Last weekend, Americans across the country organized protests as part of a growing Main Street Movement to stand with organized labor and demand that the burden of deficit reduction not be placed solely on the backs of the middle class and public employees. US Uncut, modeled on UK-inspired demonstrations against tax dodgers, protested outside of multiple Bank of America branches, noting that BofA paid nothing in federal taxes in 2009.
BofA is hardly alone in this regard. Many companies — such as Boeing, General Electric, and Wells Fargo — have paid nothing to the federal treasury in recent years. Others — such as Google and Pfizer — have dramatically lowered their tax rate. Though the U.S. has a high statutory corporate tax rate, the effective tax rate that corporations actually pay is far lower, due to the myriad loopholes and credits in the corporate tax code, as well as the widespread sheltering of income in tax havens. As the Center on Budget and Policy Priorities found, “corporate tax revenues are now at historical lows as a share of the economy.”
Of course, corporations could not get away with this behavior if policymakers actually set and enforced rules that prevented it. But conservatives in Congress have gone to great lengths to allow tax avoidance to continue. Here are six ways in which conservatives aid and abet corporate tax avoidance:
— PROTECTING OFFSHORE DEFERRAL: The Obama administration and Senate Democrats last year proposed ending the practice of allowing corporations to claim domestic tax credits for profits they earn overseas while deferring tax payments on those profits. Republicans blocked the bill in the Senate. Corporations use offshore deferral to lower their effective tax rate by 20 points or more.
— SLASHING THE IRS BUDGET: In their proposed spending plan for the rest of the fiscal year, House Republicans suggested cutting the Internal Revenue Services’s budget by $600 million, even though “every dollar the Internal Revenue Service spends for audits, liens and seizing property from tax cheats brings in more than $10.” IRS Commissioner Doug Shulman said that a $600 million cut in this year’s budget “would result in the IRS collecting $4 billion less” through tax enforcement programs.
— PUSHING FREE TRADE WITH TAX HAVENS: Republicans in Congress have been pushing for rapid, uncritical ratifying of a free-trade pact with Panama, even though Panama has a notorious reputation as a tax haven. Before advancing the agreement, the Obama administration is pushing for “implementation of a tax information exchange agreement the two countries signed last year to address tax haven concerns.”
— ENACTING REPATRIATION HOLIDAYS: When corporations bring money they earn overseas back to the United States, they are required to pay the full statutory corporate tax rate. But in 2005, they were allowed to bring money back at a drastically lower rate (delivering a windfall to executives and none of the expected economic benefits). Both Republicans in Congress and conservative activists are pushing for yet another repatriation holiday.
— ENDORSING TAXPAYER GIVEAWAYS: House Republicans (joined by 13 Democrats) voted unanimously this week to preserve big oil subsidies worth billions of dollars a year, even as Big Oil companies continue to reap record profits. In fact, Republicans have continually protected billions in annual giveaways to Big Oil, allowing those corporate giants to pay nothing into the federal treasury.
— PUBLICLY DEFENDING THE DODGERS: Both House Ways and Means Chairman Dave Camp (R-MI) and Rep. Jeb Hensarling (R-TX) have said that widespread corporate tax evasion is a good reason to lower the statutory corporate tax rate. When asked by ThinkProgress if it was fair that Bank of America pays no federal corporate taxes, former governor and 2012 GOP presidential contender Tim Pawlenty replied “the corporate tax rate in America is too high.”
For more information, read today’s Progress Report, “Making Corporations Pay Their Fair Share.”