Tax Man (Part II) - Coporate Tax Avoidance

Groups that are paying the least amount in taxes or avoiding taxes all together are the ones that are receiving the greatest subsidies from the government. Those who are at the top of the income brackets and the major corporations, which pay the least percentage of their income in taxes, are the ones that get the greatest benefit from governmental services and they have the most to lose when the governmental programs fail.

Just as an example of the tax avoidance problem, Enron paid no tax four of the last five years it was in existence and it received a million dollar refund from government on at least one occasion. Thus, not only did it not pay taxes, it actually made money on the backs of others who were paying taxes. Nonetheless, it, like other major business, benefitted from the government programs it failed to pay for or support.

Every business that has an internet portal has gained a subsidy from the government as it is was the U.S. military that developed the internet and no business was required to pay to access it or to reimburse the government for its development. The interstate system is used the most by companies that are shipping products from one place to another and helping to ensure that their employees can get to work in a timely fashion every day. Companies shipping products through the air either through overnight courier services or otherwise are reliant on the government continuing to ensure that air travel is safe and efficient. The pharmaceutical companies receive a great deal of protection by the FDA conducting the testing process and many drugs that are found to be defective after being released rightfully receive immunity from tort claims based upon their the FDA testing process. Businesses are the ones who receive the greatest benefit from tax dollars as they are using the governmental services in greater quantities than individuals are.

When the government systems fail, the businesses are the ones that have the greatest to lose. When the Northeast blackout occurred in 2003 the nation lost between $7 and $10 billion dollars in the course of two days. The reason for the blackout was that the government deregulated the electrical industry and the private companies determined that there was no cost benefit in maintaining the Ohio powerlines, which, when they failed, affected the entire Northeast. Thus, government’s failure to maintain the systems resulted in significant losses for businesses.

When the New York subway and bus workers went on strike, New York City businesses lost approximately $400 million per day. The companies were not closed down the way they were when the blackout occurred; however, due to the reduced number of employees who could get to work and other complications that the strike caused resulted in significant losses.

Commercial cruise lines, such as Carnival, avoid taxes and U.S. law by having their ships fly under a Liberian flag opposed to a United States flag. By flagging the ships in Liberia, the ships are governed by Liberian tax laws, which are virtually non-existent; however, the ships likely never dock in Liberia during the course of their service and the companies rely upon port security and the U.S. Coast Guard when emergencies occur. All these are in operation because our taxes pay for them, even if the cruise lines which rely on them do not.

In sum, when the government programs fail, it is the businesses that have the most to lose, yet businesses are paying the lowest percentage of their overall income to taxes compared to individual tax payers. So long as businesses are more reliant on the governmental services than individuals, the businesses should be required to pay their fair share of income tax and not receive huge tax breaks by the Federal and State governments.