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No two corporations follow the same exact tax-dodging strategies. To give a sense of the breadth of corporate tax-avoiding creativity, we are spotlighting a choice selection of the nation’s most aggressive corporate tax avoiders.
International Paper Company
Turning a tax boondoggle into personal gold
CEO compensation: $12.3 million
U.S. federal income taxes: $249 million refund
International Paper CEO John Faraci received a 75 percent pay hike in 2010. He pocketed $12.3 million.
Faraci owes his good fortune, in large part, to a wood pulp byproduct called “black liquor.” Paper mills have been using this byproduct as a fuel since the 1930s. But that didn’t stop International Paper from lobbying in Washington to have “black liquor” earmarked for subsidies and federal tax refunds designed to spur the development of entirely new biofuels.That lobbying would be successful — for International Paper.
How much has the company garnered from twisting the intent of the alternative fuel incentive? In 2009, this twisting handed the company a whopping $1.7 billion in cash and cut the International Paper tax bill by another $379 million. This windfall added up to nearly 9 percent of the firm’s annual global revenue. Last year, International Paper reported still another net $40 million tax benefit from the biofuel credit.
International Paper’s corporate board, naturally, cited the company’s strong cash flow as a rationale for Faraci’s generous compensation package.
Outraged? Sign our petition and share with your friends below.
September 6, 2011 · By Tiffany Williams
On September 28th, I am going to be participating in a delegation of women leaders who will be traveling from all around the country to Atlanta, Georgia. This is an action borne out of one of the projects I am co-coordinating with the National Domestic Workers Alliance, the National Asian Pacific American Women’s Forum, the National Day Laborer Organizing Network, and several partners on the ground in Atlanta. Our goal is to continue bringing a gender lens to immigration issues.
Not only are women victims of crime and violence becoming more reluctant to call the police for help, they are also being targeted for bearing children (so-called "anchor babies") and simply working to care for their families. A recent study from the American Psychological Association showed the traumatic impact of family separation due to deportation has long-lasting and multi-faceted negative effects on children. For the last 13 years, Break the Chain Campaign has focused on the human trafficking of housekeepers and nannies, but we were compelled to enter the world of immigration advocacy because of the chilling effect on police collaboration that is the result of draconian enforcement efforts. If we cannot trust law enforcement not to deport our undocumented clients (many of whom became undocumented as a result of escaping their traffickers), how can we go to them for help? Similarly, we care about this issue as a human rights issue – we believe that every human being deserves safety, respect, and the ability to provide for basic needs for herself and her family. The erosion of human rights, and the ability to claim them, feeds human trafficking.
While the Obama administration has recently announced that deportations will be halted for many vulnerable families, we believe that the problem is larger than anything that a temporary hold or selective enforcement of deportation could fix. We need to understand the inevitable realities of immigration on one hand, and our common humanity on the other hand. It is impossible to rest until our country regards no human being as "illegal," we all love our families, work and do whatever we need to do to support them, and deserve to be treated with respect and dignity. A political border does not define our humanity.
For that reason, on September 28th, our group of high-profile women (including Betty Gorman Robinson, Laura Flanders, Ai-jen Poo, and 20 other leaders) will give witness to the testimony of women and children in the area who have been affected by anti-immigrant actions/legislation, and the following day we will hold a press conference. We anticipate follow up events (teach-ins, legislative visits, etc.) in a few cities. The event will be similar to the sharing testimony/rally event held in Arizona in the wake of SB1070, which we called “Arizona Women and Children Rise.”
If you or your friends/colleagues/allies are going to be in the Atlanta area on September 29th, please save the date and join us at the press conference. Otherwise, join Break the Chain Campaign at the IPS office in October for a follow up event (details on all events to follow in the coming weeks!)
September 6, 2011 · By Sam Pizzigati
Sarah Anderson, a veteran analyst at the Institute for Policy Studies in Washington, D.C., has been the lead author of the Institute’s annual executive pay report ever since 1993.
On CEO pay, Anderson sighs, “I sometimes think I’ve seen everything.”
And then came the research for this year’s report — released last Wednesday — and the results floored even Anderson.
Last year, the Institute for Policy Studies researchers discovered, CEOs at 25 of America’s largest corporations — powerhouses that range from Boeing and Verizon to Prudential and G.E. — took home more in personal compensation than the companies they run paid Uncle Sam in federal corporate income tax.
