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The big cheat of 2018: Corporations make billions in profits, demand tax refunds from the American public

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

Many of our country’s largest corporations make billions of dollars in income, use deferrals and write-offs and credits to underpay their current tax bills by staggering amounts, and in some cases claim foreign profits and U.S. losses despite having much of their sales and assets in the United States. These captains of American capitalism are brazenly ignoring their responsibility to their own nation, a nation in desperate need of funding for education and infrastructure and job training.

The corporate tax rate nosedived from 35% to 21% in 2017, but the thirty companies listed here paid only 8.7% of their reported U.S. income in current federal taxes (even worse, an estimated 7.4% if U.S. income were based on a true percentage of sales). That’s $30 to $35 billion – from just 30 companies – that is owed to the American public.

Who’s the worst? Big tech?

Amazon claimed a REFUND on its $11 billion in U.S. profits. It did the same on nearly $6 billion in profits in 2017.

Netflix paid a 35 percent tax on its foreign earnings, a NEGATIVE TAX on its largest-ever U.S. earnings.

IBM had 37% of its 2018 revenue in the U.S., but claimed only 6% of its income in the U.S., and despite making a total profit of over $11 billion, it claimed a REFUND on its federal taxes.

Big Pharma?

Pfizer, whose CEO Ian Read once complained that U.S. taxes had his company fighting “with one hand tied behind our back,” had nearly half of its sales in the U.S. in 2018, yet claimed a $4.4 billion LOSS in the U.S. along with over $16 billion in foreign profits.

Abbott reported 35 percent of its revenues in the U.S., but a LOSS in the U.S. along with a $3.3 billion foreign profit.

Big finance?

Berkshire Hathaway made 85% of its $4 billion in profits in the U.S. in 2018, yet claimed a $1.6 billion tax REFUND while paying over a billion dollars in foreign taxes. Warren Buffett’s company had deferred $77 billion in recent years, then used Trump’s corporate tax break to write off over $25 billion. Billions of dollars owed to the American public just disappeared.

Bank of America paid 3% in federal taxes in 2018, 5% in 2017. Citigroup had 46% of its 2018 revenue in North America but declared only 31% of its profits in the United States. In the last two years it has paid only 7% in U.S. taxes on its declared profits.

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How Failing Capitalist System Is Allowing Amazon to Cripple America

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

Capitalism is failing in America, and Amazon is both the cause and beneficiary of much of the breakdown. Jeff Bezos said, "We've had three big ideas at Amazon that we've stuck with for 18 years, and they're the reason we're successful: Put the customer first. Invent. And be patient." He might have added three capitalist practices familiar to his company: (1) Pay no taxes; (2) Drive competitors out of business; and (3) Exploit workers. 

Anarcho-Capitalism: The Sordid Details of Amazon's Tax Avoidance 

In 2018, according to its own SEC filings, Amazon claimed a refund on its $11 billion in U.S. profits. It did the same on nearly $6 billion in profits in 2017. The company has reportedly positioned itself to avoid even more future taxes with unspecified tax credits. 

In the most extreme form of capitalism taxes do not exist. This is called "anarcho-capitalism." Among all corporations, Amazon may be the leading advocate of this philosophy. They haven't paid federal income tax for the past two years. They set up headquarters in Luxembourg for tax breaks that are now being challenged. They claim minimal profits on hundreds of billions in revenue, resulting in one of the lowest profit margins among major corporations, and thus much less tax. Of course, Amazon claims to be using tax credits from past losses that stemmed from investment in research and development (R&D). But the company appears to overstate and obfuscate the R&D numbers. Its only 'explanation' of R&D in its annual report comes in an ambiguously all-encompassing section called "Technology and Content." Plus, that's no excuse to dodge taxes. Walmart and Google each spent nearly $12 billion on technology in 2018, almost as much as Amazon, but Walmart paid 28 percent in federal taxes, and Google 14 percent. 

We learn much more at the state level. Amazon has played one state against another for tax breaks over the years, most recently negotiating an estimated $3 billion tax credit from the state of New York before residents rebelled—as well they should have. The Economic Policy Institute found that employment levels don't significantly change in communities with new Amazon warehouses, and a recent study by The Economist concluded that the opening of a fulfillment center in a given community actually depresses warehouse wages. Furthermore, as an indication of the folly of wooing corporations with state subsidies, Upjohn research found that in the great majority of cases incentives are not even a part of a company's decision to locate in a given area.

