A Rogues Gallery of the One Percent

For the past 30 years, Forbes magazine has used its annual list of the 400 richest Americans as a platform for celebrating the wealthy. This year, amid the persistent jobs crisis and the growing challenge posed by the Occupy movement, the Forbes list has to be viewed in a different light. Rather than a scorecard of success, it comes across as a rogues gallery of the 1 Percent who have hijacked the U.S. economy.

Start with the overall numbers. Combined, the 400 are worth an estimated $1.5 trillion, up 12 percent from the year before. This at a time when both the net worth and annual income of the typical American household have been sinking. When the first Forbes list was published in 1982 there were only about a dozen billionaires. Today, every single member of the 400 has a ten-figure fortune. Their average net worth is $3.8 billion.

And where did this wealth come from? Forbes tries to justify the skyrocketing assets of the 400 by saying that “an alltime-high 70% are self-made…This is the working elite.” New riches may indeed be better than inherited wealth, but how did this “elite” climb the ladder of success?

The question is all the more pertinent, given the current inclination of conservatives to refer to the wealthy as “job-creators” as a way of rebuffing efforts to get the plutocrats to pay their fair share of taxes.

How much job creation can be attributed to the Forbes 400? In a chart on Sources of Wealth, the magazine notes that the largest single “industry” is investments, accounting for the fortunes of 96 of the 400. By contrast, manufacturing, which is more labor intensive, is listed as the source for only 17 of the tycoons.

Within the investments category, about one-sixth of the people in the top 100 made their fortunes from hedge funds, private equity and leveraged buyouts—activities that are more likely to result in the destruction than the creation of jobs. For example, Sam Zell (net worth: $4.7 billion) was ruthless in laying off workers after his takeover of the Tribune newspaper company.

Forbes no doubt would respond by pointing to the 48 people on the list who got fabulously wealthy from the technology sector. Yet many of these companies create very few jobs: Facebook, which made Mark Zuckerberg worth $17.5 billion, has only about 2,000 employees. Or, like Apple, which gave the late Steve Jobs a $7 billion fortune, they create most of their jobs abroad in low-wage countries such as China rather than manufacturing their gadgets in the United States. The same is now true for Dell—source of Michael Dell’s $15 billion fortune—which has closed most of its U.S. assembly operations.

The few people on the list who are associated with large-scale job creation in the United States got rich from a company known for paying lousy wages and fighting unions. Christy Walton and her immediate family enjoy a net worth of more than $24 billion deriving from the notorious Wal-Mart retail empire (other Waltons are worth billions more). The Koch Brothers ($25 billion) are bankrolling the effort to weaken collective bargaining rights and thereby depress wage levels, while satellite TV pioneer Stanley Hubbard ($1.9 billion) has been an outspoken critic of labor unions and was an aggressive campaigner against the Employee Free Choice Act.

Poor job creation performance and anti-union animus are not the only sins of the 400 and their companies. Some of them have a checkered record when it comes to other aspects of accountability and good corporate behavior.

Start at the top of the list. Bill Gates, whose $59 billion net worth makes him the richest individual in the United States, is known today mainly for his philanthropic activities. Yet it was not long ago that Gates was viewed as a modern-day robber baron and Microsoft was being prosecuted by the European Commission, the U.S. Justice Department and some 20 states for anti-competitive practices. In the 1990s there were widespread calls for the company to be broken up, but Microsoft reached a controversial settlement with the Bush Administration that kept it largely intact.

Today it is Google, whose founders Sergey Brin and Larry Page are estimated by Forbes to be worth $16.7 billion, that is at the center of accusations of monopolistic practices.

Amazon.com, headed by Jeff Bezos ($19.1 billion), has fought against the efforts of a variety of state governments to get the online retailer to collect sales taxes from its customers. By failing to collect taxes on most transactions, Amazon gains an advantage over its brick-and-mortar competitors but deprives states of billions of dollars in badly needed revenue.

Cleaning products giant S.C. Johnson & Son, the source of the combined $11.5 billion fortune of the Johnson family, recently admitted that it has used aggressive tax avoidance practices to the extent that it pays no corporate income taxes at all in its home state of Wisconsin. Forbes ignores this issue, but instead describes in detail the criminal sexual molestation charges that have been filed against one member of the family.

And then there are the environmental offenders, such as Ira Rennert ($5.9 billion.) His Renco Group was for years one of the country’s biggest polluters, and the Peruvian lead smelter of his Doe Run operation is one of the most hazardous sites in the world.

This is only a small sampling of the transgressions of the 400 and their companies. Rather than being hailed as job creators, they should be made to answer for their job destruction, their tax avoidance, their anti-competitive practices, their environmental violations and much more.  Rather than celebration, the Forbes 400 and the rest of the 1 Percent are in need of investigation.