In 2010, these 25 companies averaged a whopping $1.9 billion each in global profits. Yet they actually came out ahead last year at tax time. Uncle Sam owed them money, an average $304 million in tax refunds and credits.
The CEOs who call the shots at these 25 companies make up a quarter of 2010′s 100 highest-paid CEOs. Their average take-home last year: $16.7 million.
How could the companies these 25 CEOs rule be so profitable — and so generous to their top execs — yet end up paying Uncle Sam so precious little?
Giant corporations like these, explains IPS study co-author Chuck Collins, are essentially “rewarding CEOs for aggressive tax avoidance.”
That reality has caught the eye of Rep. Elijah Cummings, the top Democrat on the House Oversight and Government Reform Committee. Last week, at the release of the new IPS study, Cummings called for hearings to examine “why CEO pay and corporate profits are skyrocketing while worker pay stagnates.”
The new IPS report, Executive Excess 2011: The Massive CEO Rewards for Tax Dodging, puts numbers on this soaring and stagnation. Last year, the study documents, CEOs at America’s S&P top 500 corporations saw their average pay jump 27.8 percent. Average worker pay rose just 3.3 percent.
The aggressive tax dodging that’s enriching corporations and CEOs, the IPS analysts add, doesn’t actually break any laws. Corporate America has seen to that — by just as aggressively gaming the political system to stud the tax code with loophole after loophole.
In fact, 20 of the 25 major corporations that paid their CEO more than Uncle Sam last year, notes Executive Excess 2011, “also spent more on lobbying lawmakers than they paid in corporate taxes.” And 18 of the 25 “gave more to the political campaigns of their favorite candidates than they paid to the IRS in taxes.”
This corporate lobbying and campaign cash has, over the years, created a tax code that offers CEOs a wide array of tax-dodging options. Many involve tax havens. Of the 25 top firms that paid their CEOs more than Uncle Sam last year, Executive Excess points out, 18 sport tax haven subsidiaries.
The over 550 tax haven subsidiaries of these 18 firms make shifting profits offshore — and beyond the reach of federal tax collectors — almost effortless. One example of this effortlessness: the shell game known as “transfer pricing.”
To play this “transfer” game, a corporate chief typically hands a tax haven subsidiary control over the U.S.-based firm’s “intellectual property,” assets that might range from patents to logos. The shell company then charges the U.S.-based operation inflated royalties for the right to use this property.
The U.S.-based concern happily tallies these inflated royalty costs, adds them in with the company’s other regular expenses, and proceeds to tell the IRS that the company’s U.S. operations have lost money for the year. The resulting profits from all this scheming pile up, in turn, on the books of the tax haven subsidiary, where they face rock-bottom tax rates — or no taxes at all.
Last week’s IPS study drew extensive media coverage, from national dailies like the New York Times and Washington Post to top global news services. Reporters at many of these outlets asked the corporate giants the IPS study spotlights to defend themselves.
Some firms, like Bank of New York Mellon, offered no defense. Others, like Ameriprise and General Electric, argued they weren’t dodging taxes. They were merely “deferring” them.
The tax code does indeed let corporations “defer” taxes, a power the code does not grant to individual taxpayers. These deferrals, notes Executive Excess 2011 co-author Scott Klinger, amount to interest-free loans to corporations.
Even better — for corporations — the deferred taxes may go unpaid for decades. Taxes on earnings held offshore, for instance, do not come due until those earnings slide back into the United States. Adds Klinger: “If these funds are never brought home, the taxes are never paid.”
Verizon and eBay led the corporate pushback last week against the new IPS study. eBay charged that IPS had “misrepresented” the company’s tax situation. A Bloomberg reporter, in response, asked eBay and Verizon to disclose their exact 2010 federal tax return information. Both declined to make that disclosure.
Other reporters covering the corporate pushback told IPS that the corporate media relations officers that had contacted them couldn’t themselves explain what the numbers in the tax footnotes of their own corporate reports meant.
Corporations, IPS noted Friday in a reaction to the pushback, seem to complain “almost every time a story is written about a particular corporation’s tax position.” Yet these same corporations resist reforms that would require all companies to disclose clearer data on “what they actually pay in taxes.”
This year’s Institute for Policy Studies Executive Excess report offers outraged readers a guide to all the significant reform proposals — inside and outside Congress — on the tax and pay games CEOs play.
IPS has also created an action page online to help Americans push corporate tax and pay reform forward. And that reform, after this year’s Executive Excess, has seldom seemed more desperately needed.
