Outraged by a new report about America’s largest corporations dodging their taxes, small business owners are orchestrating a new campaign to pressure the congressional super committee into delivering a legislative fix.
Twenty-five companies, led by Wells Fargo, AT&T, and Verizon, enjoyed a combined $114.8 billion in tax breaks from 2008 to 2010, according to a joint study by Citizens for Tax Justice and the Institute on Taxation and Economic Policy released Thursday. Of 280 Fortune 500 companies the report examined, analysts detailed a combined $222.7 billion in tax subsidies.
Wells Fargo collected $681 million from taxpayers after making $49.3 billion in profits in 2008-10. Verizon Communications earned $32.5 billion over the same period, but got an extra $951 million back from taxpayers.
Wells Fargo told The Huffington Post the data in the report was taken out of context, just as General Electric did on Thursday.
“The truth is that over the past 10 years Wells Fargo has paid more than $30 billion in income taxes to federal and state authorities and billions more in other taxes, and it fulfills all tax obligations,” Ancel Martinez, a spokesperson for Wells Fargo, said in a statement. “The years cited by the study were unusual for Wells Fargo, as results included significant losses as a consequence of its acquisition of Wachovia [12/31/08], which when realized reduced Wells Fargo’s taxable income.”
Martinez added Wells Fargo expects to pay significant income taxes in 2011.
But that’s not enough for some small business owners.
Jody Gorran, owner of Aquatherm Industries Inc., which employs 45 people in Lakewood, N.J. to manufacture solar panels, called it “unconscionable.” Gorran told HuffPost he felt like small businesses are bearing the brunt of the business tax burden “simply because a large corporation [has] potentially hundreds of accountants looking to minimize their tax liability.”
“It’s crazy, it’s like creating this false dichotomy as if it were reality [that taxes are too high],” Gorran said. “We pay that rate [35 percent] but no one else seems to bother.”
Business for Shared Prosperity, the Main Street Alliance and the American Sustainable Business Council sent a letter this week to super committee members charged with finding ways to reduce the deficit asking them to make the corporate income tax more equitable.
“The tax code should promote a level playing field between large multinational corporations and smaller, domestic businesses,” the letter read. “We need to close loopholes that allow large multinational corporations to avoid their tax obligations by shifting U.S. profits offshore, rather than rewarding firms engaging in this practice with either short or permanent tax holidays.”
“Big Business is getting away with taxation murder,” said Frank Knapp, president and CEO of the South Carolina Small Business Chamber of Commerce, in a statement. “They pay little or no taxes on massive U.S. profits and then have the gall to lobby for lowering the ‘high’ corporate tax rate. They’re even campaigning for a tax holiday to ‘repatriate’ profits they have stashed offshore to avoid taxes. Patriots pay their taxes; they don’t dodge them.”
The number of corporations paying no corporate income taxes has doubled since 2008, the group of tax policy think tanks found. And much to the chagrin of Occupy Wall Street protesters, the financial industry has taken $37.45 billion in tax subsidies from 2008 to 2010. When asked by The Huffington Post if this validates the protesters’ anger, Robert McIntyre, director for Citizens for Tax Justice said “I’m sure they’ll be interested in it.”
“There are vast disparities within industries and between industries. The playing field is clearly not level,” said Rebecca Wilkins, senior counsel for Citizens for Tax Justice.
When Ronald Reagan took office, corporations were dealing with a 14 percent effective tax rate. After Reagan signed tax reform into law in 1986, closing loopholes, he left office with an effective tax rate of 26.5 percent. Today, federal corporate taxes have dipped to an all-time low.
“We’re now in a situation much like we faced way back then,” McIntyre said, adding “This is just as unacceptable as it was back in the 1980s.”
House Republicans have been pushing to scale the corporate income tax rate from 35 percent to 25 percent. But by the Joint Taxation Committee’s calculations, the lowest revenue neutral number they could get to is 28 percent. Even that would cause difficulties.
“You want to have a lower tax rate from 35 percent down to 25 percent? Well, fine, but eliminate the loopholes. … This takes you into discussions into off-shoring of jobs and profits and the whole issue of repatriation,” Gorran said, referring to the corporate practice of stashing money abroad to avoid paying U.S. taxes.
Sen. Carl Levin (D-Mich.) studied through the Senate Joint Taxation Committee how much it would cost for a tax holiday to let companies bring their money back from off-shore accounts. They concluded it would cost taxpayers upwards of $80 billion to bring $4 billion in corporate cash currently stashed abroad back into the U.S.
“It is also unfair to the 96 or 97 percent of the companies that keep their operations here. For them to compete with companies who are paying a 5 percent tax rate as they move their jobs overseas while they’re paying up to a 35 percent corporate tax rate is unfair to the companies that stay,” Levin said in October. “So that kind of preference to the few at the expense of the many is one of the reason we’ve got so much frustration and so much anger in this country.”
A majority of layoffs in 2011 have come from state governments, which have been devastated by the lack of revenue. With this income off the table thanks to federal tax law, states lose the ability to tax it. And states have seen an unprecedented drop in revenue, with declines beyond what they saw during the Great Depression.
McIntyre said Citizens for Tax Justice and the Institute on Taxation and Economic Policy plan to issue a follow-up report that takes a closer look at state corporate income taxes.