Patriot Corporations

Are you tired of "the billions of dollars in subsidies and tax breaks our government gives to companies that outsource jobs, exploit workers (both here and overseas) and dodge taxes" that Rep. Jan Schakowsky (D-IL) described in her "Patriot Corporations" essay in the February 6th issue of The Nation?

You're not alone.

Call Congress at (888) 355-3588-- ask them to make Rep. Schakowsky's common-sense "Patriot Corporations" proposal real (much more on this below).

Help start spreading the word here in the grass roots to send a strong message to Washington on this.

It's time.

Joel Tyner
Dutchess County Legislator
Clinton/Rhinebeck
324 Browns Pond Road
Staatsburg, NY 12580
(845) 876-2488

p.s. Anyone in the U.S. is eligible to sign this petition; wording of resolution refers to Dutchess County because I will try to get our County Legislature here to pass a resolution supporting Rep. Schakowsky's "Patriot Corporations" proposal.

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[Contact our County Legislature at [email protected] to help get this resolution below passed (note-- much of the wording of this resolution is taken from Rep. Schakowsky's February 6th article for The Nation).]

DUTCHESS COUNTY'S TAXPAYERS AND WORKERS NEEDS "PATRIOT CORPORATIONS" LEGISLATION PASSED IN WASHINGTON

WHEREAS, CBS News reported on April 25th last year in its "Tiny Nations Home to Trillions" story on offshore tax shelters for the wealthy in seventy mostly tiny nations that, "the US alone probably loses $60 billion a year" in tax revenue because of such shelters, and

WHEREAS, Lou Dobbs stated on CNN on October 5, 2004 that, "the federal government has awarded billions in government contracts to companies that shelter their profits or set up headquarters in offshore tax havens; more than half of the top 100 contractors doing business with the government also have subsidiaries in tax-haven countries; that may explain why these corporations now pay only about 6 percent of federal revenue, the lowest level since World War II," and

WHEREAS, Accenture, for example, advises other companies how to outsource jobs overseas while avoiding its fair share of tax payments by incorporating offshore in Bermuda; yet like many other US corporations, Accenture continues to qualify for tax breaks, and it currently has more than $500 million in government contracts, courtesy of taxpayers, and

WHEREAS, small towns are devastated by plant closings; often these plants are owned by profitable corporations like Maytag, which moved its Galesburg, Illinois, plant to Reynosa, Mexico, in 2004, leaving 1,600 workers without their good-paying jobs, and

WHEREAS, as part of this restructuring, Maytag recognized a pre-tax charge of $67.1 million in 2002, which resulted in a $44.3 million after-tax reduction in corporate earnings; American taxpayers financed exporting American jobs to Mexico by nearly $23 million, and

WHEREAS, the number of manufacturing jobs in the United States has fallen all the way back to the level it was in 1945, and our government continues to provide incentives, without penalties, to companies harming our economy, and

WHEREAS, to end this race to the bottom, we must stop rewarding outsourcers and tax dodgers, and start rewarding companies that care about America and American workers, and

WHEREAS, a sensible proposal to create "Patriot Corporations" was developed by Bill Edley, a former State Representative in Illinois, and political scientist Robin Johnson of Monmouth College, and is now being advocated by Rep. Jan Schakowsky, as highlighted in the February 6th issue of The Nation, and

WHEREAS, funded by rolling back all of President Bush's tax cuts and recouping taxes lost through corporate offshore loopholes, the Patriot Corporations program would be entirely revenue-neutral and voluntary, and

WHEREAS, the Patriot Corporations program would give significant tax advantages and shareholder incentives to corporations that agree to create a real partnership with American workers; Patriot Corporations would also move to the front of the line for federal contracts, and

WHEREAS, to qualify, corporations would have to produce at least 90 percent of their US-sold goods and services in the United States; they would also have to limit top management salaries to 100 times the lowest-paid full-time worker, spend at least 50 percent of their research and development budgets in the United States, operate a profit-sharing plan for all employees, contribute at least 5 percent of payroll to a portable pension fund and pay at least 70 percent of the cost of a standardized and portable health insurance plan, agree to neutrality in employee organizing drives, be in good standing with EPA, OSHA and NLRB regulations, and agree not to price-gouge consumers, and