“We have,” as the new 2011 Executive Excess sums up, “a corporate tax system today that works for top executives — and no one else.”
Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up at Inequality.Org to receive Too Much in your email inbox.
September 5, 2011 · By Emily Schwartz Greco
This week's OtherWords editorial features three op-eds that reflect on the 10th anniversary of the 9/11 terrorist attacks. John Feffer says al-Qaeda was already losing its primary battle by September 2011. J. Richard Cohen issues a warning about the consequences of depicting "Islam as a virulent political movement rather than a religion." And, Peter Hart laments that the mainstream U.S. media seems to accept "endless war" as a rational U.S. foreign policy. Get all this and more in your inbox by subscribing to our weekly newsletter. If you haven't signed up yet, please do.
- CEOs Rewarded for Corporate Tax Dodging / Chuck Collins
- 9/11 is No Excuse for Bashing Muslims / J. Richard Cohen
- 10 Years of 9/11 Wars is Enough / Peter Hart
- Al-Qaeda Lost the Battle Long Ago / John Feffer
- Apple's Steve Jobs: Not Quite Henry Ford / Donald Kaul
- Michigan Locals Fight for Democracy / Jim Hightower
- Big Tobacco Targets the Young and the Poor / William A. Collins
- High-Wire CEO / Khalil Bendib
September 4, 2011 · By Daphne Wysham
As a single mother whose life's work has largely focused on solving the climate crisis, I'm often in a quandary. How much should I share of the work I do on this issue — which overwhelms those rare adults who immerse themselves in the details with grief — with my 11-year-old son?
When I posed this question in an interview with NASA's top climate scientist, Dr. James Hansen, who often speaks of his grandchildren as his motivator for speaking out on climate change, he advised me that it's more important to let a child be a child. Let them experience the wonder and beauty of nature, not fear it, he said.
And so I was a bit perplexed as to what to tell my son as I prepared to get arrested for the first time in my life. It turned out I'd be joining over 1,000 people from around the United States and Canada in nonviolently protesting a pipeline that President Barack Obama is poised to approve.
This isn't just any pipeline: It is, as Dr. Hansen calls it, a pipeline that, if opened, would ignite the "carbon bomb," a move that would signal "game over" for the climate.
In the aftermath of Hurricane Irene, my son and I watched the movie Avatar on DVD (for the nth time). As it ended, I thought: This might be a good opportunity to explain my plans for that week.
"You know, this movie is very close to what's happening in Canada right now," I explained. "And it's one reason I'll be getting arrested this week."
As my son took in my explanation for my planned act of civil disobedience, he quickly concluded that he, too, wanted to be arrested. But, after some hours of contemplation, I had to reluctantly tell him no.
Why "reluctantly"? Because I felt I was denying my son the right to act, politically, on an issue that would very likely have a much larger impact on his life than on mine. He, far more than the adults who were weighing in, should have a vote on this issue. Yet he, and all our children, have little say on the world they'll inherit, one that may be changed utterly, in ways we can't even comprehend.
As I stood before the White House gates a few days later, listening to the police issue their warnings of our impending arrests to our group of over 100 demonstrators, I thought of what I would say as they carted me away — what cry I wanted the president to hear.
And I recalled the day Obama stood before the American people, in those days and months as BP's deepwater well billowed millions of barrels of oil from that horrifying wound in the Gulf of Mexico floor. I remembered him remarking that, yes, he was very concerned about the spill because, while he shaved one morning, his 11-year-old daughter Malia had asked him, "Did you plug the hole yet, Daddy?"
Children have a way of speaking to our hearts. And so, I mused, even if President Obama didn't hear the songs and the chants of the more than 1,000 people who were arrested over the course of two weeks, even if the prayers of religious leaders and Native American elders went unanswered, even if he didn't read the editorial opposing the Keystone XL pipeline in The New York Times, even if he ignored the advice of his very own EPA, perhaps, in this instance, Sasha or Malia might see us outside the White House gates, and ask him, "Did you stop the pipeline yet, Daddy?"
As the police handcuffed my hands behind me and led me off to a white school bus, I shouted: "For Sasha and Malia!"
I don't think Obama or his daughters heard me, I thought, as I watched my fellow protesters be cuffed, searched and photographed through the bus's caged windows. But perhaps, if we keep this up, they will.
Daphne Wysham is a fellow at the Institute for Policy Studies, co-director of the Sustainable Energy and Economy Network, and host of Earthbeat Radio. www.ips-dc.org