Rachel Maddow’s example on MSNBC was a simple enough explanation of how $21 billion dollars in annual tax revenue disappears from US coffers through legal loopholes that create tax shell corporations.
Mr. Bill Hypothetical, based in Texas, earns $50,000 annually and pays a 25% tax rate. KBR’s profits, also based in Texas (a military contractor and part of giant Halliburton), are subject to a 35% corporate tax rate. KBR though sets up an offshore shell subsidiary in the Cayman Islands and 0% of those profits are taxed.
It means Bill pays more in taxes than KBR.
This is the fundamental unfairness in the US Tax Code the Obama Administration aggressively wants to address and, unbelievably is what the Republicans now object to, saying attempts to fix the Tax Code is an unfair tax on companies. WTF? (There are days when being on Twitter and using its quaint language tricks creates advantages.)
The non-descript Ugland House in the Cayman Islands, a 5 story building that 18,857 businesses call their corporate HQs to make them look like they are headquartered there.
The Bahamas, Cayman Islands, Leichtenstein, Isle of Man, Guernsey, Gibraltar (more than a rock from Prudential days) and several other non-descript small countries have tax treaties that have been lucrative for many years providing some of the finest banking systems and white collar jobs around the world moving company money and profits from place to place with nary a trace.
What caused the uproar is that the banks taxpayers have bailed out to the tune of some $3 trillion US (also includes value of loans guaranteed) as part of the TARP program (Citi Group, Bank of America, Morgan Stanley) all have these tax shell subsidiaries to shield them from paying US corporate taxes (again, WTF?!?).
Bank of America has 115 foreign subsidiaries, Morgan 273, and Citi Group an eye-popping 427. So they seem to be benefiting from taxpayer largesse and stiffing us by not paying their tax dollars.
Republicans come down on the side of the scam. Minority Leader Mitch McConnell is against it and his Party of NO! followers are marching (for now) in lockstep like lemmings together over the cliff face. Obama’s message: companies used to dodging will now have to pay their taxes.
And more than just restricting tax havens, the Administration wants to do away with tax breaks for moving jobs overseas and provide tax breaks to companies to incentivize and create jobs at home. The President wants to give breaks to make the R&D tax credit permanent and incentivise folks to build jobs in the USA.
A very simple solution, alas lots of powerfully connected toes to tread upon along the way. Stop people from evading taxes and give back tax credits for R&D. Equalize the rates, use common sense rules and in order to take deductions from overseas you must declare (and pay taxes on) the repatriated profits.
Change the tax code, grow jobs at home and fulfill the dream talked about since JFK, closing the loopholes. You may ask why this has been so difficult or not happened in the past? Washington is controlled by powerful self interests and lobbyists. Like the force inside of Luke Sky Walker and Darth Vader, the dark side has always won.
Watch out though for Master Barry. The force is strong in this one. He uses it wisely.
Denis Campbell publishes the e-magazine UKProgressive.co.uk. He is an investigative journalist whose instincts lead to breaking political and business stories on everything from: election machine voting fraud, political party misdeeds and the scandal ridden Mind Body Spirit business that fleeces many of its followers. His work has appeared in many international news publications across all media platforms including: The BBC, The Huffington Post, Western Mail, The Guardian and PokerNews.com. He writes from very cool 600-acre farm high above the cliffs along Wales ‘ historic Glamorgan Heritage coast.