Green Accountability

Obamacare, abortion, gay marriage and taxes are apparently not enough to complain about. Conservative politicians have a new whipping boy: green jobs. Republican members of Congress and GOP Presidential hopefuls seem to think these days that the greatest sin of the Obama Administration is its effort to encourage employment growth in the renewable energy sector.

Mitt Romney’s recently released economic plan accuses Obama of having “an unhealthy ‘green’ jobs obsession.” In her response to the President’s jobs speech, Michele Bachmann charged that the Administration is imitating the green-jobs policies of Spain, which she bizarrely suggested were responsible for that country’s astronomical rates of unemployment. Rick Perry’s attacks on the reality of climate change imply that green jobs are unnecessary.

At the same time, Republicans in Congress are trying to turn the bankruptcy of solar company Solyndra, which leaves the federal government on the hook for $535 million in loan guarantees, into a morality tale not only about supposed cronyism but also about the folly of government support for green jobs.

As usual, there is a high dose of hypocrisy among those making the criticisms. As USA Today points out, while he was governor of Massachusetts, Romney supported the use of public funds to support renewable energy businesses. What the paper did not mention was that one of the recipients of those funds was Evergreen Solar, which got a $2.5 million state grant in 2003 and went on to receive $44 million more from Romney’s successor Deval Patrick. Earlier this year, Evergreen announced plans to shift its production to China and later filed for bankruptcy.

In 2008 the Texas Enterprise Fund, a subsidy program overseen by Gov. Perry, gave $1 million to the solar company HelioVolt. The company has also struggled and earlier this year put itself up for sale. A report by Texans for Public Justice noted that the fund had relaxed HelioVolt’s job-creation requirement. Perry’s fund also gave $2.5 million to SunPower Corp.

Romney and Perry are far from the only Republic governors who have overseen the use of taxpayer funds to invest in renewable energy companies. Under the leadership of Gov. Jan Brewer, Arizona has been offering a Renewable Energy Tax Incentive. In her State of the State speech last year, Brewer said she was “proud to announce the arrival of Suntech Power Holdings. It’s the first solar company to come to Arizona because of the renewable energy tax incentive program I signed into law in June.”

Recently, Mississippi Gov. Haley Barbour, who flirted with a run for the Republican Presidential nomination earlier this year, supported and then signed legislation that will provide a whopping $75 million subsidy for Calisolar, a California company that plans to produce solar cells in the Magnolia State. The law also includes $100 million in financial assistance for biomass energy company HCL CleanTech.

The fact that Republicans are disingenuous in their criticism of the Obama Administration’s renewable energy efforts does not mean that green subsidies at the federal or state level are necessarily a good thing. While the need to develop alternative energy systems is an urgent task for the nation, it does not make sense to repeat the mistakes of conventional economic development policy in helping the green sector.

That means, for one thing, not simply throwing money (including tax breaks and loan guarantees) at companies simply because they are making green promises. In many cases it may make more sense to let the private sector finance new renewable energy ventures and save public funds for energy infrastructure investments and for worker training in green occupations. Adopting aggressive renewable portfolio standards is also a key role for government to play.

In cases where some direct government assistance makes sense, public officials need to perform due diligence on the recipient company and impose strong safeguards, including job quality standards and clawbacks if the firm does not live up to its job-creation obligations.

As the Solyndra and Evergreen episodes show, the fact that corporations are focused on renewable energy does not make them angels. They may still be incompetent or engage in the same types of corporate misconduct seen among their conventional counterparts. Green business must also be accountable business.

Green Jobs Blues

President Obama’s grand plan for job creation has not yet been released but it is already struggling. The capitulation to Speaker John Boehner on the scheduling of Obama’s speech to Congress about the plan is a sign of things to come.

Yet perhaps even more troubling is the announcement by a company that served as a showcase for the administration’s campaign to promote jobs in renewable energy that it is shutting down, sticking taxpayers with the bill for $535 million in federal loan guarantees. Solar panel maker Solyndra’s decision to close its manufacturing plant in California and file for bankruptcy will put more than 1,100 people out of work.

Conservatives are having a field day arguing that Solyndra’s demise illustrates the folly of government involvement in the market. It is hilarious to hear many of the same lawmakers who refuse to end subsidies to the ethanol industry and tax breaks for Big Oil get indignant about assistance to wind and solar companies.

It is also amusing to see Republicans try to turn the Solyndra debacle into a story about Obama Administration stimulus cronyism. Solyndra was approved for loan guarantees in 2007 by the Bush Energy Department based on the Energy Policy Act passed by Congress in 2005, though funding for the program was not appropriated until the 2009 Recovery Act.

The real issue is why Solyndra, even with the loan guarantees, was not able to succeed in a market that is supposed to be the wave of the future. And it’s not just an issue of this one company. Evergreen Solar, which received more than $40 million in state government subsidies in Massachusetts, filed for bankruptcy recently. Other U.S. renewable energy firms are also facing difficulties.

