Bloomberg reported today that Goldman Sachs, which received $10 billion in loan guarantees from U.S. taxpayers earlier this year, will pay just 1 percent in taxes on 2008 profits. In 2007, they paid 34.1 percent.
Maybe their operations in low-tax countries suddenly became very profitable. Maybe they used their fourth quarter losses and accumulated tax credits appropriately to decrease their overall tax burden in tough economic times (this year, Goldman Sachs posted its first quarterly losses since going public, though its annual profits were positive).
Or maybe it’s just another troubling example of huge companies using shelters and loopholes to wriggle out of tax obligations.
Goldman’s financial statements say that this lower rate came partially from changes in the “geographic earnings mix.” Robert Willens, CEO of a tax and accounting advisory firm, told Bloomberg that this meant “they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions.”
A recent GAO report found that between 1998 and 2005, by “about two-thirds of corporations operating in the United States did not pay taxes,” either through loopholes and shelters or by incorporating as tax-exempt entities. The United States actually collects much less revenue than its 35 percent statutory rate would suggest because of these tax loopholes, shelters, and giveaways that minimize, or completely eliminate corporate taxes.
Meanwhile, President Bush’s IRS has recently pushed through a series of rule changes that are “unusually aggressive” in lowering corporate taxes, “going above and beyond what has been allowed in the past.”
For bail-out thirsty banks, the excessive income sheltering is a bit unseemly. As U.S. Representative Lloyd Doggett (D-TX) explained, “with the right hand out begging for bailout money, the left is hiding it offshore.”