Artful Dodging
Robert B. Reich is the Maurice B. Hexter Professor of Social and Economic Policy at Brandeis University, and was the Secretary of Labor under former President Bill Clinton.
Over the past four decades, the share of federal revenues coming from corporations has dropped by two-thirds, from 21 percent of government revenues in 1962 to only 7 percent last year. Who's made up the difference? You and me, of course.
America gasped when it learned that Enron didn't pay a dime of taxes on $2 billion of reported earnings between 1996 and 1999. Well, it turns out Enron wasn't exactly an exception. A new study by the General Accounting Office shows that between 1996 and 2000"years of record profits for American businesses"fully 60 percent of large corporations paid no taxes at all. And you can bet they haven't paid any taxes since.
What's going on? Three things. First, a growing industry of accountants, lawyers and tax advisers specializing in corporate tax avoidance"and pocketing up to a third of what they save their corporate clients. Talk about contingency fees. They're still at it"devising ever more complex schemes for sheltering corporate income"often involving foreign tax havens, offsetting taxable losses, dummy corporations and special-purpose entities.
Second, a growing cadre of Washington lobbyists and their congressional patrons who lard the tax code with special corporate tax breaks"amendments, exceptions, exemptions, sub-clauses"provisions often so complicated that nobody other than the lobbyists who insert them can find them.
And third, not nearly enough enforcement staff at the IRS"especially in light of how much time it takes to audit the tax returns of the corporations that are creating and exploiting every tax dodge imaginable. A new study by researchers at Syracuse University shows that the rate of IRS audits of America's 11,200 largest corporations has fallen by almost half over the last decade. The audit rate of corporations of all sizes was only 7.3 percent last year, down from almost 30 percent a decade ago.
What's the answer? Well, this one isn't complicated, folks. Bar tax advisers from pocketing a portion of the money they save their corporate clients. Simplify the tax code"get rid of all corporate welfare in the form of special tax breaks. And beef up IRS enforcement.
Easier said than done. You see, big corporations have lot of political clout. And you don't. That's why you're paying more in taxes, while big corporations are paying less ... and usually, nothing.
This commentary originally appeared on MarketplaceŽ, public radio's only daily business news program, on April 14, 2004. MarketplaceŽ is produced by Minnesota Public Radio and is heard on 322 public radio stations nationwide. More online at www.marketplace.org.
Click here to subscribe to our free e-mail dispatch and get the latest on what's new at TomPaine.com before everyone else! You can unsubscribe at any time and we will never distribute your information to any other entity.
Published: Apr 14 2004