Rather than simply debating this country’s half-hearted industrial policy, more attention should be paid to the failures of the companies themselves. U.S. solar panel producers, for instance, were slow to get started and allowed foreign competitors to gain a strong foothold in the international market.

It is customary for firms such as Solyndra and Evergreen to cite low-cost producers in China as a key reason for their plight. What the U.S. renewable energy manufacturers fail to mention is that some of them helped develop the Chinese solar industry by locating some of their own facilities in that country. At the same time, companies like First Solar and SunPower Corporation have intensified global cost competition by building plants in other cheap-labor havens such as Malaysia and the Philippines.

Some European companies have shown it is possible to compete without depending on low wages offshore. Germany’s SolarWorld, which is in the top tier of global producers, does most of its manufacturing in its home country and in the United States (including a plant in Oregon that has received state subsidies). In June it sold off its share in a joint venture in South Korea, saying that it had “decided in favor of production at locations with the highest quality, environmental and social standards.” Imagine a major U.S. corporation saying that.

The fact that many U.S. companies—green or otherwise—cannot or will not compete by adopting a high-road approach does not bode well for the country’s future. As long as wages remain low or stagnant, the buying power of American workers will remain weak, and this in turn will keep the economy in a funk.

Compounding the problem is that, apart from a few tech sectors, innovation in American business seems to be limited to finding new ways to lower tax bills and increase executive compensation. A new report by the Institute for Policy Studies does a good job of linking the two, showing that numerous large corporations are now remunerating their CEOs more each year than the firms are paying in federal income taxes. Many of these same companies are not hiring in the U.S., preferring to rely instead on those offshore labor havens and extracting more work out of their existing domestic employees.

This is the dilemma facing the job proposals of the Obama Administration and state governments: they all ultimately rely on action by corporations whose outlook these days is dominated by executive self-enrichment, tax dodging and labor exploitation—not the creation of quality jobs.  Happy Labor Day.

Striking Back at Verizon

As the U.S. economy teeters, most politicians and mainstream analysts have nothing to offer but the usual counter-productive agenda of reduced public spending, corporate tax cuts and weakening of government regulation of business.

Some of the only helpful initiatives are coming from an institution that much of the American public has been taught to despise: labor unions, especially aggressive ones like the Communications Workers of America.

The strike recently launched by CWA and the International Brotherhood of Electrical Workers against telecom giant Verizon Communications has significance that goes far beyond the terms of their contract negotiations. It is one of the only arenas in which an effort is being made to shore up rather than erode the living standards of American workers—living standards that are supposed to be the backbone of an economy that we are constantly told is based on consumer spending. Also adding to the importance of the walkout is that it is targeting an employer that is emblematic of much that is wrong with corporate America today.

That starts with the evolution of the company. Verizon started out as Bell Atlantic, one of the regional operating companies, or Baby Bells, that resulted from the 1984 dismantling of the old AT&T monopoly. Taking apart Ma Bell was supposed to beget a new era of competition in the telephone business, but instead, some of the stronger Baby Bells focused on acquiring their rivals. Bell Atlantic took over NYNEX in 1997, and a few years later it bought the large non-Bell local phone company GTE. Seeking to downplay its origins, the combined corporation adopted the portmanteau name Verizon, a combination of “veritas,” the Latin word for truth, and “horizon.”

Verizon is now one of two firms that dominate traditional phone service in the United States. The other is the new AT&T, the name taken by the other voracious former Baby Bell, SBC Communications, in 2005. In the end, the dismantling of Ma Bell simply replaced a monopoly with a duopoly.

This concentration of ownership has carried over into the wireless realm, which in the U.S. is now largely controlled by subsidiaries of Verizon and AT&T (Verizon Wireless is a joint venture with Britain’s Vodafone, which owns 45 percent).

Verizon has compounded the negative effects of its bloated market share by fighting the extension of union rights to its wireless operation. From the end of the Second World War to its break-up, the Bell System was strongly unionized, and phone company jobs were among the most secure and best-paying blue-collar positions in the private sector. Things became more contentious after the creation of the Baby Bells—there were widespread strikes in 1989 over company attempts to curtail healthcare benefits—but workers in the core wireline business retained their union protections.

Workers at Verizon Wireless, on the other hand, have been struggling for the past decade to achieve such protections. The company has employed all the usual dirty tricks of union-busting, including surveillance, misinformation and intimidation of activists. As American Rights at Work noted in a 2007 report, Verizon also shut down call centers where organizing was taking place and moved the operations to states with anti-union “right-to-work” laws. The National Labor Relations Board found the company guilty of violating federal labor law for disciplining a worker for union organizing.

