so they can keep ripping us off – paying taxes is just propping up a destructive system.

Others – including some leading conservatives – say that the problem is that the wealthiest haven’t been forced to pay their fair share of taxes.

We’re not weighing in one way or the other. But one thing is for sure: either no one should pay taxes, or we should all – illegal immigrants, giant corporations and the super-rich – be subject to the same rules and pay our fair share.

Soaking the middle class is unfair, unjust … and unAmerican. Indeed, while the Boston Tea Party was a revolt against taxation without representation, it largely centered on the British government’s disproportionate tax breaks towards the East India Company, the giant company which dominated the tea market and hurt small American business.

Illegal Aliens Scam Tax Refunds

For years, American taxpayers have been shelling out $4.2 billion dollars per year to pay for a scam.

A report by the Inspector General found that some 2 million illegal immigrants have been receiving large tax refunds by pretending that numerous dependents live with them … when, in fact, most of the dependents live in Mexico and have never lived in the United States.

Once whistleblowers called attention to this problem, their IRS bosses told them to ignore the fraud and look the other way:


WND notes:

The problem was not a revelation to the Northern California IRS field-office worker who viewed the report: “The fraud has been going on for years,” he told WND. “Business as usual.”

“As the video indicates the Service does nothing,” he said, asking WND not use his name to avoid reprisal.

(The Federal Reserve has been bailing out foreign banks for years; but we assume that this is not a backdoor bailout for foreign nationals.)

Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “Giant Corporations Scam Tax Refunds”

  1. Iamthe50percent says:

    Interesting. I never realized that dependents had to live in the United States. I thought they just had to have certain defined relationships and be dependent on you for over 50% of their support.

    So if you are in the Armed Forces and stationed in say Korea, you cannot claim your spouse or children if you are on extended deployment to the Middle East? Or is it only if they are Korean nationals?

  2. VennData says:

    One of the first things Bush did in office was gut US cooperation with the FATF
    http://www.fatf-gafi.org/pages/aboutus/historyofthefatf/

    They are trying to get offshore tax dodgers to pay by pointing out governments. The legal stashing of money offshore that you all complain about was down by Reagan.

    http://www.reuters.com/article/2014/04/09/us-usa-tax-offshore-idUSBREA3729V20140409
    This is what the GOP does to our country.

  3. rd says:

    The primary beneficiaries of Pax Americana are multi-national corporations. The average American would not be mpacted significantly by civil strife in many parts of the world. It might actually even keep their jobs back on home soil. However, it would be highly disruptive to multi-national corporations operating in those regions, so they really do rely on the US military to keep order. Unfortunately, they are not particularly interested in paying the taxes to support it although they are quite eager for the government contracts to supply it.

  4. ComradeAnon says:

    Barry, I don’t doubt for a minute that corporate America is scamming us on taxes. But using anything that has WND as a quoted source is journalistic suicide.

  5. rj chicago says:

    @ Venn:
    Please stop with the one sided repub bashing rants – this is an issue perpetrated by all the powers that be in govt. at the local, state and fed. level by BOTH parties. This is not about who wins and who loses nor what color stripe you wear or that banner you rally under – this is about attaining and holding on to power!!! I am sure Mr. Steyer is doing something similar and he is a big time demo for example.

    • formerlawyer says:

      False equivalency – prove it or shut up.

    • RW says:

      Four or five years ago a plausible case could be made for the “both sides do it” position WRT national politics but that is no longer possible; e.g., Thomas E. Mann and Norman J. Ornstein

      We have been studying Washington politics and Congress for more than 40 years, and never have we seen them this dysfunctional. In our past writings, we have criticized both parties when we believed it was warranted. Today, however, we have no choice but to acknowledge that the core of the problem lies with the Republican Party.

      As to Venn he just seems to be doing his utmost to push the limits of Poe’s Law and has achieved some level of success in that endeavor; at least that’s how I read it.

  6. Frilton Miedman says:

    A couple of years ago, CNN’s Fareed Zakaria interviewed Chinese PM Wen Jiaboa.

    Fareed asked Mr Jiaboa why China taxes the U.S. 25% to export, while we only tax them 2.5% for their imports.

    Mr Jiaboa smiled, politely explained that was the choice of the U.S., and that it might coincide with the fact that over 60% of Chinese exports to the U.S. are U.S. corporations doing business in China for the cheaper labor.

    • lucas says:

      First, the Chinese surname is Wen, so it should be Mr. Wen.

