Region News

“Happy Hippos” Enjoy Tax Breaks
by Region 8 Webmaster John Davis

“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

With tax day being upon us, the phrase “we the people” takes on a more significant meaning, as “we the people” develop a greater understanding of what it takes to provide these things guaranteed in the preamble to the Constitution. Taxes are the fuel behind the machine that runs our government. In 2003, The White House pushed a round of “tax cuts” where 64% of the benefit went to the wealthiest 5%. Last year another round of tax cuts were passed that included $136 billion dollars to corporations.

In the 1940’s corporations represented 40% of the U.S. federal tax structure. Today that number is down to 7.5% and shrinking every year. A recent study by Citizens for Tax Justice and the affiliated Institute on Taxation and Economic Policy finds that in 2003 alone, 46 of the 275 companies it reviewed paid no taxes at all in 2003, despite reporting a total of $42.6 billion in pre-tax profits. Indeed, these companies received $5.4 billion in tax rebates that year. In the last three years, 82 of the country's largest profitable corporations paid no federal income tax for at least one year of the Bush administration's first three years, the study found.

The average Big Three union member is probably in the 25% tax bracket for federal income taxes. How does it make you feel to know that while 25 cents of every dollar you made went to federal taxes, that most of the major corporations paid no taxes at all? Not only did they pay no taxes, on average they received almost $120,000,000 in tax refunds. In 2002 a Wall Street Journal editorial stated that individuals making under $12,000 “lucky duckies” because they only pay 4% of their income in federal taxes. If those making under $12,000 are “lucky duckies” then I guess that makes corporations earning over a billion dollars a year and paying no taxes “happy hippos.”

The “Happy Hippos”
So just who are these “happy hippos”? Many corporations who are household names, that’s who. The top 25 corporate tax break recipients from 2001-2003 was led by General Electric, SBC Communications, Citigroup, IBM and Microsoft. With gasoline prices going through the roof, oil companies on the list included ExxonMobil and ConocoPhillips, both of whom saw record profits in 2003 and 2004. ExxonMobil turned a profit of $21,288,000,000 in 2003 and saw their federal income taxes cut by 57% or a reduction of over four billion dollars. From 2001-2003 General Electric saw tax breaks of $9.5 billion after profits of almost $37 billion.

So what keeps the “hippos happy”? It is a little game of tax evasion called “offshoring”. U.S. tax law requires U.S. companies to pay 35% on U.S. profits. In 2002 if this had been the case then corporations would have paid $308 billion in taxes, as opposed to their actual taxes of $136 billion. Imagine the good that could have been done in this country if corporations had actually paid the other $172 billion in taxes. What could our school systems, state hospitals and colleges and other relief agencies done with that money?
Corporations get around the tax laws by setting up off shore “subsidiaries” on their books to avoid taxes. They sell their “logo” to the subsidiary and then pay a high price to rent it back, deducting the rent as expense. They also may move money to the subsidiary and then “borrow” it back, deducting interest payments that are actually paid to their self. These subsidiaries can keep their ownership secret to prevent the government from knowing these companies are actually doing business with themselves. There are 55 “offshore” zones including Switzerland, the Caribbean, Monaco and others. Many banks in the “offshore” areas are owned by major international banks such as the Bank of New York and Citibank.

So why does the government tolerate this? Because powerful people and corporations benefit from it. When President Bush was on the Board of Harken Energy they set up an offshore network to cut taxes. When this action was questioned after Bush became President, White House spokesperson Dan Bartlett simply stated it was about “competitiveness.” When Vice-President Dick Cheney ran Halliburton they increased their subsidiaries from 9 to 44 to evade taxes. Halliburton taxes fell from $302 million in 1998 to less than zero, and they received $85 million tax rebate in 1999. Last year the Bush Administration passed another $19 billion in tax cuts for oil companies including Halliburton.

Now “family” corporations are trying to get in the act. Wal-Mart is currently heavy handing Congress to make permanent Bush’s 2002 dividend tax cut that is set to expire in 2009. Wal-Mart’s move to supplying non-American made products and reduction of standard of living for its employees have drove record profits and higher stock dividends. The dividend tax repeal saved the Walton family a reported $51 million in taxes this year alone.

The Walton Family holds the controlling interest in the company. Sam Walton's widow, Helen, inherited his shares after his 1992 death; she now owns about 8% of the company. She is 85 and has not fully recovered from an automobile accident five years ago.
Overall, Helen, daughter, Alice, and sons Jim, John and Rob, own nearly 40% of Wal-Mart. The children got their shares when the company started, allowing the family to defer billions in estate taxes at Walton's death. If estate taxes are not repealed, then the children would be forced to sell stock to cover the taxes should a family member die. This would loosen their grip on the companies and their employees who they work very hard at keep down.

Walton daughter Alice is a political force. Last year she poured $2.6 million in the political action group Progress for America, which spawned the Swift Boat group that dogged John Kerry’s service record. The Walton family also spent another $3.6 million on lobbying efforts last year and contributed over $1 million to the campaign of President Bush and several Congressional Republicans.

So, we - the people pay the taxes, for them –the “Happy Hippos” to benefit. Additionally, we - the people need to keep up with how are taxes are being collected and spent. Everyone should share in the burden to run the country and corporations shouldn’t be rewarded for beating the system and outsourcing jobs. Still, only we – the people can make a difference by supporting candidates that support we the people.