“A tax loophole is something that benefits the other guy. If it benefits you, it is tax reform.”
~ Russell B. Long
Democratic U.S. Senator Carl Levin from Michigan is upset with Caterpillar Tractor Company for avoiding $2.4 billion in taxes since 1999.
A Senate Permanent Subcommittee on Investigations report indicated that Caterpillar spent $55 million back in ’99 to hire an accounting and legal strike team to move its most profitable division to Switzerland to cut its U.S. tax bill.
“Caterpillar is an American success story that produces tremendous industrial machines,” Levin said yesterday. “But it’s also a member of the corporate profit-shifting club that has shifted billions of dollars in profits offshore to avoid paying U.S. taxes. This is a prime example of a tax avoidance strategy that has cost the U.S. Treasury billions of dollars.”
This tax strategy currently saves Caterpillar approximately $300 million a year in taxes that would otherwise wind up in the bowels of the U.S. Treasury.
Has Caterpillar broken any laws?
No . . . even Carl Levin admits that.
So, what does Caterpillar have to say?
Just what you would expect.
A well-crafted PR statement from July Lagacy, a vice-president in Caterpillar’s financial services division, reads as follows: “Caterpillar takes very seriously its obligations to follow tax law and pay what it owes. Caterpillar’s philosophy is that our business structure drives our tax structure. We comply with tax laws enacted by Congress, by the states and by all of the many jurisdictions in which we conduct business.”
Permit me to translate Mrs. Lagacy’s statement into plain English: “Caterpillar obeys tax laws.”
Okay . . . no one ever doubted that fact.
So, what is Carl’s complaint?
The honorable senator, who has complained about how corporate giants like Apple and Microsoft avoid taxes by taking advantage of the ins and outs of the current U.S. tax code, seems to be saying that Caterpillar somehow has a moral obligation to in essence give up $2.4 billion in profits because it is “an American success story”.
Is that a realistic expectation?
Is Senator Levin right?
Should ‘American success stories’ voluntarily pay more in taxes?
Or, should Senator Levin and his 99 colleagues in the United States Senate actually do the jobs for which they are very well paid, turn their backs on lobbyists, and rewrite the tax code?
What do you think?
Comments? Questions? Contact the author at: email@example.com or Tweet: @DavyZJones