Rather than improving working conditions at Verizon Wireless, Verizon seems intent on lowering those in its wireline business. The current strike was prompted by management demands for a long list of major contract concessions concerning pensions, sick leave, healthcare and job security. Verizon also wants to tie wages more closely to individual job performance, an arrangement that is typical of non-union workplaces. CWA and IBEW are accurately charging the company with trying to undo half a century of advances in worker rights.

Verizon’s position should be seen as an assault not only on its 45,000 unionized employees but on the entire economy. If management gets its way, some people will find themselves transferring from Verizon’s payroll to the unemployment rolls, and those who remain would have less disposable income.

Its labor practices are not the only way Verizon harms the economy. As Citizens for Tax Justice points out, Verizon is among those large companies that find ways to avoid paying their fair share of taxes. For the past two years, its federal tax rate has been negative, meaning that it is getting rebates from the Treasury—totaling more than $1 billion—despite enjoying profits of more than $10 billion in each of those years.

Verizon also plays the tax avoidance game at the state and local level. For example, it has received tens of millions in subsidies in New Jersey, and last year it pressured authorities in New York to award it more than $500 million in property tax abatements and other tax breaks for a data center it was planning to build near Niagara Falls. This was on top of $96 million in electricity subsidies. The company cancelled the plan after a lawsuit was filed by a local resident.

In addition to mistreating workers and taxpayers, Verizon has apparently found time to cheat its customers. Last year, Verizon Wireless had to pay a record $25 million to settle Federal Communications Commission charges that it charged 15 million cell phone customers unauthorized fees. The company also agreed to provide $52 million in refunds.

A sign seen on a picket line reads: VERIZON IS KILLING MIDDLE CLASS AMERICA. If this strike is successful, it will send a strong message to all corporate assassins that U.S. workers will not roll over and die.

The Forgotten Legacy of the Excess Profits Tax

Behind all the ideological posturing going on in Washington over the debt ceiling, there is a surprising amount of consensus on the wrongheaded proposition that corporations need more tax relief.

The bipartisan Gang of Six plan that has recently been at the center of attention provides for the reduction of the statutory corporate tax rate from 35 percent down to as low as 23 percent. It also calls for moving to a “competitive territorial tax system,” which, as Citizens for Tax Justice points out, would make it even easier for companies to exploit offshore tax havens. A reported new plan being discussed by President Obama and Speaker Boehner as this is being written would probably include something similar.

Corporate domination of our political discourse makes it all but impossible for national leaders to suggest that large companies, which have been enjoying abundant profits while much of the country suffers from high unemployment and other forms of economic distress, should be paying more, not less to keep the USA afloat. Behind many of the protestations against special tax breaks for the oil industry and ethanol producers are agendas that call for lowering the statutory corporate rate for all companies.

It wasn’t always this way.  The United States has a history, now largely forgotten, of imposing higher taxes on corporations during times of national emergencies. Excess profits taxes were imposed at various times to put a check on profiteering during wartime.

The first excess profits tax was enacted in 1917, less than a decade after the basic corporate income tax came into being. It remained in place through the World War I, and in 1919 President Wilson recommended that it be made part of the permanent tax system. Congress demurred, but the tax was not eliminated until 1921, well after the end of the war.

Interest in an excess profits tax was revived in the 1930s.The National Industrial Recovery Act of 1933 used a form of excess profits tax to prevent evasion of the declared-value capital stock tax. Later in the decade, as war seemed imminent, a broader based excess profits tax began to be discussed. In 1940 President Roosevelt, insisting that government should ensure that “a few do not gain from the sacrifices of many,” sent a message to Congress calling for a “steeply graduated excess-profits tax.”

There was little disagreement on the need for such a tax. The debate centered, instead, on how the levy would be calculated—especially the question of what base would be used to determine the excess. The tax remained in effect through 1945. Only five years later, Congress returned to an excess profits tax to help pay for the Korean War.

Writing in the Journal of Political Economy in 1951, economist George Lent wrote that the tax had “been accepted as an essential part of a broad system for the equitable distribution of the cost of defense.” Unfortunately, that acceptance turned out to be short-lived. The excess profits tax enacted in 1950 was terminated in 1953, and despite an ongoing Cold War and then large-scale intervention in Vietnam, corporations were no longer expected to shoulder a significant portion of U.S. military costs.

During the past decade the situation has grown even worse. Despite the existence of two expensive wars and a trend toward privatization of military functions that makes the conflicts extremely profitable to the private sector, no one talks of higher corporate taxes.  On the contrary, the demand for lowering those taxes has been relentless.

The justification for excess profits taxation need not be linked only to military costs and the profits of Pentagon contractors. Today we are seeing excessiveness of another kind in relation to corporate profits. Most large companies are enjoying bloated bottom lines by refusing to return their workforce back to pre-recession levels. They can do this because unemployment is high, unions are weak and those with jobs find it difficult to resist demands for intensified workloads.

