The Corporate Observer Blog : Consumer Protection, Corporate Abuse : Class Action Lawyer & Attorney : Steven Berk Law Firm

Today the Corporate Observer welcomes Gouri Bhat, a Partner in Berk Law's Austin, TX office, who addresses corporate tax avoidance – a discussion notably missing from our mainstream media.  Please enjoy.

The chasm between the individual and the corporation is never bigger than during tax season.  As millions of average, procrastinating Americans like me – individuals, households, small business owners – put the final touches on their income tax returns, thrilled to discover that they may be getting a small refund ($500 this year!) or at least don’t owe any money, it’s always shocking to be reminded that the largest, most profitable U.S. corporations somehow manage to completely avoid paying taxes.  Their refunds are a lot bigger than mine, too.  How do they do it?

Just a few examples: In 2009, after receiving almost $1 trillion in bailout money from taxpayers , Bank of America made $4.4 billion in profits, and then received a $1.9 billion tax refund.  Exxon Mobil made $19 billion in profits, and then took home a $156 million rebate from the IRS.  And most notoriously, General Electric – the nation’s largest corporation and most aggressively creative tax-avoider – reported $14.2 billion in profits in 2009 ($5.1 billion from its U.S. operations), but still claimed a $3.2 billion tax benefit.  And the list goes on.

With all the furor over the Bush tax cuts on the wealthiest households (“to renew or not to renew”), corporate tax reform is much less discussed in mainstream media.  Some estimates are that by simplifying the maze of tax loopholes and ending the abusive use of offshore tax shelters, the federal government could raise more than $400 billion in the next decade.  That would make for a pretty good start on deficit reduction.

Guest post by Gouri Bhat.

• Print
• Comments
• Trackbacks
• Share Link

All those Ivy League graduates working on trading formulas that yes, will yield some short-term profits, but in the end merely rachet up volatility and risk in the market – that will no doubt find Wall Streeters back in the halls of Congress looking for a handout.

Just when we thought maybe, just maybe, greed would take a back seat to long term value and prudent compensation that incentivizes sound risk taking, the WSJ reports that pay at public companies on Wall Street will reach a new record: $135 billion.  Wow.

What’s up with that?  The same Wall Street that brought us to the brink of a worldwide catastrophic depression; just ask Federal Reserve Board Chairman Ben Bernanke and Former Treasury Secretary Hank “I’m vomiting in public from all the stress” Paulson how close we were.  The same Wall Street that came hat in hand to Uncle Sam and the American Public, seeking oh, “about a trillion dollars” should do it.  

Ok.  So some of that money was paid back.  But from my vantage point, the driver there was Wall Street’s singular desire to be out from under additional regulation imposed on them by the TARP and other federal bailout programs.

I would not be so outraged if the American public were getting something for these record-breaking salaries.  Hey how 'bout the creation of some jobs fellas?  Last time I checked unemployment remained dangerously close to 10%.  What about some innovative financial product to reduce the deficit or some effort to stem the tide of home foreclosures?  Nope.  Instead it’s the same story.  Trading on exotic financial instruments, arbitrage, shorting markets, stocks and commodities.  That’s where the money is and that’s what we’ll get.  All those Ivy League graduates working on trading formulas that yes, will yield some short-term profits, but in the end merely rachet up volatility and risk in the market – that will no doubt find Wall Streeters back in the halls of Congress looking for a handout.

I hope when that happens – and it will – policy makers have the guts to stand up to the Street and impose limitations and sanity to future compensation.

• Print
• Comments
• Trackbacks
• Share Link

This Blog typically supports Main Street heroes, but this week we are saluting one of Wall Street’s greatest: Warren Buffett. Buffet is a rare breed, a multi-billionaire who has not lost touch with normal society and is a daily champion of Main Street America.

Appearing on BBC 2 Monday night, Warren Buffett once again called for a progressive tax system where the money of the rich is spread more equally throughout society. Some have called this socialism, but Buffett seems to think this it is just how a practical, realistic society should work. He decided to compare our modern society with that of a small group trapped on a remote island with no hope of rescue. Buffett wisely claimed that if 20 people were trapped on such an island and decided to grow rice, it would be ludicrous to assume that we would ask the five smartest people to simply trade futures on the rice. He added that it would be even more ludicrous to assume that these elites would be asked to give less back to the community than the people doing the actual work.

            Buffett claimed that the rich in America – including himself and Bill Gates – are the beneficiaries of circumstance. Had they been born in another time or another place they may have been some animal’s lunch, but being born in America at the times when they were, these giants of capitalism were allowed to grow into the magnates that they are today. Men and Women like Gates and Buffett, though deserving of praise should not be treated as untouchable elites. Buffett famously showed the world that he paid a lower rate of taxes (about 17%) than the person who cleans his office (about 30%). It is time the tax system reflected more progressive social values rather than protect the rich and their interests.

            Buffett’s main claims are easily comprehendible and should be quite easy for all to accept:

·        The great heads of industry and capitalism should not “delude” themselves into thinking that they are somehow superior individuals

·        The rich should play a larger part in repaying the masses of people who got the short ends of the sticks and allowed the privileged few to succeed

·        The financial community needs to readjust its ideas of wealth to include values of social responsibility

Buffett was right to claim that Americans are infuriated by losses of jobs and foreclosures with no judicial intervention or punishment. A little more government regulation and taxation to repay the less fortunate should not send investors running for the hills (or in this case, the Cayman Islands and Switzerland), but rather it should be each person’s social duty to contribute their fair share to society.

Nobody is asking for fully equal distribution of wealth or a 90% income tax, but simply a sense of moral obligation and a reevaluation of the importance of personal wealth over societal wealth. It is time Wall Street stopped its selective learning of financial lessons from the Sage of Omaha and started respecting his social wisdom as well.

Assisted by Zach Kady

• Print
• Comments
• Trackbacks
• Share Link