From a purely economic standpoint, the holiday season is a big boon for retailers and manufacturers who wait all year for their products to fly off the shelves on black Friday and the month leading up to Christmas and the New Year.
But where's all that money we spend actually ending up? It's not going to taxes, and it's not circulating through the American economy. No, because companies like Apple, General Electric, Boeing and Verizon don't pay much in taxes relative to their earnings, at least not here in America. Take a look as 60 Minutes' Charlie Rose pressed Apple CEO Tim Cook on the issue. That last sentence from Cook is really strange, because it's technically true, but it's beside the point.
The real question isn't whether Apple "pays what it owes", the real question is whether Apple is hiding massive amounts of profit offshore so that their CPAs can calculate that Apple owes less than it really should. As Charlie Rose pointed out, Congressional and independent probes have shown that that's exactly what Apple is doing.
And they're making a killing by doing it, the Senate Permanent Subcommittee on Investigations found that Apple avoided paying 9 billion dollars in US taxes. SEC filings show that Apple holds over $181 billion in offshore profits, more than any other US company, and they would owe roughly a third of that, about 60 billion dollars, if they tried to bring the money back into the United States. But it's not just Apple, it's pretty much all of the biggest corporations on the Fortune 500.
According to research done by Citizens for Tax Justice and the US Public Interest Research Group Education Fund -- the 500 largest American companies hold more than $2.1 trillion of accumulated profits offshore, just to avoid supporting America by paying the US taxes they should.
The same research shows that they would collectively owe more than $620 billion if they decided to bring that money back home. One thing that pretty much every presidential candidate points out as a problem, even if they disagree about what needs to be done about it, is the fact that companies are dodging our taxes and storing their massive profits overseas.
In 1952, Corporate Income Taxes made up 32% of Federal Revenue, today those taxes make up closer to 10% of federal revenue.
And you and I personally are making up the difference. Payroll taxes have increased as a portion of federal revenue by more than corporate income taxes have decreased. In the 1950s, payroll taxes only made up about 10% of federal revenue, and now they provide roughly 40% of what it costs to run our government and keep our streets paved. That's right, the richest companies are hiding TRILLIONS of dollars overseas, and the average working American is paying the difference in taxes.
According to Americans for Tax Fairness and Citizens for Tax Justice, companies like General Electric, Boeing, Verizon and 23 other firms paid zero, none, zilch, in federal income taxes between 2008 and 2012. That's right, according to that research, for four years, 26 of the most profitable companies that the world has ever seen paid nothing in taxes. And 111 other firms paid nothing in at least one of those years. Americans for Tax Fairness and Citizens for Tax Justice also noted that 288 other Fortune 500 firms only paid a tax rate of 19.4%.
To put that in perspective, that's in the neighborhood of what a single person who earns 30,000 dollars a year has to pay on his or her income. According to Citizens for Tax Justice, at least 358 companies on the Fortune 500 were operating subsidiaries in tax havens at the end of 2014, a strategy that if you or I tried, we'd end up in jail. And as Vermont Senator and Democratic Presidential hopeful Bernie Sanders has been pointing out for years, some of those companies even end up getting rebates from the government.
Which means that your tax dollars are not just paying to make up the loss in federal revenue that these giant corporations aren't paying, it means that your tax dollars are actually being used to subsidize those corporations that aren't paying taxes.
Over the last 60 years, and on steroids since the advent of Reaganomics, our tax code has created a massive redistribution of wealth from average working people into the offshore corporate bank accounts both these companies and many of their senior executives and large stockholders. Tim Cook probably isn't evil, and he didn't even really lie to Charlie Rose, Apple pays what it technically owes year to year. The problem is, thanks to corporate shell games and an easily exploited corporate tax code, Apple and America's other largest corporations simply don't owe, and thus, don't pay, as much as they should.
Which is why it's time to close corporate loopholes to make it harder, and more expensive, for companies to dodge U.S. taxes and offshore their profits.
You can find Thom's previous editions here.
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