Along with the wars in Iraq and Afghanistan, there is a war at home—a war against workers that amounts to a form of profiteering. If the leaders of this country were not in thrall to corporations, we would be talking about an excess profits tax focused on employers that keep their staffing levels artificially low.

It could very well turn out that higher, not lower taxes are what would induce companies to begin hiring again. Those companies which resist would at least be helping reduce the national deficit rather than further enriching the investor class.

Amazon’s Anti-Tax Crusade

When large companies complain about taxes, they are usually talking about levies they have to pay out of their own deep pockets. Amazon.com is engaged in a battle to make it easier for its customers to avoid paying their taxes – their sales tax, that is, on what they purchase from the giant online retailer.

The outcome of this dispute will have broad consequences for a U.S. economy in which state and local governments face ongoing revenue shortfalls and commerce increasingly takes place online.

At the center of the dispute is the question of whether web-based retailers such as Amazon have the same obligation as brick-and-mortar stores to collect sales tax from their customers. Sales taxes are essential to the finances of state governments, accounting for nearly half of all their tax revenue. Widespread corporate income tax dodging and business property tax breaks have made the sales levy all the more important.

While traditional retailers have no choice about collecting the sales tax mandated by state and local authorities, the story is more complicated when it comes to e-commerce. A 1992 U.S. Supreme Court opinion barred states from requiring catalogue and internet sellers to collect sales tax unless they had a physical presence (“nexus” in legalese) such as a distribution center in the customer’s state. The argument was that forcing merchants to keep track of varying tax rates across thousands of jurisdictions was too onerous.

That ruling, which was handed down before Amazon.com was founded, did not mean that online transactions were tax-free. Many states require residents to voluntarily report their online purchases and pay taxes directly to the government. Most people are unaware of these rules or choose to ignore them. The failure of online retailers to collect taxes thus results in revenue losses that a University of Tennessee study estimates will reach $11 billion next year.

The Supreme Court hinted that a solution to the problem should come in the form of federal legislation sanctioning sales tax collection on remote transactions along with efforts by the states to streamline and simplify their sales tax practices. Progress on these fronts has been slow.

As people spend more and more of their money in cyberspace, some states feel they cannot wait. They have been devising creative ways to establish nexus. New York led the way in 2008 with legislation, dubbed the “Amazon law,” that requires online retailers to collect taxes if they have affiliate websites in the state promoting sales on their behalf. A few other states followed suit in 2009 and 2010.

This year the issue has mushroomed. More than a dozen state legislatures have taken up the matter, and Amazon laws have been enacted in Illinois, Connecticut and California. Amazon is furious. It responds to the new laws by vowing to terminate its relationship with affiliates in the affected states and by threatening legal action.

The company’s aversion to sales tax collection is so strong that it carries over into states in which it should have a nexus obligation. As Michael Mazerov of the Center on Budget and Policy Priorities points out, Amazon has put ownership of its physical facilities in the hands of subsidiaries and then claimed there was no basis for the parent company to collect taxes. When that has not worked, the company has sought special exemptions by what amounts to bribing the state with promises of job creation. Such an effort just failed in Texas, but Amazon prevailed in a drawn-out dispute in South Carolina.

In early June, South Carolina legislators reversed themselves and approved a bill that gives Amazon a five-year exemption from its sales tax collection duties. The move came after the company upped to 2,000 the number of jobs it promised to create in the state in the course of building a $125 million distribution center.  Amazon had also been offered subsidies such as income tax credits and property tax breaks, but it is significant that the sales tax collection issue was the deal breaker for the company.

Despite all evidence to the contrary, Amazon claims that its opposition to collecting sales tax is not driven by a desire to gain a price advantage over its competitors. Instead, the company insists that collecting sales tax in every state would be excessively burdensome.

It would be one thing for that claim to be made by a mom-and-pop operation. But this is Amazon—the online service that not only sells its customers a vast array of merchandise but also anticipates what they may want to purchase by offering an endless stream of targeted recommendations and by listing what customers who bought a particular item also purchased.

A company that has the computing power to predict the consuming habits of each of its tens of millions of customers could easily handle a few thousand different sales tax rates.

At stake are not only Amazon’s convenience and state revenue loss. By taking a hard line on sales tax collection, Amazon is contributing to the anti-tax sentiment that is doing so much harm to the country. Everyone likes a bargain, but it should not come at the expense of revenues needed to sustain vital public services.

Corporate America’s Paid Holiday

According to the old saying, insanity can be defined as doing the same thing repeatedly and expecting different results. But what do you call corporate executives who want the country to adopt a business tax policy that has failed miserably in the past? Crazy like a fox.