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Capitalist-Style Wealth Gap: 1 Tech Guy = 1,000,000 Teachers

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

As of 01/20/19, the richest six American tech leaders (Bezos, Gates, Zuckerberg, Ellison, Page, Brin) averaged over $80 billion in net worth. Meanwhile, the 25 million Americans just above the median, many of them teachers, have an average net worth of $78 thousand. That's a difference of a million times. 

For anyone questioning this disturbing truth, the following information should be helpful: There are over 4 million preschool, primary, secondary, and special education teachers; the median teacher age is 41; the median elementary school salary is $57,000; the median wealth of a 41-year-old is only $60,000. So it's probably even worse than a million to one. Consider also that about 77 percent of teachers are female, and that females suffer the discrimination of lower wealth, especially Black and Hispanic women, for whom net worth is in the low HUNDREDS. 

The Los Angeles teachers are striking for better pay, smaller class sizes, the addition of nurses and counselors, and the ending of the rash of charter school openings that suck the lifeblood out of the public school system. They could also be striking for a fairer wealth distribution. A technology boss is not a million times more important than an L.A. teacher. 

Do They Deserve It? Fact 1: The Richest Tech CEOs Had Shady Beginnings 

Bill Gates may be a knowledgable man, but for starters he was lucky and opportunistic. In 1975, at the age of 20, he founded Microsoft with high school buddy Paul Allen. This was the era of the first desktop computers, and numerous small companies were trying to program them, most notably Digital Research, headed by software designer Gary Kildall, whose CP/M operating system (OS) was the industry standard. Even Gates' company used it. But Kildall was an innovator, not a businessman, and when IBM came calling for an OS for the new IBM PC, his delays drove the big mainframe company to Gates, who provided an OS based on Kildall's CP/M system. Kildall wanted to sue, but intellectual property law for software had not yet been established. David Lefer, a collaborator for the book They Made America, summarized: "Gates didn't invent the PC operating system, and any history that says he did is wrong."

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The Inequality to Be Suffered by Our Children

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

The Inequality to be Suffered by Our Children 

The fortunate ones will not be suffering. In the past eight years, the richest 5% of Americans have increased their wealth by $30 trillion -- almost a third of total U.S. wealth -- while the poorest 50% have seen their average wealth drop from $11,500 to $9,500. There is ample evidence for a nation soon to be made even more unequal by the transfer of wealth from rich baby boomers to their children and grandchildren, who will have done little if anything to earn it. The middle class will be further crippled by the ongoing growth in inequality. Unless progressive policies are demanded by American voters, most of our children and grandchildren will suffer from the continuing expansion of a Great-Depression-like wealth gap that already "dwarfs" the rest of the developed world. 

Nearly a Third of U.S. Wealth will be Handed Down, Mostly to Rich Kids 

Total U.S. wealth is about $98 trillion. According to an Accenture study, $30 trillion in financial and non-financial assets will be inherited by the children of Baby Boomers in the next thirty to forty years. A Boston College study predicts an overall transfer twice that size, at $59 trillion, with $36 trillion going to heirs. Deloitte predicts a $24 trillion transfer of wealth (to and from all generations) in the next fifteen years. America's richest 20% own nearly nine-tenths of this impending windfall (Table 6-5)

Some sources question the claims for massive impending wealth transfers, saying that Boomers may spend most of their money, or that the newly rich young beneficiaries will mismanage their portfolios. Apparently it's difficult for some of us to accept the reality of a worsening disparity in U.S. wealth. 

The Rich Kids will have Learned How to Avoid the Public Good 

Skipping out on tax obligations will start right away, as over 99.8 percent of estates are not currently required to pay any estate tax. 

Here's another way for the young heirs to skip out on taxes: Offshore hoarding of private American wealth is estimated to be $3.3 trillion (4% of U.S. $82 trillion financial wealth).

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Facts That Privileged Americans Don't Want Us to Know

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

Many of us are ill-informed about certain critical economic and social issues. The following facts should have been reported by the mainstream media, but unfortunately most of that media is controlled by the very people who have reason to hide the facts. 

