Congress, Media, Politics, Testimony

Corporate Liars and the Lies They Tell

Respectfully submitted by Lawrence Rafferty (rafflaw)- Guest Blogger

I have written in the past about corporations dodging taxes, but this latest story out of Washington takes the cake. Susan Ford, an executive with Corning, Inc. testified recently at a House Ways and Means committee meeting and made the following claim.  “American manufacturers are at a distinct disadvantage to competitors headquartered in other countries. Specifically, foreign manufacturers uniformly face a lower corporate tax rate than U.S. manufacturers, and virtually all operate under territorial systems which encourage investment both abroad and at home.” Think Progress  That is a very strong statement coming from Ms. Ford.  What is really interesting is that her claim that foreign companies face a lower corporate tax rate would be important issue,  if it only was true!

“In fact, according to Citizens For Tax Justice, the company received a $4 million refund from 2008 to 2010.  The truth is that Corning, Inc. is one of at least 26 companies that paid zero Federal taxes on their profits. ” Think Progress   According to the Citizens for Tax Justice, Corning actually paid an effective tax rate of -0.2 percent for 2011!  Now, as many on this blog can attest to, I am no math whiz, but a negative tax rate is a good thing, isn’t it?  The truth that Ms. Ford and many other Corporate executives don’t want you to know is that the United States, while it does have one of the highest marginal tax rates, its effective tax rate is lower than most.  In fact, according to Think Progress, the effective rate in 2011 was the lowest it has been in 40 years!

“U.S. corporate taxes that were actually paid (the effective rate) fell to a 40 year low of 12.1 percent in fiscal year 2011, despite corporate profits rebounding to their pre-Great Recession heights. The U.S. both taxes its corporations less and raises less in revenue from corporate taxes than its foreign competitors:

 

Why wouldn’t Ms. Ford and her fellow corporate executives want you to know that they are paying an effective tax rate that is so low that they are actually obtaining refunds from the IRS even though they are earning Billions in profits?  Why do politicians keep repeating the meme that our corporations are being bogged down financially by the taxes that they are being charged and that they just can’t compete against these foreign companies that pay less taxes? When you are actually paying little or no taxes like the 26 companies mentioned above, how much lower can your taxes really go?

How can you not be competitive when you are not paying any Federal taxes at all?  It is time for politicians of all stripes to actually tell the American public the truth about corporate taxes.  The good Benedictine Nuns taught me that it is always better to tell the truth.   Our long nosed fellow shown above learned the lesson too.  So, here it goes.  It isn’t Federal taxes that are preventing United States corporations from being competitive!   Now, was that so hard?  My nose feels much better now.

By the way, should there be an investigation into the untruths that Ms. Ford testified to?  Let’s here what you think!

Additional Reference: Citizens for Tax Justice; Susan Ford Testimony

71 thoughts on “Corporate Liars and the Lies They Tell”

  2. CLH:

    YEP, if the govmint would do away with all the loopholes and just say profit is what is left after all bills have been paid for the year and wages paid and taxed it at about 10%, oh what a recovery we would have.

    They should do that for consumers too, you make 100 bucks send in 10. Doesnt matter if it was earned through actual work or investments. No deductions, no nutten.

    I imagine your father would make a little less money but maybe not, he could spend his time doing real accounting and not worry about tax code.

  3. The researcher’s don’t know what they’re talking about. The Germans still have plenty of hidden plunder they won’t tell you about. The Swiss won’t tell you either. Neither will the Norwegians.

  4. rafflaw,

    I thought you might find the following article interesting:

    Super-Rich Hold Up To $32 Trillion In Offshore Havens: Report
    http://www.huffingtonpost.com/2012/07/22/super-rich-offshore-havens_n_1692608.html

    Excerpt:
    LONDON, July 22 (Reuters) – Rich individuals and their families have as much as $32 trillion of hidden financial assets in offshore tax havens, representing up to $280 billion 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.

    The research was carried out for pressure group Tax Justice Network, which campaigns against tax havens, by James Henry, former chief economist at consultants McKinsey & Co.

    He used data from the World Bank, International Monetary Fund, United Nations and central banks.

    The report also highlights the impact on the balance sheets of 139 developing countries of money held in tax havens by private elites, putting wealth beyond the reach of local tax authorities.

    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.

  6. The “corporations are people” meme is getting old. They are collections of people organized and chartered by a state to do business or other activities, as a means of protecting the assets of the officers and stock holders of the organization by limiting the liability of corporations to the assets they possess, except in limited cases where the officers of corporations and board memebers can be held accountable for fraudulent and other criminal activity. That’s the basic, fundamental definition of a corporation. Corporations have rights that are only inherent in the people that comprise the organization, that those people bring to the corporation as it’s formed, such as the right to free speech and assembly. There is no inherent right in the Constitution for a corporation to be formed, of course, but there are rights of freedom of assembly, and I’m not aware of any case law that addresses that issue.