Such self-serving fiscal delusion is on full display in the current push for a “repatriation holiday.” A slew of major U.S.-based corporations are proposing that they be allowed to bring home many billions of dollars in largely untaxed overseas profits and, for a limited time, pay only a fraction of the statutory rate. According to a corporate front group called Working to Invest Now in America, or WinAmerica, this is “a common sense solution that will immediately inject up to $1 trillion into our economy and provide businesses with the security and certainty they need to help get Americans back to work.”

The group should really be called ConAmerica. The corporate titans are proposing a scheme that was tried and failed miserably only a few years ago, not to mention the fact that it would reward big business for practices that already deprive the country of huge amounts of tax revenue and countless jobs.

First, a bit of background. Although the U.S. Internal Revenue Code is designed to tax corporations on their worldwide profits, it contains a provision that allows companies to defer paying domestic taxes on overseas earnings as long as they stay with a firm’s foreign affiliates.

That may sound reasonable to some, but what corporate giants designate as overseas profits actually includes disguised domestic earnings. That’s because corporate tax dodging frequently takes the form of accounting gimmicks that shift reported earnings to subsidiaries in tax haven countries like the Cayman Islands and Bermuda.

This is done in a variety of ways. A company may transfer ownership of valuable patents and trademarks to a tax haven subsidiary, which then collects royalties from other parts of the company. Earnings stripping is a similar ploy that involves bogus interest payments. And then there’s the big daddy of multinational tax schemes: transfer pricing. This is the practice of exchanging goods and services among parts of a corporation at rates that have little relation to real costs.

The objective of all these tricks is to maximize reported income in countries that subject profits to minimum taxation—or none at all. Thanks to the deferral rule, a lot less is paid to Uncle Sam. It is estimated that transfer pricing costs the U.S. Treasury more than $28 billion a year.

Having engaged in this brazen tax dodging, corporations now want the right to bring the profits back home and get another tax break through the repatriation holiday. Their complaints about the need from relief from U.S. tax rates sound a lot like those of the proverbial murder who kills his parents and then pleads for sympathy as an orphan.

What makes the chutzpah quotient of the repatriation holiday advocates even higher is that they are promoting the idea in the face of documented evidence of its ineffectiveness. In 2004 a similar big business campaign succeeded in getting Congress to enact a repatriation holiday that brought the statutory tax rate on the returning profits down to 5.25 percent for the following year only. The plan was dressed up as the Homeland Investment Act, which was part of the American Jobs Creation Act.

The 2005 tax holiday was hailed as a success by corporate apologists for repatriating some $312 billion in profits for more than 800 large companies led by pharmaceutical giants Pfizer, Merck and Eli Lilly.

What they don’t emphasize is that the plan was a dismal failure in its stated purpose of generating jobs and investment in the United States. This should not have come as a complete surprise, since Congress allowed companies to use the repatriated profits for other purposes such as acquisitions and repayment of debt. Another factor was the old problem of the fungibility of money.

According to an analysis produced for the National Bureau of Economic Research, the 2005 repatriation holiday did not lead to an increase in domestic investment, domestic employment or R&D spending. The biggest impact, the report found, was an increase in stock buybacks by corporations, which was not one of the intended purposes of the legislation.

In other words, the tax holiday was a scam. Instead of stimulating job growth, it served as yet another way for large corporations to continue shrinking their contribution to the costs of running the U.S. government that serves them so well. In fact, some of the companies that benefited most from the holiday—such as Merck—carried out large-scale layoffs of U.S. workers during the time they were bringing those profits home.

Six years later, the same misleading claims are being made for repeating the practice that did so little good. What makes this especially frustrating is that it is taking place not long after Barack Obama made the issue of deferred taxes an issue in his presidential election campaign and then sought to increase taxation of foreign profits during his first year in office.  Those plans have been forgotten, and now the repatriation holiday proponents are riding high, despite estimates that the scheme would result in a loss of $78 billion in federal revenues over the next decade.

Fortunately, not everyone is being taken in by WinAmerica. Along with stalwart critics such as Citizens for Tax Justice—which calls the idea “amnesty for corporate tax dodgers”—the repatriation holiday is being attacked by newer groups such as US Uncut, whose main target is WinAmerica ringleader Apple Inc.

One of US Uncut’s slogans is “Tax Dodging. Is there an app for that?” Actually, no app is necessary as long as Congress goes on buying the tax-break snake oil of Corporate America.

Corporate Taxes and Corporate Power

CTJ's 1985 report

In his 2009 utopian novel Only the Super-Rich Can Save Us, Ralph Nader conjures up a scenario in which a group of enlightened retired U.S. billionaires spark a populist uprising against excessive corporate power. One of the prime issues in the revolt is widespread tax dodging by big business, aided by the various forms of corporate welfare inserted in the tax code by compliant members of Congress.

