[Boston-editorial] Op-Ed Submission: America ¹ s Corporate Benedict Arnolds

[Press Room at UFE]

Op-Ed Submission from United for a Fair Economy (617-423-2148 x119)

America's Corporate Benedict Arnolds

³That¹s un-American² is the cry heard whenever the unwritten code of
American values is breached, Compassion, fairness and equal opportunity are
hallmarks, and although you might not be able to recite chapter and verse of
the code, you know when it is broken.

On this the 204th anniversary of the death of Benedict Arnold, one of
America¹s most famous traitors, it¹s time to consider whether some of
America¹s largest corporations that pay little or no federal taxes, have
indeed become traitors.

Large corporations are in full retreat from paying their fair share of
taxes. In 2003, corporations paid just 7% of the cost of the US government,
according to a study by Citizens for Tax Justice.

It wasn¹t always this way. At the end of the Second World War, a time when
paying taxes was viewed as a patriotic duty, corporations paid half the cost
of the federal government. Even as recently as the 1970s, corporate taxes
accounted for 20% of federal treasury receipts.

This dramatic change has shifted the cost of paying for government to
smaller businesses and individual taxpayers, while at the same time boosting
corporate profits and their executive¹s pay.

In 2003, ten companies each reported more than $1 billion in profits to
their shareholders, yet paid no federal corporate income tax. Collectively,
these firms that have claimed the only way they can remain competitive is
through tax breaks, earned $30 billion in profits and paid their CEOs $126
million in 2003.  The average pay of the CEOs of the corporate Benedict
Arnolds was $12.6 million, 51% higher than the pay of the average
large-company CEO as reported by Business Week.

Who are these resurrected Benedict Arnolds? A new report published by United
for a Fair Economy entitled Corporate Traitors: The Decline of Corporate
Taxes and the Subsequent Rise of CEO Pay
(http://www.faireconomy.org/press/2005/corporatetraitors.pdf) bestows awards
on some of these tax avoiders.

Boeing, the nation¹s second largest defense contractor, is honored with the
³Taxes are the Real Enemy² Benedict Arnold award. Boeing received the
largest federal tax refund in 2003. So large was Boeing¹s $1.7 billion tax
refund that it dwarfed the company¹s $1 billion in reported earnings, giving
the company an effective tax rate of -159% according to Citizens for Tax
Justice. 

Viagra maker Pfizer took home the ³Taxpaying Dysfunction (TD)² award.
Despite $14 billion in profits between 2001 and 2003, Pfizer couldn¹t get
excited enough about paying taxes to perform ­ sending just $1.2 billion to
the federal treasury, a miserly effective tax rate of just 8.2%. In
contrast, Pfizer¹s industry competitor Merck paid 32.5% of its $12.7 billion
in three-year profits in federal taxes.

Pfizer saw no need to be Scrooge-like when it came to paying its CEO Hank
McKinnell, however, who walked away with $21.4 million in 2004, more than
three times what Merck paid its CEO.

These disparities in tax rates adversely affect the competitive playing
field not only between giant companies like Pfizer and Merck, but to an even
greater degree between large companies and small businesses. While the
average large company today pays only 18% of its income in federal taxes,
many small businesses owners pay 34%.

Two centuries after Benedict Arnold used his power and influence to gain a
plum assignment as commander of West Point, and then used that position to
surrender this important fort to the British, we are witness to other
powerful players using their privilege and standing to rewrite the nation¹s
tax laws for their own gain.

Corporate tax and accounting departments have morphed from backwater cost
centers to sexy profit drivers. Investments in research and development have
shrunk as investments in aggressive lobbying and accounting have blossomed.
These corporate Benedict Arnolds, like their namesakes, are jeopardizing the
nation¹s security. 

The American public, angered by Arnold¹s betrayal, went on to fight and
reclaim West Point from the British. Today the fight is about restoring the
fairness of the tax system by assuring that corporations pay their fair
share to maintain the society upon which their vast wealth depends.

The fight has many fronts
-Congress should reform and simplify the corporate tax code, lowering the
rate, eliminating the myriad of tax breaks and implementing progressive tax
principles that would tax Big Business at higher rates than small family
businesses, reversing the current reality.
-The corporate alternative minimum tax, eviscerated by the Clinton
Administration, needs to be restored, so that all profitable companies pay
taxes. 
-We need to withdraw from tax treaties with many of the 90 tax haven nations
who aid and abet corporate tax avoiders.

Those who continue down Benedict Arnold¹s path might, like the infamous
traitor, consider taking themselves to another country. Their current
behavior is un-American and unacceptable.

Scott Klinger is the corporate accountability coordinator at United for a
Fair Economy (http://www.faireconomy.org) and author of the report:
³Corporate Traitors: The Decline of Corporate Taxation and Subsequent Rise
in CEO Pay.²  (http:///www.faireconomy.otg/press/2005/corporatetraitors.pdf)
Scott Klinger may be emailed at sklinger at faireconomy.org.