Tuesday, May 27, 2003

The General hasn't blogged on transnational corporations much yet, but a new report by Associated Press on how deadbeat US firms going off-shore to avoid taxation are at the same time feeding at the federal government's contract trough provides a great opportunity.

You know the type. Stanley Works, that helpful company making all the power tools for Norm Abram to work his magic on PBS, tried to scurry "off-shore" -- to Bermuda in this case -- last year in an effort to flee its responsibilities to Connecticut and to US taxpayers. This is no repeat of the Baltimore Colts, however, packing up and moving in the middle of the night. No, you can 'move' to Bermuda or The Bahamas or The Caymans or any number of off-shore tax havens simply by setting up a folder in a filing cabinet in some name-plate bank in one of these tropical locales, call it "headquarters" and then go about business as usual. Stanley Works faced withering criticism over its plans to run off with its tail between its legs to Bermuda, but public outcry (including some helpful threats from Capitol Hill) kept the firm in Connecticut. Not so with most, who gladly take tail and run.

So its bad enough that these mega-corporations leave taxpayers holding the bag, but even worse when they "return" to the US and hit the taxpayers up again for work! The likes of Arthur Andersen, Foster Wheeler and Tyco made over $1 billion off of US taxpayers in 2002 despite their deadbeat status. A few folks in Washington thought this wasn't good policy and not once but twice passed Senate legislation to bar the O-so-patriotic Department of Homeland Security from doing business with such bad seeds, only to see the provisions expunged by House Republican leaders. I guess deadbeat off-shore corporations just love America more than all the suckers voting Republican.

This cycle is only a small part of the larger trend away from business taxation and towards individual taxation in the US. Citizens for Tax Justice crunched the numbers from the Congressional Budget Office and the Joint Committee on Taxation earlier this year and found that corporate income taxes as a percentage of GDP was down to 1.7% in 2001 and forecast to be a miniscule 1.3% in 2002. Back in the bad old days of economic growth and rising wages, corporate taxation as a % of GDP was around 4% (4.5% in the Truman and Eisenhower administrations, 3.7% under Kennedy and Johnson). No wonder the little guy is happy to collect another crumb or two off the master's tax-cut table. When big business refuses to pay, the middle class picks up the slack.

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