From Wisconsin Public Radio’s The Kathleen Dunn Show
By Richie Hobin
The Daily (3/16/16)
This week’s Podcast to Ponder is from Wisconsin Public Radio’s “The Kathleen Dunn Show” entitled “What are Corporate Inversions and How Do Companies Escape Paying Taxes?”. Kathleen has a conversation with David Cay Johnston who won a Pulitzer Prize in 2001 for enterprise reporting that uncovered loopholes and inequities in the U.S. tax code. Johnston authored “Free Lunch: How the Wealthiest American Enrich Themselves at Government Expense And Sticks You With The Bill.” You can access the podcast for streaming or download HERE.
Tax season can make Americans surly. Doing them, processing them, hoping for a return or dreading when you have to pay, makes tax season ripe for a nice fat headache between anyone’s ears. Nobody likes paying for a society, war machines, congress critter salaries, roads, schools and the running of the government. And if you are not super wealthy or a corporation it is a headache 99% of us have to deal with. There is a small fortunate few who can evade paying their fair share of taxes and, in fact, profit off of them. Corporations have the lucky mixture of wealth, lawyers, platoons of well-heeled lobbyists and know-how to avoid paying taxes to the tune of 2.1 trillion dollars they have in offshore, tax-dodging holding companies.
Multinational companies turn the burden of taxes into profit centers. You’d think it would make our collective headaches feel better that someone is getting out of paying taxes. It doesn’t. When Johnston warned listeners at the beginning of the program that if they take blood pressure medicine they may need to take two during this interview, he wasn’t kidding. Johnston’s message can turn your tax headache into a full-blown aneurysm when you realize the economy isn’t a level playing field. As Johnston states in the interview, “the rules of the economy have been rewritten to take from the many and further enrich the few.”
One of loopholes in the tax code Johnston describes is “Inversions.” An inversion is when a company moves its headquarters outside the United States for tax purposes while that company still runs and earns profit inside the United States. Johnston goes on to explain how he exposed these Inversions in 2001 with the Bermuda mail box trick, in which an American-based company pays the Bermuda government $26,000 for a mailbox and moves the company’s profits off shore paying their share of US taxies. For example, Apple has over $200 billion offshore and untaxable.
What was intriguing about this interview is that Johnston explains the early days of corporations and the difference between how domestic the corporate tax rate widely differs for multinational corporate tax rate. If an American Corporation does not keep its profits in a scheme described above, they pay the highest taxes in the world. But because of a 1986 law that exempts corporations from paying high taxes, due to the fact that their corporate headquarters are off-shore, actually profits from this unequal situation. We have smaller patriotic corporations, mostly family owned businesses, taking a bath with tax burden while gigantic multinational corporations having a tax free profit making party offshore. If you want to know how these companies are getting hidden subsides and charges themselves fees to get tax breaks to move money offshore, you should listen to the interview or perhaps take an aspirin.
The interview is breathtaking in how unequal and unfair the tax system is for ordinary Americans compared to wealthy corporations. One example Johnston gives of inequality is the statement that, “the bottom 90% Americans adjusted for inflation in 2013 made 300 dollars a year more than they did in 1967. That’s a 1% increase in almost 50 years.” Not much of raise when you consider everything else has gone up.
This means the rest of the wealth generated over the past 50 years has gone to the 1%. And Mr. Johnston makes it clear that it is government tax “policy” that allows this inequality to happen. This is a very informative if not frustrating interview to listen too. Mr. Johnston reminded me that corporations are amoral which I forget from time to time. I recommend this podcast if you are someone who wants to understand the unfairness in America’s tax system hopefully to pester you public representatives to change the tax codes. Of course, this interview won’t help that tax season headache you might be suffering from. Listening to this episode of the Kathleen Dun Show will probably make it worse.