G-20 governments voted last week to fight tax evasion at the same time that Citizens for Tax Justice released a report on American corporations that evaded the federal income tax.
Associated Press reported that the world’s rich nations might raise billions of dollars by fighting together against “cross-border tax evasion.”
The story noted that the United States loses an estimated “$100 billion a year and Greece $30 billion on tax evasion.”
Cutting off “cross-border tax evasion” will go a long way toward helping rich nations obtain urgently needed revenue and addressing the growing frustration that wealthy individuals and corporations are not paying their fair share.
Meanwhile the Citizens for Tax Justice (CTJ) released a study on the federal taxes of 280 of the most profitable corporations in the United States, all of whom are on Fortune’s list of the nation’s 500 largest corporations.
A “nonpartisan research and advocacy group that fights for tax fairness,” CTJ’s study was titled “Corporate Taxpayers & Corporate Tax Dodgers: 2008-2010.”
The anti-tax, anti-government crowd crows that the statutory corporate tax rate of 35 percent is too high. They assert that such a tax rate is unfair to U.S. corporations on the global playing field because other nations have lower rates. They say it harms American business.
But do they protest too much?
The 280 corporations studied paid on average in 2009 and 2010 a tax rate of 17.3 percent, a far cry from the 35 percent rate about which anti-government and anti-tax forces complain bitterly.
The CTJ study found that 71 corporations (25 percent of those studied) had an “average effective tax rate” of 32.3 percent.
Another 67 corporations had “tax rates of less than 10 percent.”
Astonishingly, 30 corporations paid “less than zero percent” with an “effective tax rate” of -6.7 percent.
“These companies, whose pretax U.S. profits totaled $160 billion over the three years included: Pepco Holdings (–57.6% tax rate), General Electric (–45.3%), DuPont (–3.4%), Verizon (–2.9%), Boeing (–1.8%), Wells Fargo (–1.4%) and Honeywell (–0.7%),” said CTJ.
CTJ said, “In 2010, 37 companies paid no income tax, and got $7.8 billion in rebates.”
That’s right. Highly profitable American corporations are not only evading taxes, they are getting tax rebates.
Whether it is the G-20 nations wanting to shut down cross-border tax evasion or CTJ focusing on tax dodging corporations, why is it important for people of faith to care about taxes?
Taxation is a social justice issue. It is one significant tool for creating a good society.
Many of our nation’s wealthiest corporations aren’t paying their fair share. They are leaching off the benefits of a good society for private gain.
When they leach off society, the burden for a good society gets spread to others less able to pay, and resources for the least of these in our society get cut. That’s unfair. It contributes to social inequities.
When corporations avoid and evade paying taxes, they are saying theologically that they are not their “brother’s keeper.”
Theologically, a good society is built on the idea of being our brother’s keeper.
A good society cares for its brothers and sisters when it provides public education, high-quality health care, clean water and air, safe food, a transportation infrastructure, police and fire protection, national security, and protects its weakest members from harm.
A good society advances the common good for all, not for the financial elite only.
Moreover, a good society enables corporations to do business. Corporations rely on the roads, fire and police protection, clean air and water, national security, public education and social services that taxpayers provide.
Yet some of these profitable corporations are in the business of taking advantage of a good society. That simply must end, as must the narrative that taxes somehow harm society.
This is not the first editorial to draw attention to corporate tax evasion.
“General Electric was once a household name. Now it’s synonymous with mastering the tax-avoidance game,” began a March editorial.
Citing a New York Times article, the editorial noted that GE’s U.S. tax bill was zero, while it had U.S. profits of $5.1 billion and claimed tax benefits of $3.2 billion.
One of the hinges for social justice is moral redundancy. As companies advertise constantly, social justice advocates must draw attention over and over again to issues that require redress.
One such issue is the need for a just tax system in which those who benefit the most from a good society pay their fair share.