The CBS News show 60 Minutes usually can be counted on for hard news about controversial subjects but a recent story about corporate income tax rates in the US showed how even a once great investigative news show can present a story so lopsided one would think it was repeating a press release.
Correspondent Lesley Stahl had a story about some large corporations who have moved their headquarters out of the country to dodge the US’s 35% tax rate on corporate income. She showed that some of the moves were a sham when she went to talk to the people in charge and they weren’t there.
Next came a short section where Rep. Lloyd Doggett (D-TX) complained about the companies that were dodging the taxes and questioned their patriotism.
Stahl then spent the remainder of the time giving big corporations an opportunity to whine and complain about the hardship of paying their fair share even though most don’t actually pay it and when they didn’t back in 2004, it didn’t help the economy.
Economist Martin Sullivan told Congress these patent and profit transfers are accounting tricks that have allowed companies to chip away at the 35 percent and save tens of billions of dollars. He says that from 2007 to 2009 these maneuvers helped lower Pfizer’s average tax rate to 17 percent; Merck to 12.5 percent, and GE to just 3.6 percent.
“It’s really remarkable, as I review the data, is the consistency with which you see this phenomenon. The taxes are going down, the profits are shifting offshore at an accelerated rate over the last few years,” Sullivan said.
So now these companies have profits accumulating overseas in places like Zug.
If they bring the money home, it’s taxed the full 35 percent. If they leave it overseas, the IRS can’t touch it. In other words, the tax law all but forces companies to keep their money out of the country, indefinitely.
“We leave the money over there. I create jobs overseas; I acquire companies overseas; I build plants overseas; and I badly want to bring that money back,” John Chambers told Stahl.
Chambers told Stahl Cisco has almost $40 billion overseas that could be brought back to the U.S.
The total amount of money U.S. companies have trapped overseas is $1.2 trillion. Chambers is advocating for a one-time tax break to allow them to bring that money home at a rate of, say five percent. That would, he says, stimulate the economy and create jobs.
“What is your downside for money that isn’t going to come back anyhow? I’d say your downside is zero,” he told Stahl.
But the Obama administration opposed this idea. When it was tried in 2005, the Treasury did rake in billions of dollars, though very few jobs were created.
John Chambers of Cisco also complains “All we’re asking is: Give us a level playing field. Get us close.”
Of course Chambers doesn’t say that Cisco and others who have operations in Europe don’t have to pay health insurance for workers – the European Union has universal health care and his fellow businessmen fought tooth and nail against the US health care reform efforts that then led to a much watered down “Affordable Healthcare Act”. Also as noted briefly we did try a one time tax reduction and it failed to generate jobs.
The story Lesley Stahl did the other night was about as bad for the middle class as the long wet kiss the entertainment division does with the show “Undercover Boss”.
Sure corporations should have a chance to lower their overall tax rate but it needs to be done with a fair intent – not as a dodge. Average Americans have been though the legal system for less.
I wouldn’t be opposed to a lower tax rate but that then must be balanced with a closing of all the loopholes. Fair is fair.
Doug~ I absolutely agree. These corporate whinebags never pay 35% as it is. Look at GE, one of the biggest lobbyists against corporate tax rates, paying absolutely nothing in taxes on billions in profit (while taking taxpayer-funded bailout money…really?!) Look at Google, who promises to "Do No Harm", paying $2 million in taxes on billions in profit. Give 'em a lower rate (and no laughable 5%, either; if you are gonna see the benefits of incorporating, then expect to pay a percentage comparable to at least what your mid-level employees pay) and tell them they HAVE to pay it every year with no dodges or else they can just go do business in the EU and Mumbai and Shanghai and forget the American market. That way, maybe we can open up some true capitalist competition for small businesses.
Although, as I have become crazier, I am all for totally disbanding the Socialist system of public ownership. Shut down public trading of companies and force all these leaders of industry to make money the old-fashioned, American way: come up with a better product and sell it. If someone wants to invest in your company, it is because he believes in what you are doing, he can support it directly with a direct investment, and he can do it with real money actually paid to the company that goes toward real building and manufacturing and paying real employees, not speculating, mutual funds, stock option payouts and day trading. Meanwhile, all these fools who pass numbers around on paper while driving up the prices of everything from energy to housing to food might actually have to walk away from their computers and DO something to earn a paycheck. And a huge company couldn't just wipe out all competition with another stock offering…they might actually have to compete. Call me crazy, but wipe out Wall Street and create a truly capitalist system and get back to the foundations of American free-market.
Oh well, I can only fall asleep at night remembering that, in the end, there are more of us who work each day for our check than there are them…