With the second anniversary approaching of the Supreme Court’s decision in the Citizens United case – which opened the floodgates to corporate spending on elections – it’s worth a look at whether playing in politics actually pays off for corporate interests. As it so happens, it does.
Between 2008 and 2010 at least thirty US corporations spent more to lobby congress than they paid in federal taxes over the same time period. Clearly, when it comes to politics, corporations really do spend money to make money.
In addition to the “Dirty Thirty”, 280 consistently profitable Fortune 500 companies paid about half the statutory corporate tax rate while spending $2 billion to lobby Congress on tax policy and other issues. Twenty-nine of these corporations actually received a net tax rebate simply by exploiting special provisions and loopholes in the tax code.
All told, the “Dirty Thirty” companies made $163.7 billion in profits while paying zero dollars in federal income taxes and collecting a total of $10.6 billion in various tax rebates. Meanwhile, they collectively spent $475.7 million in lobbying expenses for the three year period. Mattel, a California based company, spent $800,000 on lobbyists and was rewarded with $366 million in subsidies.
One of the most egregious ways these corporations skirt their taxes is by shifting profits legitimately earned in America to offshore tax havens, where they are subject to little, if any taxes. At least 22 of the thirty companies studied had subsidiaries in tax haven countries. Wells Fargo, another California based company, has 58 tax haven subsidiaries.
The solution to closing offshore tax havens is simple. Congress should end the rule that allows U.S. corporations to “defer” U.S. taxes on their offshore profits. “Deferral” of U.S. taxes on these profits is often more like a blanket tax exemption for any U.S. profits that are dressed up as “foreign” profits using myriad accounting gimmicks. Failing that key reform, there are some other steps that Congress can take that will lessen, if not eliminate, the problems associated with corporations shifting their profits to offshore tax havens:
– Treating the profits of publicly traded “foreign” corporations that are managed and controlled in the U.S. as domestic corporations for income tax purposes.
– Requiring full and honest reporting by ending the ability of multi-national corporations to hide the identity of their owners and the origins of their profits behind layers of shell companies and requiring a full reporting of profits, country by country.
– Closing the loophole that allows foreign subsidiaries of U.S. companies to deposit profits in U.S. financial institutions, thereby benefiting from the stability of the dollar while skipping out on U.S. taxes.
The data show that corporate power and influence was already on full display when it comes to our tax code, which is riddled with special carve outs and loopholes won through decades of corporate lobbying. This is just one of a thousand reasons why, with one of the most expensive elections in history on the horizon, we need bold action from both the states and the federal government to end corporate influence in our elections.
The Supreme Court needs to reverse its decision to clarify that when our founding fathers wrote “of the people, by the people, and for the people” they did not mean “of the corporations, by the corporations, and for the corporations.”