Wal-Mart's Bottomless Greed: Dodging Billions in Taxes, Scheming to Avoid Billions More

Published on Alternet (http://www.alternet.org)

AlterNet [1] / By Steven Rosenfeld [2], Alyssa Figueroa [3]

Wal-Mart's Bottomless Greed: Dodging Billions in Taxes, Scheming to Avoid Billions More
November 19, 2014 |

There’s another reason why Wal-Mart is one of America’s greediest corporations: it won’t pay its fair share of taxes.

Wal-Mart Stores is America’s top-earning corporation. In 2013, its revenues were $473 billion, yet it only declared $16 billion in profits. While it has been reported [4] that Americans subsidize Wal-Mart because their low-wage employees receive an estimated $6.2 billion annually in Food Stamps, Medicare and other anti-poverty benefits, what’s not widely known is that Wal-Mart has parked [4] $21.4 billion in untaxed profits offshore and is currently lobbying to cut U.S. corporate tax rates.

“Wal-Mart’s offshore profits have doubled in recent years at the same time that its offshore investments flattened, suggesting that the company is piling up cash overseas to avoid paying U.S. taxes on the earnings,” a new report [4] by Americans for Tax Fairness found. “Wal-Mart is working to reduce corporate tax rates and eliminate all taxation of foreign profits.”

“You’re starting to see Wal-Mart playing games like other companies,” said Frank Clemente, Americans for Tax Fairness executive director and author of How Wal-Mart is Dodging Billions in Taxes and Scheming to Avoid Billions More [4]. “They’re engaging in a tax dodge.”

Wal-Mart employees 74 lobbyists in Washington, has spent $32 million on tax-related lobbying in the past five years, and underwrites other tax-cut lobbying by the Capital’s three largest tax-cut groups, AFT found, which are the RATE (Reforming America’s Taxes Equitably) Coalition, the Alliance for Competitive Taxation, and the Business Rountable.

“There’s a big campaign going on here in Washington, D.C., to reform the corporate tax system,” Clemente said. “It’s a big lobbying effort being waged by big corporations to try to reduce their income tax rate at the same they’re lobbying for corporate tax loopholes.”

Corporate Lobbyists Smell The Money

Right now in Washington, both parties are entertaining one of the most dangerous and destructive policy decisions that could affect all Americans for years to come.
There is a growing bipartisan consensus that America needs tax reform and that many corporations are paying too much—even as giant multi-nationals have dodged paying taxes on $2.1 trillion dollars that’s sitting offshore [5] instead of being spent here.
Wal-Mart’s $21.4 billion is untaxed offshore profits is part of that corporate tax-avoidance trend.

“What’s going on on the Hill is really, really insane,” said Stephen Wamhoff, legislative director for Citizens for Tax Justice [6], speaking about the growing obsession with tax reform. “Members and staffers are saying that they should renegotiate and get the policy right and not talk about revenue numbers.”

“The whole purpose of taxes is to raise revenue. So how will they decide what that plan is,” he asked, explaining that Republicans want to keep cutting corporate taxes—even if America's biggest business aren't paying [7] an estimated $100 billion a year. Worse, plenty of Democrats are going along with this script, Wamhoff said, instead of demanding a fairer system and more revenue for needed essentials. “It’s crazy,” he said.

It’s no surprise that after every federal election, the winners salivate about what they can do to enact their sponsor’s agendas. But what’s especially dangerous now is that on the tax front, both parties seem willing to perpetuate the right-wing's “starve the beast [8]” philosophy, which bleeds public programs and keeps giant tax evaders off the hook.

In coming days, for example, Congress has to decide if it will extend 56 individual and corporate tax breaks that are set to expire this year. If not renewed, they would yield an estimated $609 billion dollars [9] over the next 10 years for the feds, with tens of billions [10] also going to states. The GOP-led House wants these breaks to be permanent. The Democratic-controlled Senate is inclined to go along for now and revisit it next year.

“The reason you do comprehensive, bipartisan tax reform is that’s the place where you put the spotlight on each and every one of these provisions,” Senate Finance Committee Chair Ron Wyden, told [9] the New York Times. “You can’t do that in the space of 11 days.”

No matter the explanation, the bottom-line is that tax-avoiding corporations are all-but certain to keep evading taxes. And the worst of them will keep doing that by keeping their billions in untaxed earnings overseas, as their lobbyists—like Wal-Mart’s team in Washington—moan that U.S. tax rates are too high.

“Everyone is saying that the system is broken and needs to be changed, and corporations are trying to ride that wave,” Wamhoff said.

Most Corporations Don’t Even Pay Today’s Tax Rate

Talking about taxes, like anything involving numbers, can be numbing. And much of corporate America is depending on Americans to glaze over and not take a hard look at what has been going on for years when it comes to corporate American avoiding a fair share of taxes.

“Corporations are lobbying Congress to get a better deal on taxes, claiming that they are harmed by the U.S. statutory income tax rate for corporations, which is 35 percent, which they argue is the highest in the world,” Wamhoff said. “But almost no corporation actually pays 35 percent of their profits in U.S. income taxes.”