Among the real-life characters in Nader’s fantasy is Bob McIntyre (misspelled as MacIntyre), head of Citizens for Tax Justice. For more than 30 years, CTJ has been shining a light on the inequities in the U.S. tax system. During the 1980s CTJ issued a series of reports that documented the disastrous consequences of the Reagan business tax cuts and paved the way for the Tax Reform Act of 1986. That law closed many of the loopholes and cracked down on tax shelters, reversing the precipitous decline in corporate tax payments—until George W. Bush came along.

Alas, Nader’s vision has not come to pass, though a funhouse-mirror version of it can be seen in the pseudo-populist Tea Party movement instigated by some very different billionaires, the rightwing Koch Brothers. Yet McIntyre and CTJ are still on the scene and re-fighting the battles of the 1980s. Now, as then, CTJ stands out for naming names—listing the specific large corporations that pay little or no federal income taxes.

CTJ has just released a preview of its new study of corporate tax avoidance that identifies a dozen major companies—including the likes of General Electric, DuPont and Wells Fargo—that together paid less than nothing in federal income taxes over the past three years. The dirty dozen had total U.S. pretax profits of $171 billion for the period but had a combined effective tax rate of negative 1.5 percent.

Had these companies paid the full 35 percent statutory corporate rate, CTJ notes, their combined tax bill would have been about $60 billion. Instead, they got $2.5 billion from Uncle Sam. The $62 billion difference exacerbated the country’s budget deficits and national debt.

It would be comforting to imagine that brazen corporate tax avoidance is leading us to a replay of the backlash of 1986, with changes to the tax code that force big business to pay something closer to its fair share of the costs of running a government that treats it so well.

Unfortunately, that now seems as unlikely as Nader’s rebellion of the billionaires—and the reason is not just the intransigence of Republicans. The Obama Administration has adopted the bizarre position that any revenue gains from the elimination of business tax subsidies should be used to fund new reductions in the statutory corporate tax rate, which virtually no large companies pay.

In other words, the debate over corporate tax reform within the Washington establishment is between the Obama Administration’s “revenue-neutral” approach and the desire of the Republicans to shrink corporate tax liability to a point at which it can be given the Grover Norquist drowning-in-the-bathtub treatment. Corporate taxes account for less than 9 percent of federal revenues, so we have already moved far in that direction.

CTJ, to its credit, is calling for a revenue-positive approach to corporate tax reform to help alleviate the country’s fiscal problems, as are other progressive groups such as the new US Uncut movement. But there are more fundamental reasons to make business pay more.

The windfall profits produced by tax dodging also serve to enhance the overall power of large corporations and make it easier for them to engage in anti-social behavior. It is telling that CTJ’s list of major tax avoiders includes several companies—including Boeing and Verizon—that are leading foes of unions and several others—including Exxon Mobil and American Electric Power—that are key environmental villains.

A fatter bottom line for such companies means they have more money to fight stricter regulation and consumer protection, more money to undermine labor organizing drives, more money for dubious mergers and acquisitions that reduce competition, more for lavish executive compensation packages, and of course, more for lobbying and public relations efforts to make sure that overall public policy continues to serve the needs of corporations above all else.

Restoring corporate tax payments to more appropriate levels will not by itself reform big business, but it would make it easier for the rest of us to accomplish that without waiting for a group of retired billionaires to come to the rescue.

The $100 Million Stickups

According to the FBI, the typical bank robber escapes with about $7,600. It would take more than 13,000 such capers to reach the amount that some individual corporations are netting in their own holdups, though of a legal variety.

This year has seen a series of cases in which large companies secure big subsidy packages by hinting that they may move their corporate headquarters to another state, and in several instances those packages have turned out to be worth an eye-popping $100 million.

The fact that state and local governments around the country continue to face severe budgetary shortfalls has not prevented them from offering—and companies from taking—these huge payoffs. Here are some new members of the $100 Million Club:

Motorola Mobility Holdings—one of the two spinoffs from the split-up of the old Motorola Inc. earlier this year—recently extracted $100 million in EDGE tax credits from Illinois as the price for keeping its headquarters and approximately 3,000 employees in the Chicago suburb of Libertyville. EDGE credits normally apply to corporate income tax payments, but the state legislature allowed the smart-phone company to keep employee income tax withholding payments instead. Motorola Mobility was awarded several million dollars more in job training and other grants.

When Panasonic Corporation of America let it be known it was considering moving its headquarters out of New Jersey, the state offered the company a tax credit worth just over $100 million to stay. But it couldn’t remain at its existing site in Secaucus. The Urban Transit Tax Credit required a relocation, so the state’s Economic Development Authority got the Japanese electronics firm to agree to move a few miles down the road to Newark. The arrangement was expected to provide a big boost in tax revenue for Newark (money in effect poached from Secaucus), but the struggling city for some reason decided it was necessary to give back a portion of that to Panasonic in the form of more subsidies, the amount of which has not yet been determined.