      A similar thing happened in Japan with CocaCola a long time ago. The Japanese soft drink Byerleys sold for 100 yen per can. Japan told Coke they had to sell for at least 100 yen as well. Coke wanted to price their product at about 30 yen. Coke said fine, we’ll price it at 100 yen and laughed all the way to bank.

      • Frilton Miedman says:

        Duly noted on Chinese surnames.

        The Japanese Coke comparison isn’t similar imo, I’m talking about a tax (tariff) code that compounds the problem of job losses with a tax advantage for mutlinationals who already reap greater gains from cheaper Chinese labor.

        Where min wage in the U.S. @ $7.35, a Chinese worker makes $0.50 or less, that’s a substantial cut in production cost, then factor a tariff 2.5%, meanwhile, the GOP parrots what the corporate lobby tells them, pummeling us with “job creating tax cuts”.

  7. lucas says:

    In a post littered with links related to corporations, the notion that bazillions of illegal immigrants get tax refunds based on numerous dependents has no supporting evidence, and in fact it does not happen, the one WND link nothwithstanding. I know because I am very familiar with the ITIN process. First, lots of legal people qualify for an ITIN. Just because someone has an ITIN does not mean they are illegal.

    Second, at least we learn from the link that (surprise!) illegal immigrants ARE filing tax returns and paying taxes. I have been telling people this for twenty years. Some of them do qualify for some level of refund. People keep forgetting that a refund is a return of some of their wage already paid in. People with ITINs do NOT qualify for credits.

    Third, the wages of illegal immigrants are reported on a W-2 (just like you and me), except the social security number is a fake one generally assigned to the illegal employee by the EMPLOYER.

    Fourth, most illegal immigrants end up with a balance due because the employer (not the employee) fills out the W-4 to minimize the withholding. Therefore, illegal immigrants pay a minimal income tax and owe more, but pay the full share of social security and medicare, without any hope of receiving benefits. Those FICA contributions go to the general social security pot to help fund the benefits of you and me. Therefore, illegal immigrants pay taxes at the highest relative rate in the land.

    It is true that some illegal immigrants play musical dependents. It is not true that they are claiming umpteen illegal dependents, and in fact there is no tax advantage for more than just a few dependents. When illegal immigrants try the dependency game, the goal is to spread the dependents around so that all the wage earning relatives can receive some small tax advantage. The rules for dependency are complicated and strict. The most common ploy I see is that, say there is a family with four kids. The mother and father each claim head of household, and then each claim two of the kids.

    Illegal immigrants are not the only ones playing this game. Citizens try the same gambit regularly. Perhaps some of the ITIN documentation is forgeable, but then so is much of the documentation presented by citizens. The thing is, if our government wants to authorize tax preparers to also act as auditors, then we will have to enforce against citizens as well. People beating the illegal alien drum never think about that part. The fact is, the IRS watches ITIN returns very carefully, and especially monitors the tax preparers of such returns.

  8. Frilton Miedman says:

    I missed the WND link, that site is pure garbage, they take rumor based on rumor and attempt to pass it off as legitimate news..

    Also, I clinked the “Ohio wasn’t ratified” link regarding the legitimacy of the 16th amendment & income taxes.

    You need to read sources before posting them, the article debunks the Ohio 16 amendment myth, it doesn’t make the case.

    To quote the article’s conclusion -

    “Whew, you say. The republic saved again. Not that this will stop the tax resisters. While the Ohio argument has some entertainment value, most tax-resister arguments are just stupid, e.g., the claim that the IRS is unlawful because it’s an “establishment of religion.” Taft not a citizen of the U.S.? These people aren’t citizens of earth.”

    Again – ” .. most tax-resister arguments are just stupid .. ” is the gist of the article.

    On several occasions, I’ve debated those who say the Washingtons Blog is sensationalist, exaggerative or incendiary…..I’m not so sure all of a sudden.

    WND as a credible source?…Really?

  9. econ1 says:

    Well, a simple way to get the rich, corporations, illegal immigrants, criminals and tax evasion artists to pay taxes is to have a universal sales tax (except on food)..include services, art, boats, jewelry etc.. Get rid of the other taxes altogether. Then whenever someone buys something they pay tax. Easy to administer, difficult to evade (just don’t ever buy anything….whats the fun in that). Then send checks to the lower 20% (or better increase the earned income tax credit) to make up for the progressiveness. Unfortunately the politicians won’t want to give up the control…and an army of lawyers and accountants wouldn’t have anything to do…..so it will not happen.

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