Taxes and democracy are two oft-maligned activities that Americans dearly depend on. “Indeed it has been said,” noted Winston Churchill, “that democracy is the worst form of government except all those other forms that have been tried from time to time.” He might just as easily have been talking about the responsibility of paying taxes.
Two years ago the Supreme Court’s misguided Citizens United decision struck down long-standing Congressional limits on the political power of large corporations by vastly expanding the legal metaphor that “corporations are people.” Now there is fresh evidence that corporate influence over Congress makes it easy for those same corporations to avoid their civic duty of paying taxes.
A new report identifies thirty Fortune 500 corporations that pay less in federal income taxes than they spend on federal lobbying.
You read that right. These companies – dubbed the “Dirty Thirty” – exploited loopholes in the tax code so aggressively that all but one of them enjoyed a negative tax rate over the three year period of the study, while together spending nearly half a billion dollars to lobby Congress on issues including tax policy. Instead of paying for the public structures such as roads, police and education which make their profits possible, they collected $10.6 billion in tax rebates from the federal government. Had these thirty companies paid the statutory 35 percent corporate tax rate, the Treasury would have collected an additional $67.9 billion.
Every dollar in taxes avoided by these Fortune 500 companies is a dollar that must be cut from public programs, added to the national debt, or paid in the form of higher taxes by ordinary taxpayers.
The companies in the Dirty Thirty include household names like General Electric, Verizon, Mattel, Wells Fargo, Dupont and FedEx. There’s no avoiding how the story at each of these companies represents a mockery to both our tax system and our democracy.
The tax data in the report comes from companies’ own Security and Exchange Commission filings, which also list some of their subsidiaries in offshore tax havens. By focusing their study only on corporations that reported profits across all three years, the authors ensure that the companies cannot credibly claim these findings merely reflect quirky tax timing or deferrals.
Taxation is like a canary in the coal mine for the post-Citizens United era. Tax legislation is particularly vulnerable to the influence of powerful corporations. Most Americans pay little attention to the arcane rules of corporate taxation. Although special tax giveaways have the same bottom-line effect on the budget as direct spending, they are subject to far less democratic oversight. And unlike direct spending proposals, special tax favors are usually not considered against competing spending proposals or with consideration of how other ordinary taxpayers must pick up the tab. Once tax giveaways are on the books, they usually don’t need to be reapproved each year the way budget allocations do. Instead they tend to remain on the books indefinitely unless lawmakers can be strongly nudged by public outrage to remove them.
Towards that end, the study, which is produced by the U.S. Public Interest Research Group and Citizens for Tax Justice, recommends a number of immediate reforms to close offshore tax loopholes and limit corporate money in elections. While working toward overturning the Citizens United decision, these are good steps toward taking back our democracy and our tax system.