Tax Haven Cheating is Much Costlier than the Annual Safety Net—But the IRS Keeps Getting CUT 

Offshore hoarding of private American wealth is estimated to be $3.3 trillion (4% of U.S. $82 trillion financial wealth). 

The safety net costs about $400 billion per year, or, including Medicaid, about $900 billion per year. 

Taking on the tax cheaters seems like an obvious response, instead of cutting the safety net. But the IRS budget itself has been steadily cut. Amazingly, and perversely, the Internal Revenue Service, which could be recovering much of our hidden money, has seen its staff and budget slashed 14 to 18 percent since the recession.

Our Own Country is the World's Second Biggest Tax Haven 

While the privileged American tax cheaters are taking money from their own country, they're not shy about taking from the rest of the world. According to the Financial Secrecy Index of the Tax Justice Network, the U.S. is second only to Switzerland as a tax haven. Their report states: "Financial secrecy provided by the U.S. has caused untold harm to the ordinary citizens of foreign countries, whose elites have used the United States as a bolt-hole for looted wealth." 

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An Arena Full of the Richest Americans Would Own as Much Wealth as 70% of the World

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

That's 25,000 American adults, about the number of people in a large basketball stadium. That's the richest .01% of America. Together they own nearly $10 trillion, which is approximately the total wealth owned by the 3.5 billion adults who make up 70% of the entire adult world. 

Data is taken from various current sources: the Credit Suisse 2018 Global Wealth Databook (GWD), the Forbes 400 rankings, and Business Insider's reporting on the world's billionaires. A summary of the calculations can be found here.

But Only India has a Greater Percentage of its People in the World's Poorest 10% 

Inequality in America is out of control. A careful look at the GWD (Table 3-4) makes that clear. While our nation has by far the greatest percentage of its people in the world's richest 10%, it is second only to India in the percentage of its people in the world's poorest 10%. This is almost certainly due to the number of Americans mired in unmanageable debt. 

To put it another way, one out of seven American adults is among the world's least wealthy 10%. 

To put it yet another way, while 100 million American adults are among the world's richest 10%, 34 million American adults are among the world's poorest 10%.

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The Capitalist Manifesto: Let Poor People Die

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

The original Capitalist Manifesto was a 1958 book by economist Louis O. Kelso and philosopher Mortimer J. Adler. In their view of a properly conducted democratic capitalist society, a sort of modern-day Homestead Act was envisioned, in which all Americans would participate in the "capitalist revolution" of growing stock portfolios. This would be possible because of great technologies (energy in the 1950s, AI now) that would allow all of us, in Aristotelian and Jeffersonian property-owning ways, to become 'free' to pursue the arts & sciences and to enjoy more leisure time. Today, this form of democratic capitalism could be realized through the Employee Stock Ownership Plan promoted by the "Just Third Way" movement. 

Just one problem. Apparently, in 1958, economists and philosophers were not able to foresee the unlimited greed of the relatively few people with the power to manipulate the strings of the capitalist state. They thought the newly productive post-war capitalists were being cheated by workers who depended on socialist strategies to even the score. But the opposite has happened. Average Americans have been cheated out of the gains from technological productivity. Just in the past ten years in our world of big business, over $30 trillion -- nearly a third of our nation's TOTAL current wealth -- has gone to the richest 10% of Americans. Yet market-happy illusionists like the Wall Street Journal keep spouting nonsense about a healthy economy built on today's capitalism. 

The root of the problem is the condemnation of anything 'social' as un-American, which has helped modern-day capitalists to justify their belief in individual gain by any means. Wealthy conservatives know that social responsibility might take away some of their riches by providing opportunities and jobs and a decent standard of living for all Americans. In their minds, the poor have only themselves to blame for being poor, and for dying. But it is capitalism that is killing them. The Capitalist Manifesto has been twisted into an assault on poor people.

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A Grim Update for 2018: More Evidence That Half of Americans Are In or Near Poverty

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

Deniers like Nikki Haley refuse to admit that mass poverty exists in their prosperous nation. That would reflect poorly on their capitalist beliefs. But if the skeptics would look at the half of America they don't care to see, the stark display of destitution might shock them. At least until they invent an excuse to remove it all from their minds. 

