Editorial: Who’s the fool?

Brattleboro Reformer

Yes, you too can reduce your federal income tax burden to zero ... or even get a tax credit.

It’s easy.

All you need is 1,000 lawyers or so, millions of dollars to spend on lobbying lawmakers in Washington, D.C., and a mailbox in Zug, Switzerland.

Zug, home for 26,000 people, is also the "headquarters" of more than 30,000 companies. Its roster of businesses is growing by 800 a year.

The current list includes Transocean, which owns the drilling rig that blew up in the Gulf of Mexico last year.

In Zug, Transocean has about a dozen employees. In Houston, its real headquarters, it has 100 times that number.

And then, there is Weatherford, a $10 billion oil field services firm, located in Zug, even though it still has 2,800 employees, also in Houston.

More companies around the world are packing up a file or two, maybe a nameplate and a clipboard for good measure, and moving to Zug as we speak.

Rep. Lloyd Doggett, D-Texas, hopes to stem that flow from the United States at least.

He has proposed legislation that would tax a company not based on where they file, but where their decision-makers and management actually reside.

What has happened since he proposed the legislation?

Let’s take Transocean as an example: It’s top 10 executives now live in the Geneva area (or at least have one of their homes there) and work on the top two floors of a Geneva office building.

Those execs include everyone from the CEO to the chief financial officer, to the vice president of taxes, according to CBS’ 60 Minutes.

Finding a tax-friendly town in Switzerland isn’t the only way to corporations avoid paying their fair share in taxes.

Other companies, such as G.E., game the tax system, driving truckloads of cash through loopholes engineered by their fleet of tax attorneys and lobbyists.

In 2010, G.E. reported $5.1 billion in profits in the United States alone ($14.2 billion worldwide), but received a tax benefit of $3.2 billion.

A spokesman from G.E. said the reason the company didn’t pay any taxes for 2010 was because of GE Capital’s losses due to the financial crisis, and not tax avoidance strategies.

"In short, when you lose money, you don’t pay taxes, and that’s what happened at GE Capital."

But over the past five years, it made $26 billion in profits in the United States and received a $4.1 billion refund from the IRS.

Other companies that continue to game the system include ExxonMobil, the largest oil company in the world, which made $19 billion in profits in 2009. It not only paid no federal income taxes, it actually received a $156 million rebate.

Bank of America made $4.4 billion in profits and got a $1.9 billion refund.

Chevron made $10 billion in profits, a $19 million refund.

Boeing, with a $30 billion contract to build 179 inflight tankers in hand got a $124 million refund.

Goldman Sachs earned a profit of $2.3 billion and received almost $800 million from the Federal Reserve and U.S. Treasury Department but only paid 1.1 percent of its income in taxes.

ConocoPhillips made $16 billion from 2007 to 2009 and received $451 million in tax breaks through the oil and gas manufacturing deductions.

Carnival Cruise Lines made $11 billion in profits in the last five years and its income tax rates dropped to 1.1 percent.

As Sen. Bernie Sanders said on the floor of the Senate recently, if you go out and you work for a living, you pay 10, 15 percent or more of your income in taxes.

"But if you are on Wall Street, if you are a major oil company and have lobbyists all over this place, not only can you avoid paying any taxes, in many cases you will actually get a tax refund from the IRS."

So while the country is running a trillion-dollar deficit and legislators are trying to reduce it by cutting services to those who can least afford it, said Sanders, "Maybe ExxonMobil and some of the large oil companies might be asked to pay something in taxes. Maybe General Electric might be asked to pay something in taxes. Maybe the wealthiest people in this country might be asked to pay something in taxes."

Asking these companies, their executives and shareholders to do so out of the kindness of their hearts is a joke. The system has to be overhauled. The tax code is too complex, riddled with inconsistencies and written by those who benefit the most by its idiosyncrasies.

Of course, the tax code will never be re-written while Capitol Hill is crawling with high-paid lobbyists in $3,000 suits.

It will also never be fixed until former legislators and regulators, after they leave federal "service," are prohibited from receiving jobs in the companies they were sworn to oversee.

But then again, you and your friends could pile your pennies together, hire a hundred or so tax experts, and figure out your own way to game the system.

That might be more effective than waiting for a change.