After raising the possibility of moving out of state in response to an increase of one half of one percent in local income taxes, American Greetings agreed in March to keep its corporate headquarters in northeast Ohio. All it took was a state package of grants, tax credits and low-interest loans worth an estimated $93 million over 15 years. Once the greeting card company settles on the exact site, it is likely to get additional local assistance that will put its total subsidies above $100 million.

A few weeks after the American Greetings deal, ATM manufacturer Diebold, which had made similar noises about a possible move to another state, was also induced to keep its headquarters in northeast Ohio. It, too, is slated to get total subsidies of about $100 million—$56 million in refundable tax credits from the state and anticipated local “incentives” of more than $40 million.

Sears Holdings could soon join the club as well. Actually, Sears is already a leader in it. Back in 1989 it got a subsidy package of $178 million for moving its headquarters from downtown Chicago to exurban Hoffman Estates, 29 miles away. The state and local tax subsidies from that deal are set to expire next year. Playing the we-might-move-out-of-state game, Sears has set off a frantic effort by Illinois officials to extend the company’s subsidies for another 15 years. No deal has yet been announced.

It is frustrating to see one company after another get away with job blackmail. If only we could get the FBI to take an interest in this kind of stickup.

Capping the Oil Profits Gusher

You know the gas price problem is getting bad when even leading Republicans need to make noise about petroleum industry tax breaks.

John Boehner caused a stir the other day when he seemed to be telling an interviewer from ABC News that he was in favor of cutting federal subsidies for the oil giants. “It’s certainly something we should be looking at,” he said.

My initial reaction was that a Boehner look-alike working with the Yes Men had made the remarkable statement. Alas, it turned out to be a tease or a case of temporary sanity, for Boehner’s people later clarified that the Speaker was not actually calling for reductions in the giveaways. Perhaps he meant to say that we should examine the subsidies to be sure they are high enough.

Before Boehner’s true position became clear, President Obama seized on the moment to remind Congress about the Administration’s proposal to do away with “unwarranted” oil industry tax breaks. Such a move would be welcome but far from adequate.

Consider the size of those tax breaks. The Administration’s 2012 budget estimates that the repeal of eight oil & gas tax preferences would save all of $3.5 billion in 2012. The amount would rise to $5.4 billion in 2013 and then fall to $4.6 billion by 2016. The total increase in federal revenues over five years would be only $23 billion.

Compare these amounts to the profits being reported by the U.S.-based oil supermajors. For 2010, Exxon Mobil alone posted total profits of $30 billion, up 58 percent from the year before. Chevron’s net income was $19 billion and that of ConocoPhillips $11 billion. This year those amounts are expected to soar again.

If the entire loss of tax breaks were to be shouldered by these three companies alone, their combined profits would sink by only a couple of percentage points.

Rather than simply eliminating some subsidies, now is the time to revive the push for a windfall profits tax. That will not be music to the ears of Obama, who had made the idea a centerpiece of his 2008 presidential campaign, only to drop it shortly after being elected. That plan was expected to collect $65 billion over five years—much more than the savings from eliminating current tax breaks—and the proceeds were meant to help people pay for higher energy costs, not to make a small dent in the national debt.

Corporate apologists say that the federal government has no reason to complain about galloping oil industry profits because it collects more in tax revenues. Unfortunately, that federal share has been shrinking. In 2008 Exxon Mobil paid about $3 billion to Uncle Sam on pretax U.S. earnings of $10.1 billion, or about 30 percent. Last year Exxon’s domestic federal tax rate was only 16 percent. The rates paid by Chevron and ConocoPhillips also fell sharply. Moreover, Exxon and Chevron pay meager amounts of state income tax.

Rather than mitigating the profits windfall, the tax system—as manipulated by the oil giants—is exacerbating the problem.

It’s difficult to believe, but an oil industry windfall profits tax was once part of the mainstream policy agenda, even in the Republican Party. In his 1975 State of the Union Address, President Ford promoted the idea to compensate for the elimination of controls on domestic oil prices. In 1980 Congress enacted such a tax (actually an excise tax on crude oil) that remained in place for eight years.

Conventional wisdom these days is that aggressive tax policies—not to mention price controls—are counter-productive. Yet even Big Oil seems somewhat uncomfortable about its good fortune.

The American Petroleum Institute issued a press release the other day that used an unusual argument to try to blunt popular anger over the industry’s embarrassment of riches. API touted a new study purporting to show that oil and gas stock holdings have been providing a big boost to public pension funds.

Those would be the same public pension funds that are said to be desperately underfunded because of shortfalls in, among other things, corporate tax payments by the likes of the oil giants. Rather than depending on a bit of indirect capital appreciation, we would be much better off if the petroleum industry paid higher federal and state tax rates, especially when oil prices—and thus profits—are going through the roof.