The U.S. poverty rate in 2016 was between 12.7 and 14.0 percent. But the poverty threshold is based on an outmoded formula from the 1960s. According to the Congressional Research Service (CRS), the threshold should be THREE TIMES HIGHER today. And it could be even higher if the true nature of poverty is considered.

Poverty is Not Just a Dollar Figure 

There is poverty in the diminishing quality of life for Americans who are unable to pay for medical treatment during years of declining health, and instead turn to life-threatening opioid painkillers, readily available in a nation with less than 5 percent of the world's population and 30 percent of the world's opioid consumption. Poverty is the lack of community support in a winner-take-all society; the stress of overwhelming debt; the steady decline of jobs that pay enough to support a family; the inability to afford a move to a desired neighborhood; the deadening impact of inequality on physical and mental well-being. The United Nations describes America as a nation near the bottom of the developed world in safety net support and economic mobility, with the highest infant mortality rate in the developed world, the world’s highest incarceration rate, and the highest obesity levels. Low-income Americans are often surrounded by food deserts, with insufficient access to clean water and sanitation, and with the pollutionlevels of third-world countries. The poorest among us are even susceptible -- unbelievably -- to rare tropical diseases and once-eradicated scourges like hookworm. 

Part of the definition of poverty is "the state of being inferior in quality." The extreme level of inequality in the U.S. is battering the poor with a sense of inferiority. It's ripping apart once-interdependent communities, and it's triggering a surge in drug and alcohol and suicide "deaths of despair."

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The "Jobs for Everyone" Fantasy

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

"The more robots we add to our fulfillment centers, the more jobs we are creating." —Tye Brady, Amazon's Chief Technologist 

That's just one outlandish example of the job-related hyperbole we've been subjected to. We keep hearing about the low unemployment rate and the "booming" economy. "Economic news has been staggeringly good," said Jared Whitley, associate director in the White House under George W. Bush. More hype comes from CNN Money, which talks about "opportunities for almost everyone"; and the windy Wall Street Journal, which claims that "Americans traditionally left behind...are reaping the benefits.." 

The super-capitalists want us to believe that they know what they're talking about. Part of their strategy, based on a neoliberal disdain for any government efforts to provide opportunities for average people, is to perpetuate the myth, as Milton Friedman said, that "the free market system distributes the fruits of economic progress among all people." Part of this myth is a job for everyone, or "full employment," which many economists believe we have attained with an unemployment rate under 4 percent. 

But "jobs for all" is a fantasy, if we're talking about family-sustaining, living-wage jobs, as we should. The facts make that clear.

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The kindly 87-year-old man who took all the school kids’ lunch money

Paul Buchheit

Paul Buchheit Author, editor, expert on income inequality

He seems to stand out as the one beloved billionaire among us, a man who admitted he doesn’t need a tax cut and promised much of his fortune to charity.

But Warren Buffett’s company, Berkshire Hathaway, hasn’t paid much in real taxes over the years, choosing to defer $77 billion through the end of 2016. And now the company has taken advantage of the Trump tax law to claim a $23 billion 2017 federal tax benefit, ironically the same amount as the cost of the Child Nutrition Programs, which provide school lunches and other nutritional needs for millions of America’s children.

Paying hypothetical taxes until the tax bill expires

Berkshire Hathaway has declared nearly $200 billion in U.S. income over the past ten years, but including the 2017 writeoff has paid only $16 billion in current (non-deferred) taxes. The company’s annual tax obligation has been announced to shareholders as satisfied by a “hypothetical” tax payment. Now, suddenly, with Trump’s corporate tax break, $23 billion of its deferred tax liability just fades away, never to be paid, never to be used for the vital public services that are dependent on tax revenue.

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Union Matters

Higher Taxes & Broken Promises

From the AFL-CIO

While many Americans are frustrated by smaller refunds this Tax Day, major corporations like AT&T are celebrating billions in massive giveaways, courtesy of the Tax Cuts and Jobs Act.  

The tax bill, which was signed into law in 2017, dramatically cut the corporate rate tax from 35% to 21%. This led AT&T’s CEO to vow that the company would create at least 7,000 jobs.

Instead, AT&T has eliminated more than 12,000 jobs since the law took effect.

At the same time, the corporation’s annual report shows the company increased executive pay and suggests that after refunds, it paid no cash income taxes in 2018.

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A Moral Imperative

A Moral Imperative