Skip to main content
  1. News
  2. Politics
  3. Policy & Issues

Tax games of the oligopolists

See also

According to Bloomberg News, Caterpillar Inc. (NYSE: CAT) has been using a legal tax maneuver to avoid paying $2.4 billion in U.S. taxes. The company is based in Morton, Illinois (just outside Peoria), but uses a Swiss subsidiary to book taxable income. The Swiss tax rate of about four percent is significantly less than the U.S. marginal tax rate of 35 percent to which the company's taxable income would otherwise be exposed. No actual, significant production occurs in Switzerland.

The disclosure of this tax manuever comes on top of reports that some of the nation's largest high-tech companies—including Google, Apple, and others—use foreign corporate shells to protect profits from U.S. taxes. According to Bloomberg, these companies have $1.95 trillion off shore. That altogether staggering cache of cash will remain where it is until such time as the U.S. Congress approves a "tax holiday," as it has in the past, allowing the earnings to be repatriated with little or no tax incidence.

Notwithstanding the rather obviously outrageous aspect of this, a rapid capital influx of that magnitude might be an electrifying boost to the rather tepid pace of recovery the U.S. economy has experienced since the Great Recession. The evidence bolstering this justification is not good, though, given that the last tax holiday, in 2004 and 2005, was followed by companies killing off 600,000 jobs, according to CNBC, citing The Wall Street Journal.

The news concerning Caterpillar's tax dodge, coming only months after release of details about the legal tax dodges used by other giant American companies, adds considerable weight to the argument that the U.S. tax code is desperately in need of more than a tweak here and an adjustment there. That, however, will not happen.

Tax reform legislation that was proposed during the current Congress now sits quietly on the shelf, ignored by all but a few rabble-rousers in the House of Representatives. Hard-core, clear-the-rafters and chase-out-the-varmints tax overhaul would set off the Right-wing, low-tax crowd of panderers in Congress and would, more substantially, get corporate lobbyists moving on generous campaign contributions to both Democrats and Republicans who might otherwise consider doing something effective and dramatic.

If you are a typical American citizen angered by these corporate tax games, keep in mind that these tax strategies have nothing to do with your taxes. For your part, politicians will promise you more tax cuts offset by more spending cuts for welfare programs that benefit people who aren't like you. You will get yours.

You don't make anywhere near enough money to enter the world of exceedingly complicated tax avoidance strategies used by wealthy families and massive, powerful corporations. Consequently, you couldn't even afford the cream-of-the-crop, top-of-the-class lawyers and accountants who craft the off-shore shells, tax-loss carryforwards, and other paper-only legal constructs.

Moreover, you will not clean house in Congress and the White House as the voters did in 1932, when the shenanigans of the wealthy and their corporations had finally sent the American economy into a near-death spiral. Instead, you will vote for the institutional candidate offered by the Republicans or the equally vested candidate feted by the Democrats.

In either case, you will be voting for more of the same. As such, you will be voting to keep the country on track for another punishing round of real consequences. The only difference will be that, unlike the reparative, radical policy and legal overhauls of the 1930s instituted by Franklin Delano Roosevelt and his Congresses, you will be handed nothing but an even more authoritarian state that will solve the problems by using the tried-and-true combination of fear, surveillance, and the prospect of state violence to quiet you.

Welcome to the 21st Century. No problem will be too big to solve, provided you agree that the problem is being solved. If, on the other hand, you disagree, that means you are the problem. Enjoy your next tax cut, and please remember to vote for the pandering politician of your choice.

Advertisement