Look at this nice little infomercial “60 Minutes” did for the corporate elite this week!
Stahl was shown to a conference room they said Weatherford rents for board meetings, but Weatherford’s Houston office told us they never go there. So are these big companies pulling a fast one? Apparently not: under both Zug and U.S. tax laws, it’s perfectly legal to get the low tax rate even without a real presence in Zug. But Rep. Doggett wants to change that.
“You have a proposed legislation that a company will be taxed not based on where they file some pieces of paper, but where their decision makers and management actually resides and makes decisions,” Stahl remarked.
“Let them pay the same way that other Houston-based companies pay. And so if they have their management and control are there, they ought to be paying here in the United States. I think it’s fair,” Doggett argued.
We found that faced with the mere threat of Doggett’s legislation, Transocean and Weatherford both recently packed up their top brass and shipped them to Geneva.
We were told Transocean’s top ten executives live in the Geneva area, and work on the top two floors of a Geneva office building – everyone from the CEO to the chief financial officer, to the vice president of taxes.
They wouldn’t talk to us on camera, and neither would Weatherford. They also moved their CEO and CFO to Geneva. And so now we’re beginning to see a jobs exodus from the U.S. of top management.
“We can’t write a law their lawyers can’t get around. That’s the whole problem here,” Doggett explained.
“You’re in Congress. Why did Congress write these laws that allowed this to happen?” Stahl asked.
“There’s been a lot of arm twisting, a lot of effective lobbying here, and some really smart tax lawyers figuring out how to game the system with one shenanigan after the other,” the congressman replied.
“But are they shenanigans or is it the law?” Stahl asked.
“I think it was a shenanigan when some of these companies felt so strongly about America that they renounced their American citizenship and began saluting a foreign flag. They exploited a provision in our tax laws and moved offshore,” Doggett said.
But here’s the real point of the piece:
Economist Martin Sullivan told Congress these patent and profit transfers are accounting tricks that have allowed companies to chip away at the 35 percent and save tens of billions of dollars. He says that from 2007 to 2009 these maneuvers helped lower Pfizer’s average tax rate to 17 percent; Merck to 12.5 percent, and GE to just 3.6 percent.
“It’s really remarkable, as I review the data, is the consistency with which you see this phenomenon. The taxes are going down, the profits are shifting offshore at an accelerated rate over the last few years,” Sullivan said.
So now these companies have profits accumulating overseas in places like Zug.
If they bring the money home, it’s taxed the full 35 percent. If they leave it overseas, the IRS can’t touch it. In other words, the tax law all but forces companies to keep their money out of the country, indefinitely.
“We leave the money over there. I create jobs overseas; I acquire companies overseas; I build plants overseas; and I badly want to bring that money back,” John Chambers told Stahl.
Chambers told Stahl Cisco has almost $40 billion overseas that could be brought back to the U.S.
The total amount of money U.S. companies have trapped overseas is $1.2 trillion. Chambers is advocating for a one-time tax break to allow them to bring that money home at a rate of, say five percent. That would, he says, stimulate the economy and create jobs.
“What is your downside for money that isn’t going to come back anyhow? I’d say your downside is zero,” he told Stahl.
But the Obama administration opposed this idea. When it was tried in 2005, the Treasury did rake in billions of dollars, though very few jobs were created.
“What if tomorrow Congress passed a quickie law and the tax rate was 20 percent? Would that solve everything?” Stahl asked.
“I think it is the most important ingredient that we have to think about being competitive,” Chambers replied.
“You lower the rate from 35 percent to 20 percent. You lose something like $2 trillion in taxes. We have a horrible deficit crisis, debt crisis. That’s almost too much money to lose. What’s your answer to that?” Stahl asked.
“My answer’s very simple: every other developed country in the world has already done this. I’m not asking to give me a favor, or a hand out,” Chambers replied.
“You know what: it sounds it,” Stahl remarked.
Chambers replied, “All we’re asking is: Give us a level playing field. Get us close.”
I guess I should point out that these are the same companies supporting the Chamber of Commerce, who did everything but throw infants in front of an oncoming train to stop the Affordable Healthcare Act — you know, the thing that would make American companies competitive with the Europeans, none of whom are paying for health insurance? So you might be a tad suspicious of this plea — and you would be right.
Or I could point out that Cisco’s effective U.S. tax rate in the last quarter was a mere 12.1%, and that they give better payment terms to their overseas suppliers?
Under a Republican administration, the Congressional Budget Office found that not only did the 2004 tax holiday not create jobs, it substantially increased the national deficit.
From the Treasury Department:
In assessing the 2004 tax holiday, the nonpartisan Congressional Research Service reports that most of the largest beneficiaries of the holiday actually cut jobs in 2005-06 – despite overall economy-wide job growth in those years – and many used the repatriated funds simply to repurchase stock or pay dividends. Today, when U.S. corporations have ready access to cash they have accumulated and are holding here in the United States, it is even harder to make the case that a repatriation holiday will unlock new investment and job creation.
Why, even Tim Geithner says it doesn’t make sense to consider it outside of the context of broader tax reform. Of course, Big Biz and their Congressional handmaidens don’t want that!
Look, U.S. corporations have made it clear that they have no loyalty whatsoever to the economic wellbeing of the country. (Which could lead to a discussion about revoking corporate charters, but let’s not get sidetracked right now.) They will outsource and offshore no matter what, so the proper conversation should be about all the other benefits (including targeted tax breaks and subsidies) they enjoy as U.S. companies.
Play me the world’s tiniest violin, Mr. Chambers. U.S. taxes are back to Roaring Twenties levels, and you’re screaming like a stuck pig? Puhleeze.
Look at all the Big Pharma plants that have moved overseas. They’re still sucking on the U.S. government teat for research and development money, yes? Poor them!
Either Leslie Stahl just doesn’t care, or she’s lived in the Village bubble far too long. Time to look for some real journalists. You know, like Jon Stewart!