American taxpayers are increasingly
picking up the tab for unpaid corporate taxes.
Today,
corporate profits are setting all-time records while middle class families
continue to struggle financially. These trends are intertwined.
Whether
you’ve clicked to send your tax forms to the IRS along the cyber-highway or
dropped your return in the old-fashioned blue mailbox, you’ll be paying extra
to cover the growing amount of taxes that the nation’s clever corporations are
shunting onto individual taxpayers.
Officially,
the U.S. corporate tax rate stands at 35 percent, but in practice it’s far lower. Corporations
have lots of tricks in their box of tax-avoidance tools.
Consider Pfizer’s track record. The drugmaker increased its offshore profits by $10 billion in 2012, boosting its offshore stash to $73 billion — all of it untaxed by Uncle Sam. Like most pharmaceutical companies, Pfizer registers its patents in a low-tax offshore haven, and then charges a high price for the use of this “intellectual property.” Doing so, it shifts all of its U.S. profits offshore, avoiding U.S. taxes and bloating its overseas bank account.
Pfizer’s
tax dodging prowess has earned it a gold medal in the sport, but it has also
drawn unwanted attention from the Securities and Exchange Commission. The SEC
wrote to Pfizer last year asking them to explain four years of large losses in
their U.S. operations despite reporting about 40 percent of their sales on
American soil. Undeterred by the SEC investigation, Pfizer added a fifth year
of U.S. losses to the string in 2012.
Imagine
for a moment one of the physicians that prescribes Pfizer’s products taking
their diploma off their office wall, carefully packing it up, and shipping it
to a bank vault in the Cayman Islands. That diploma represents the doctor’s
intellectual property. Without it, they would not be able to practice their
profession.
After
each visit, patients approaching the check-out desk would be given their bill
and an envelope to mail their check to a post office box in the Cayman Islands.
Faced with confused looks, the receptionist cheerfully explains, “Well, we have
to pay for the use of the skills represented by the diploma, which is housed in
the Caribbean.”
The
corporate offshore tax dodge that shifts $90 billion of tax expenses onto
individual taxpayers this Tax Day is just that crazy. Just like having a
doctor’s diploma parked in the Cayman Islands does nothing to improve the quality
of care, having corporate profits transferred from America to tax haven nations
provides no enhanced benefits in terms of product quality or service. In other
words, there is no economic value. It only serves to add more to
already-overflowing corporate coffers.
In
the 1950s, corporations paid nearly a third of the federal government’s bills.
Last year, thanks to the antics of Pfizer and other examples of overly creative
accounting, corporate income taxes accounted for less than a tenth of Uncle
Sam’s total revenue. This dramatic shortfall shows up in two ways — federal
budget deficit growth and the growing trend of individual taxpayers paying an
increased share of the costs of government.
Only
about two in every thousand American businesses are even eligible to play this
game, and far fewer actually do. Most business owners are proud to pay taxes
they know support schools, good infrastructure, and national security.
If
tax-dodging corporations were people, they might say thanks to the responsible
taxpayers who are picking up their share of unpaid taxes. But since they aren’t
human, allow me to say on their behalf, “Have a Nice Tax Day.”
Scott Klinger is an Associate Fellow of the
Institute for Policy Studies.
Distributed via OtherWords. OtherWords.org
Distributed via OtherWords. OtherWords.org