Monopoly Restored by Jack Lawrence Luzkow

Author:Jack Lawrence Luzkow
Language: eng
Format: epub
ISBN: 9783319939940
Publisher: Springer International Publishing

What it costs the average citizen is obvious: the tax burden has shifted, and that means there is less revenue that flows into the public treasury, and therefore either government services must be reduced, or taxes increased! And it is now evident where those increases come from. Not the corporations that have just shed their taxes, but the average citizen who must ante up for what has been lost in revenue because of the tax evasion of the super-rich.

Besides moving assets, capital, or jobs abroad to low tax regimes, there are many loopholes corporations can take advantage of at home. A report by Citizens for Tax Justice, published in June 2016, found that 315 Fortune 500 companies used what is called the stock option loophole to avoid, collectively, $64.5 billion in state and federal taxes over a five-year period between 2011 and 2015. The five biggest offenders, also among the largest and most profitable and most recognizable firms because of their vast clienteles and outsized profits, were Facebook, Apple, Google , Goldman Sachs , and JPMorgan Chase . 11

Robert McIntyre, executive director of Citizens for Tax Justice, explains how this tax loophole works: “Corporations in some cases give executives millions in stock options and then they ask taxpayers to help pick up the tab by taking tax deductions.” 12 Most big companies grant privileges allowing CEOs and senior management an option to buy a company’s stock at a favorable price and time determined by the company. To help executives maximize gain, a company typically selects a time in the past when the price was low. Executives—and others—can then exercise their option in the future whenever the price is higher: the executive pockets the difference as “compensation.” When executives exercise these “stock options ,” corporations can legally take a tax deduction for the difference between what the employees pay for the stock and what it is “worth,” the higher price at the time of the exercised option, although it costs nothing for a corporation to grant the option. Since taxpayers do not get to vote on executive compensation, they don’t have the right to decide on the real worth of executives. They cannot even veto the “subsidies” since by law, without the intervention of Congress, companies get to decide on the worth of their executive leadership. Facebook, one of the biggest users of this tax loophole, managed to reduce its federal and state tax bill between 2011 and 2015, by 70%. 13

Counting executive compensation in any form as a company expense is shameful but it is legal, which is why it is practiced by so many corporations. But there are other techniques that companies can use to commit “legal fraud,” and the tax savings quickly add up. Oxfam America has concluded that corporate tax evasion costs the American taxpayer $111 billion annually, a figure so astonishing that it hardly seems credible. 14 Yet even this amount seems small when compared to other forms of tax evasion.

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