Wamhoff’s group and other tax analysts looked at the Fortune 500 corporations that were profitable each year from 2008 through 2012 and found that they collectively paid 19.4 percent [11] of U.S. profits in federal income taxes in that time. They found that two-thirds of the multinational corporations studied actually paid lower effective tax rates in the U.S. than they paid in the other countries where they do business—which shows that corporate lobbyists’ claims that U.S. taxes are too high are nonsense.
“One reason American corporations pay so little is that they can use accounting gimmicks to make their profits appear to be earned in offshore tax havens—countries with no corporate income tax (or a very low one) or countries that have other loopholes that allow them to shift profits from one country to another,” he explained. “For example, the profits that American corporations tell the IRS they earn in Bermuda and the Cayman Islands (which both have a zero percent tax rate but very little real investment) equal 16 times [12] the entire GDP [gross domestic product] of those tiny countries! Clearly these profits are not truly earned in Bermuda or the Cayman Islands.”

The Devil In The Details

The latest buzzword in Washington’s corporate circles is “revenue-neutral” tax reform. What that means, Wamhoff said, is allowing these giant companies to keep most of the money they have should have been paying to the government for years. It’s as if there can only be “reform” if it benefits big business, not average American taxpayers who have seen government services shrink in many key areas—such as education.

“Even Obama and many Democrats have proposed revenue-neutral reform for the corporate and business part of the tax code,” he said. “Republicans insist that all of tax reform should be revenue-neutral and a close look at their plans reveal that they actually lose [13] significant revenue.”

The reason why this entire discussion is so dangerous is that sets the stage to do what right-wing extremists like Grover Norquist have wanted to do for years, which is shrink the federal government by starving programs—such as Social Security—of revenues that would be used to maintain benefits at levels upholding dignified living standards.
“In 2011, Congress declared a budget emergency and enacted the Budget Control Act, which cuts over $100 billion from federal spending each year,” Wamhoff said, referring to the so-called the federal budget sequester.

“When it started to go into effect, over 50,000 Head Start slots were being cut and medical research projects were halted. Lawmakers managed to undo part of these cuts temporarily but they are scheduled to be fully in effect again in 2016,” he said. “The big question is whether the next Congress can say with a straight face that we don’t need more revenue while kids are being kicked out of Head Start because of an alleged budget crisis.”

Needless to say, it would be wrong to even call what’s unfolding a budget crisis. It’s a greed-driven revenue crisis, because a great many of America’s biggest and most profitable corporations are tax-dodgers who refuse to pay federal taxes, who have stockpiled billions overseas, who complain that U.S. corporate taxes are too high, and won’t invest domestically—whether by paying living wages (like Wal-Mart) or bring manufacturing back home (like Apple).

Wal-Mart isn’t even the country’s biggest overseas corporate tax dodger. Americans for Tax Fairness found [7] that distinction belongs to high-tech giants Apple, Microsoft, Oracle, Dell, and the pharmaceutical giants Amgen and Eli Lilly. But as America’s biggest retailer, and a company who profits depend on delivering goods over public roads and bridges, Clemente said Wal-Mart’s refusal to pay a fair share was notable.

“Everyone [the public in polls] says they want us to invest in rebuilding our infrastructure. They want us to invest in new medical cures. They want us to make our education system better. They want us to make college more affordable for kids. All these things require money,” Clemente said. “And the question is do you want corporations to get bigger tax breaks or do you want to make these investments? That’s what it comes down to.” [14]

Source URL: http://www.alternet.org/corporate-accountability-and-workplace/wal-marts-bottomless-greed-dodging-billions-taxes-scheming

Links:
[1] http://alternet.org
[2] http://www.alternet.org/authors/steven-rosenfeld
[3] http://www.alternet.org/authors/alyssa-figueroa
[4] http://www.americansfortaxfairness.org/files/How-Walmart-is-Dodging-Billions-in-Taxes.pdf
[5] http://www.americansfortaxfairness.org/files/ATF-Offshore-Corporate-Tax-Loopholes-Fact-Sheet.pdf
[6] http://www.ctj.org/
[7] http://www.americansfortaxfairness.org/stop-tax-haven-abuse/
[8] http://en.wikipedia.org/wiki/Starve_the_beast
[9] http://www.nytimes.com/2014/11/19/business/in-congress-crunch-time-for-dubious-tax-breaks.html?ref=business&_r=0
[10] http://www.uspirg.org/reports/usp/closing-billion-dollar-loophole
[11] http://www.ctj.org/corporatetaxdodgers/
[12] http://ctj.org/ctjreports/2014/05/american_corporations_tell_irs_the_majority_of_their_offshore_profits_are_in_12_tax_havens.php
[13] http://ctj.org/ctjreports/2014/04/how_can_house_ways_and.php
[14] mailto:corrections@alternet.org?Subject=Typo on Wal-Mart's Bottomless Greed: Dodging Billions in Taxes, Scheming to Avoid Billions More

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