Corporate Tax Deferral, Inversions And The Destructive Result

Dave Johnson

Our anti-government, anti-tax policies have seriously benefited the few gazillionaires who are paying to promote and propagandize these policies, but this is seriously costing the rest of us, our economy and our country. We the People are being looted and it is time to put a stop to it.

I’m writing this from Michigan, where the roads are just awful. I mean, you can’t believe how awful if you haven’t been here; they haven’t been fixing the roads, and it’s at the point where they are not just bad, and not just bumpy and falling apart, but they are downright dangerous. I have hit holes that are beyond just potentially ruining your rim or breaking an axle, but could maybe set off the air bags.

It isn’t just the roads; it’s the schools and the courts and everything else. But the roads are a clear indicator of what anti-government government does to the economy. If I still had a business, I would be thinking about leaving Michigan to go somewhere that educates its children and fixes its roads.

This destruction of the economic infrastructure is the result of anti-government, anti-tax sentiment that leads to a revenue shortfall, which leads to deferred maintenance, which leads to bad schools, which leads to economic destruction. It costs us all – except the few gazillionaires driving these policies for their own benefit.

David Cay Johnston has studied how much the Bush tax cuts, for example, have actually cost most of us as a result of the cutbacks in things that make the economy grow. He writes at Al Jazeera in, “Americans have lost out on $6.6 trillion,”

In 10 of the 12 years when the Bush tax cuts were in effect, the average income shown on tax returns was lower than in 2000. In the two upside years, average income rose modestly, up $504 for 2006 and $1,744 for 2007.

Corporate Inversions, Deferral And General Tax Scamming

A lot of the loss of revenue to We the People comes as a result of corporate tax scams. Two of these are “deferrals” and “inversions.” Deferrals let multinational American companies out of paying taxes they owe on profits made outside of the country, thereby forcing companies to move jobs, factories, call centers and profit centers out of the country. Inversions allow American companies to pretend they aren’t American companies so they can avoid paying various taxes.

At last week’s Netroots Nation conference I moderated a private discussion for bloggers on the corporate tax policy problem. Here is what I said to open the discussion:

I put together a few short remarks to introduce today’s topic. I ran into Vice President Joe Biden downstairs yesterday and asked him for some help on ways to keep this really brief. (Groans.)

In summary: “We’ve got to get our corporate tax collection rates above the snake line.”

Corporate “inversions” are in the news right now. This is when corporations buy or merge with a non-U.S. company located in a tax haven country so they can pretend they are not U.S.-based.

But they keep their operations here, their employees here, their executives here, like Walgreens [which is considering combining with a Swiss company to enable an inversion] they keep stores here, their suppliers, and their customers – it all stays here. They still depend on our courts and military and roads and education system. They just don’t have to pay as much to help keep them going.

And we let them do this.

Other companies are able to “defer” paying taxes on profits they make outside the U.S. They move jobs, factories, profit centers, whatever it takes to make it look like they are making that money outside of the U.S. – and then they say this money is “trapped” outside of the country by their obligation to pay their taxes if they bring it back. They set up organizations like “Fix the Debt” to complain about the deficits caused by our country’s revenue shortfall, and then demand a “tax holiday” before they will let We the People use a fraction of what they owe us.

And that is when these companies bother to even acknowledge that governments are relevant to them anymore at all.

So this is today’s situation with corporate taxes.

And when these companies and the billionaires behind them don’t pay their taxes – guess who has to either make up the difference or suffer the cutbacks in the things government does to make our lives and economy better.

Guess who has to make up the difference. Guess who has to suffer the cutbacks. Guess who gets rich from this.

Get updates in your inbox