    On the issue of taxation- The tax code is so ridiculously complex, especially for corporations, that trying to make heads or tails of it is impossible for all but the most highly trained tax lawyers and accountants. I come from a family of accountants. My father owns an accounting consulting firm that specializes in IFRS (Internationsl financial reporting standards) and in international insurance practices. In reality, even concepts that seem as simple as profit can be construed many different ways. At want point do you define profit? Is profit the amount of money after you pay for the materials involved in making a product or providing a service? Is the profit the amount of money left after you pay your staff, material costs, and other overhead? Does profit start after you reinvest into your business? Are dividends the only profit that matters, as that’s the only profit that the people who actually own the organization get to keep? Reporting standards often vary widely from what people think of as actual profits, and not much can be construed from a simple statement of profits. My father told me that when his firm managed an international merger, it cost the new company around 22.8 million dollars just to pay people to figure out the US tax code. and the tax documents alone for one corporation, if they could be printed out, would have filled a multi story office building. That’s for one company. It’s not so cut and dried as people tend to make it, on either side of the debate.

    To Bron’s point- Corporations don’t pay taxes. Ever. Taxing a corporation is a silly little lie that governments play. A corporate tax is a hidden tax on the people that buy the products and services of that corporation, with the possible (and very rare) exception of investment income earned by a corporation from it’s own assets, as opposed to income from goods or services provided.

    Where do corporations get their money? Aside from corporations that invest (and that investment is usually a kind of service) they get the money from consumers. That’s it. No where else. They don’t print their own. They don’t get a magic money fairy that hands them money from a tree. It comes from the consumer. So saying that corporations pay taxes is a horrendous deceit practiced for generations.

    Government says to corporation- “Give us 20 percent of your profits.”

    Corporation- “Sure. Here you go.” (Whining edited out.)

    Customer- “Why did the price of this product go up by 20 percent?”

    Corporation- “Taxes. We’re moving to Country X. Less taxes, cheaper labor. Then we can drop the prices to a level you the consumer are willing to pay.”

    Consumer- “Dey took our jerbbs!”

  8. OK OK, but if a corporation is a person, then it has to pay US taxes while it remains a US citizen even on money it earns abroad, right?

    Or doesn’t it have to give up its US citizenship if it doesn’t want to do that?

    Or something?

  9. Thanks Gene and Mespo and Elaine!
    Mike S.,
    Maybe Ms. Ford wants some of that oil company money that Congress likes to handout.

  13. rafflaw:

    Superb. Thanks for lifting Diogenes’ lamp to these guys.

  15. John B. You explained the concept behind the huge profits that can be shown as losses on US tax returns. thank you.
    ==============
    Bron,
    “From a purely economic standpoint, it makes no sense to tax corporations at all, because only people pay taxes, not legal entities. The corporate tax is paid by customers in terms of higher prices, by suppliers in terms of lower volumes of business, by employees in terms of lower wages and by stockholders in terms of lower returns. Many countries used to have higher corporate-tax rates than the United States, but, over time, they realized they were losing business — and jobs — to countries with lower rates; so most countries have been reducing their corporate-tax rates to attract new businesses and global firms.”
    ————-
    Who are you quoting? This is nonsense. Roberts, et al have declared that corporations are people, therefore, corporations should pay tax at least at the same rate as the rest of us. Otoh, look at the graph that raf posted in his article. Other countries tax corporations at a higher rate and they collect more money than the US.

  16. Raff,

    Check out the country of Ireland….. You’ll be amazed at the number of American Corporations that are leaving because the country can no longer support corporate welfare….. They are returning to the US and are looking for even more tax breaks…..

    Good article by the way….

  17. Oro Lee 1, July 22, 2012 at 5:26 pm

    Trickle down economics — that’s the big dogs peeing on the little dogs
    —————–

    So true, ROFLMAO

  18. JB, Do you know what you’re talking about? Are you as much as an a**hol* as you appear to be.

    Tax expense for financial statement purposes is reported on a consolidated basis, and has only a tenuous relationship to cash taxes.

  19. Riffing on bettykath’s quite appropriate comments, the idea seems quite appropriate. If corporations are people shouldn’t the coporation itself, not simply human executives be subject to imprisonment (suspension or revocation of its business license for crimes such as perjury or death caused by corporate neglect or malfeasance? Yes, they should.

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