I spent part of a beautiful weekend doing my taxes; the results were not very pretty, and as a result we’ll be writing a good-sized check to the IRS in the next few days.
But maybe I should just declare myself a corporation, like General Electric. I mean, if corporations can be people, then people can be corporations, right? Last year, according to a Forbes report, GE reported a pretax profit of more than $10 billion yet somehow managed to pay nothing to the US Treasury. In fact, it banked a tax benefit of $1.1 billion against future profits.
ExxonMobil, Forbes found, reported pretax profits of $35 billion to the Securities and Exchange Commission, but no tax liability to Uncle Sam. (According to Forbes, an Exxon spokesman “insists that once its final tax bill is figured, Exxon will owe a ’substantial 2009 tax liability’,” but the company refuses to disclose it.) Chevron made $18.5 billion in pretax profits, and paid $200 million in U.S. corporate income taxes. Bank of America made $4.4 billion and paid no corporate income tax; according to Forbes, BoA won’t be doing so for years.
As the Forbes story points out, many companies lower their U.S. tax liabilities by parking a lot of their profits overseas in countries with lower tax rates. That would seem, at first glance, an argument for lowering U.S. corporate taxes.
However, the effective corporate tax rate in the United States is actually fairly low and certainly competitive when compared to other industrialized nations, as the graphic from the World Bank’s “Doing Business” report demonstrates. (Note that the effective corporate rate in China, where many industrial jobs are migrating, is considerably higher than in the U.S.)
In addition, many companies aren’t moving actual economic activity and the jobs that come with them to low-tax countries; they are relocating them only on paper. Exxon, for example, “tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands,” Forbes writes. Those countries aren’t actual industrialized economies competing with the US for jobs; they are tax scams with a flag and an embassy.
Maybe that’s what I need to do. Maybe I should open a Jay Bookman subsidiary in Bermuda and assign it all my earnings. Sure, I’d probably have to go visit that subsidiary pretty often, just to keep up appearances. But hey, I hear Bermuda’s nice.
Of course, if everybody started doing that, Bermuda might get so crowded that it would tip over. And THEN where would we be?
(This post has been edited since its initial posting.)