As reporters pore over t
he recently leaked “Panama Papers”, searching the massive document dump for names familiar here in the U.S., the Obama administration used the occasion to push for a crackdown on corporate tax inversions — an ongoing problem draining the nation’s economy of revenue by the billions.
Inversions are tax avoidance schemes in which corporations affiliate with a foreign holding company as a means to relocate as a phony headquarters overseas to enjoy the benefits of lower tax rates. Losses to the U.S. tax base are estimated to potentially be well over $100 billion, but GOP defenders of the shell game claim it is necessary because U.S. corporate taxes are too high.
Also in recent news is the story of Johnson Controls, a Wisconsin-based firm that announced earlier this year their intention to merge with Tyco International Ltd. to take advantage of Ireland’s 12.5 percent corporate tax rate. Johnson does plenty of business in Michigan.
Cheating Michigan
Fortune magazine lists the top inversion offenders, and not surprisingly Tyco made the list. But, are there any companies from Wisconsin’s neighbor to the east on the naughty list? Two Michigan companies made the top-tier — Perrigo PLC and Delphi Automotive PLC.
Delphi Automotive headquaters. Image: Wikipedia
Perrigo, an over-the-counter drug manufacturer out of Allegan, also files under an Emerald Isle address. In recent years the company sued the FDA for not moving fast enough on approving a controversial OTC testosterone cream. By avoiding U.S. taxes, they are not paying their fair share in supporting the work of the FDA — thus, American tax payers doubly bear the burden of their corporate greed.
Delphi, a well-known automotive parts manufacturer from Troy, has incorporated itself for tax purposes in the Channel Islands. They benefitted handsomely from the auto industry bailout at great tax payer expense, but they weren’t yet done screwing-over cash-strapped Michigan.
Cheating Michigan Extra: Once, Twice, Thrice, and Beyond
Perrigo and Delphi have something else in common — they’ve both enjoyed untold tax breaks from their ex-pat home of Michigan. The corporate subsidy tracking database provided by Good Jobs First offers a glimpse into their stateside tax shenanigans. Over the years, Perrigo has bilked Michigan tax payers and communities out of at least $40.6 million in the form of multiple tax abatements and rebates. It is impossible to know exactly how much money was involved because, until recently, the record keeping was spotty at best — which is also the case with over two dozen property tax abatements awarded to Delphi.
Oh, and Johnson Controls, they’ve nicked Michigan too, for a whopping $317 million. They additionally took numerous property tax rebates for which full data is not available. Of the reported amount, there was a $168.5 million “megadeal” — a term used by Good Jobs First to describe obscenely large tax breaks which are often brokered by a corporation as terms for continuing to do business within a state or community — also known as extortion.
Some would have us believe that these kinds of tax dodges are simply the price of doing business with “job creators.” Unfortunately, the cost of the tax giveaways is often upside-down compared to the gross payroll generated. In other words, another kind of bad deal Michigan simply cannot afford.
Another commentator knowing nothing about the subject of which she writes and then pretends to be an “expert”. The only statement within the article that is the reason why American companies are using the legal way to avoid the highest confiscatory corporate taxation in the free world – “inversions” are growing. What is needed is not Obama wagging both his finger and tongue and talking about punishment, but getting to a reasonable corporate tax rate. But that will never happen, as Democrats (and some Republicans) are all about draining more money from corporations and taxpayers to squander through government give away programs. I’m all for cutting any abatements and favors for any business to get to a 15% corporate tax rate – then there would be growth in the economy. Why does this administration punish the producers and hard working citizens? Because they don’t and won’t shrink the bloated government.
You sir are surely a card-carrying member of the “broken-record club” hiding behind that ridiculous, almost comical yet anonymous moniker of yours. The theory that there is exists a “reasonable” corporate tax rate somehow resides in the recesses of either your mind or the minds of your fellow “club members” is pure fantasy.
Key Facts:
Corporate share of federal tax revenue has dropped by two-thirds in 60 years — from 32% in 1952 to 10% in 2013.
General Electric, Boeing, Verizon and 23 other profitable Fortune 500 firms paid no federal income taxes from 2008 to 2012.
288 big and profitable Fortune 500 corporations paid an average effective federal tax rate of just 19.4% from 2008 to 2012.
Profitable corporations paid U.S. income taxes amounting to just 12.6% of worldwide income in 2010.
U.S. corporations dodge $90 billion a year in income taxes by shifting profits to subsidiaries — often no more than post office boxes — in tax havens.
U.S. corporations officially hold $2.1 trillion in profits offshore — much of it in tax havens — that have not yet been taxed here.
