Many of the largest U.S. corporations aren't paying the state taxes that should be funding our schools. Kids are the victims. So are the average Americans who are forced to pay higher property taxes, sales taxes, and excise taxes to meet educational budgets. Government and media sources would have us believe there's no alternative, for in a market-driven world it's heresy to make demands of big business, even when the companies are flagrantly avoiding their taxes.
Illinois: Schools Held Hostage by Just Six Corporate Tax Avoiders
The mayor and governor of Illinois are blaming each other for the Chicago Public School budget crisis, and Illinois colleges are in danger of being shut down. But Illinois lost over $1.3 billion (more than the $1.1 billion school budget shortfall) in 2015 state tax revenue to just six companies (Abbott, ADM, Boeing, Deere, Exelon, United), which together paid much less than 1% of their profits in state taxes, just pennies on the dollar for the required rate of 7.75%.
"Government and media sources would have us believe there's no alternative, for in a market-driven world it's heresy to make demands of big business, even when the companies are flagrantly avoiding their taxes."
Yet it’s the children and the taxpayers of Illinois who bear the burden of reform. Illinois has one of the "Ten Most Regressive State Tax Systems," according to the Institute on Taxation and Economic Policy. In Chicago, Mayor Emanuel recently announced another $200 million in education cuts and then raised property taxes by a half-billion dollars, but the mainstream media repeatedly hushes up the corporate tax avoidance.
California: Funding Goes to Charters as Corporations Take Tax Refunds
In California, where depleted public schools are giving way to business-happy 'reformers' and charter schools, Google took a $400 million refund on its $8 billion in U.S. profits. Chevron has over half of its oil and gas wells in the United States, yet the company claimed a loss of nearly $3 billion in the U.S., a foreign profit of $7.7 billion, and a refund on all its U.S. taxes. Intel managed to pay 1/2 of one percent in state taxes, on nearly $9 billion in U.S. profits.
The East Coast: Big Corporate Profits, Zero Tax Dollars for the Schools
New York City has nearly a half-million students in overcrowded classrooms in the most segregated city in the nation. Yet New-York-based Pfizer, which had $35 billion in profits over the past three years, has claimed massive losses in the U.S. despite having nearly half of its sales here, and just took an $8 million 2015 state tax refund while it prepares for future tax-slashing with an overseas inversion deal.
Pfizer CEO Ian Read complained that U.S. taxes had his company fighting "with one hand tied behind our back."
Just across the water in Connecticut is General Electric, which has paid little or no state income tax for years, and has now announced a move to Boston with a new state subsidy of $180,000 for every job it creates, even though Boston schools face a $50 million budget shortfall in 2016.
Insidious Tricks to Keep Tax Money Away from the Schools
Fake Loans: The New York Times reports on a practice called "earnings stripping," by which a company undergoing an inversion 'borrows' money from its foreign partner and then deducts interest on the debt. In effect writing off the money that it lends to itself.
Fake Taxes: Berkshire Hathaway (Warren Buffett's company) uses hypothetical amounts to 'pay' its taxes, which in actuality have been deferred for many years. Exxon, which uses a theoretical tax to 'pay' its bill, declared almost none of its 2015 income ($22 billion) in the U.S. even though about 80 percent of its productive oil and gas wells are in this country.
Sinking Lower: Taking School Revenue from Poor Nations: Action Aid reports: "Women and girls in the world’s poorest countries need good schools and hospitals...A little-known mechanism by which countries lose corporate tax revenue is a global network of binding tax treaties between countries." Lacking such a treaty, corporations have another strategy: lawsuits against poor countries, in the style of modern trade agreements.
Summary of Shame
Big business might claim that their minimal taxes are a result of agreements made with states to promote economic growth and create jobs. But the facts come from Good Jobs First and the New York Times, reporting on 2011-12 data:
- Federal, state, and local governments give up $170 billion per year in tax incentives.
- States were forced to cut public services and raise taxes by a collective $156 billion in 2011.
- The subsidy cost per job averaged $456,000 for 170 'megadeals' analyzed by Good Jobs First.
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It's a devious double whammy: Taxpayers are giving money to the corporations and then paying a second time to meet the needs of the underfunded public schools. Corporate annual reports never mention the need to support the U.S. educational system that helped make their companies prosperous.