U.S. effective corporate tax rates are not a burden
Some corporations pay nothing in taxes
Lower tax rates do not boost growth and jobs
Americans don’t want to cut corporate taxes
http://www.americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-corporate-tax-rates/
Here we go again! So the corporations you named paid no property tax, no employer’s contribution to Social Security, no employers portion of workman’s compensation, no sales tax, no licensing fees, no surcharges on energy, gasoline tax, did not contribute to retirement funds, no State taxes, local taxes or charitable contributions? If an Illegal pays no federal tax you overlook it and rationalize it by saying they pay payroll tax, but you forget the multitude of taxes the corporations pay. If corporate income tax is the magic bullet, the solution to the world’s problems, why do most Socialist nations have a lower tax rate than we do?
If a corporation pays taxes, where do they get the money to pay the taxes? From you and me in the form of payment for the goods and services we purchase. As long as the government spends money, they get it from you and me; in the end there is no other source. Ultimately the bottom line is that it comes from our pockets. Let the government spend more — it will cost you more. Tax Boeing and you pay more for an airline ticket, tax GM and you pay more for a car. Can’t you good folks on the left grasp that bit of common sense? Or are you so blinded by hate you cannot see the facts?
And your attacks on Free Market Man’s identity are getting old you made your point the first, second and third time. give it a rest, please.
What my liberal friend Jeff says is true – it is called “crony capitalism”, where the government picks winners and losers in the tax burden lottery. The other companies not having congressional “help” get stuck, finally get sick of paying the burden, and legally offshore their corp. headquarters – lessening their tax burden and that money goes directly to the bottom line. Companies have to compete in the marketplace, governments don’t. When companies are given unfair and uneven tax breaks, that is not capitalism, that is stealing. Notice none of the non-tax paying companies are off-shoring their headquarters? Nobody is “too big to fail”.
Also, the American farmer loves to get tax incentives and land bank money. Those providing corn for the ethanol industry are paid handsomely for their efforts. All agricultural subsidies and tax abatements must stop also. They have outlived their usefulness and paying a lower rate on their tax burden will make up the difference.
What would be the solution? Establish a reasonable corporate tax rate (15%) and EVERY industry pays the same amount, no crony capitalism or favors for one industry over another. If companies cannot compete, maybe they ought to go out of business. No deductions except for depreciation of capital equipment.
However, the citizens should be given a break too – a flat tax (15%) that EVERYONE pays. No deductions, no “earned income tax credit”, no charity deductions, no deductions or exceptions whatever. Imagine the explosion of economic activity that would occur after that happened! 1980’s all over again.
The only drawback to the federal government, it would have to reduce its workforce and eliminate departments, which they should have done years ago. Why is it industries and companies must always lose employees when there is an economic downturn, but the government never, ever pares down their workforce when tax revenues decrease and usually increase the workforce during those times? Government must be controlled and within budget and find every penny that it can save.
Capitalism works, crony capitalism doesn’t and never has. It always creates winners and losers, jealousy and deceit, and cheats
Jeff, notice the years those not paying taxes – during the Obama Administration. I’m not saying nothing like that didn’t happen before, but the Democrats are the first to decry tax cheats, but they are the worst offenders at giving breaks to their “friends”.
Look hard and long at the final presidential candidates when they are finally cast in stone. Who is going to support business as usual and who will make the changes needed?
As it is strange to hear this argument in the U.S.A. Here in France, we also hear it from the entrepreneurs, who complain to be too much taxed and they tell us, “in the United States it is better”. Even the Swiss bosses complain in their national press. Finally it is the argument used everywhere, to justify the tax fraud.
America is based on cheating and cheaters period!
You might want to rejoin your anger management meetings.
attempted deflection… strike one, argumentatively-speaking
Mr. Salisbury, congratulations on being appointed or elected the umpire for comment. We must have missed it; when did you become the Town Broadcast dictator of content? Congratulations on the new job.
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My question to Mr “Free Market Man,” Why are you too chickenshit to sign your name?
Here’s the Price Countries Pay for Tax Evasion Exposed in Panama Papers
By Jon Schwarz – theintercept.com
Apr. 5 2016
“READING THE many stories based on the giant leak of documents from Panamanian law firm Mossack Fonseca — notorious for its prolific creation of shell companies to hide assets of wealthy malefactors — you might well ask: How much tax revenue do the world’s governments lose thanks to this kind of financial engineering? According to The Hidden Wealth of Nations, a recent book by University of California, Berkeley economist Gabriel Zucman, the answer is that tax evasion costs governments approximately $200 billion per year. Zucman also estimates that tax avoidance by U.S. corporations — which, unlike tax evasion, is generally carried out in the open and is technically legal — costs governments an additional $130 billion per year. (European and Asian corporations have the same incentives to avoid taxes, but there is not enough data to estimate its scale.) So as a result of all the different schemes like the ones being unveiled by the Mossack Fonseca leak, governments around the world are dealing with at least a one-third of a trillion dollar annual shortfall that must be made up by cutting spending, borrowing, or taxing the rest of us more than they should.” https://theintercept.com/2016/04/05/heres-the-price-countries-pay-for-tax-evasion-exposed-in-panama-papers/