WHEREAS, companies that meet those standards are the ones that deserve incentives; with Patriot Corporations we can create a new class of companies as committed to American workers as they are to selling goods in the American market; we can create a new patriotic ethic in America-- one that unites workers and their employers in the mutual goal of building a stronger and more prosperous business sector that can vigorously and proudly compete in the twenty-first-century global economy, and therefore be it

RESOLVED, that the Dutchess County Legislature hereby requests that Congress and President Bush pass and sign into law Patriot Corporations legislation as stated above, and be it further

RESOLVED, that a copy of this resolution be sent to Representative Maurice Hinchey, Representative Sue Kelly, Representative John Sweeney, Senator Hillary Rodham Clinton, Senator Chuck Schumer, and President George W. Bush.

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"Patriot Corporations" by Rep. Jan Schakowsky [The Nation 2/6/06]
[TheNation.com/doc/20060206/schakowsky]

If you want to make Americans of all stripes mad, tell them about the
billions of dollars in subsidies and tax breaks our government gives
to companies that outsource jobs, exploit workers (both here and
overseas) and dodge taxes. Tell them about Accenture, for example,
which advises other companies how to outsource jobs overseas while
avoiding its fair share of tax payments by incorporating offshore in
Bermuda. Yet like many other US corporations, Accenture continues to
qualify for tax breaks, and it currently has more than $500 million
in government contracts--courtesy of taxpayers.

Meanwhile, urban communities and small towns are devastated by plant closings. Often these plants are owned by profitable corporations
like Maytag, which moved its Galesburg, Illinois, plant to Reynosa,
Mexico, in 2004, leaving 1,600 workers without their good-paying
jobs. The number of manufacturing jobs in the United States has
fallen all the way back to the level it was in 1945. And our
government continues to provide carrots--and no sticks--to companies
harming our economy.

[Note-- "As part of the restructuring, Maytag recognized a pre-tax charge of $67.1 million in 2002, which resulted in a $44.3 million after-tax reduction in corporate earnings. In other words, American taxpayers financed exporting American jobs to Mexico by nearly $23 million." (this from "Restoring American Manufacturing Might" by Bill Edley and Robin Johnson-- see more on them below; also CDFA.net/cdfa/press.nsf/pages/886).]

To end this race to the bottom, we must stop rewarding outsourcers
and tax dodgers, and start rewarding companies that care about
America and American workers.

A sensible proposal to create "Patriot Corporations" was developed by
Bill Edley, a former State Representative in Illinois, and political
scientist Robin Johnson of Monmouth College. Funded by rolling back
all of President Bush's tax cuts and recouping taxes lost through
corporate offshore loopholes, the Patriot Corporations program would
be entirely revenue-neutral and voluntary. It would give significant
tax advantages and shareholder incentives to corporations that agree
to create a real partnership with American workers. Patriot
Corporations would also move to the front of the line for federal
contracts--no small incentive.

To qualify, corporations would have to produce at least 90 percent of
their US-sold goods and services in the United States. They would
also have to:

limit top management salaries to 100 times the lowest-paid full-time worker;

spend at least 50 percent of their research and development budgets
in the United States;

operate a profit-sharing plan for all employees, contribute at
least 5 percent of payroll to a portable pension fund and pay at
least 70 percent of the cost of a standardized and portable health
insurance plan;

agree to neutrality in employee organizing drives;

be in good standing with EPA, OSHA and NLRB regulations;

and agree not to price-gouge consumers.

Companies that meet those standards are the ones that deserve
carrots. With Patriot Corporations we can create a new class of
companies as committed to American workers as they are to selling
goods in the American market. And we can create a new patriotic ethic
in America--one that unites workers and their employers in the mutual
goal of building a stronger, more prosperous, more democratic
business sector that can vigorously and proudly compete in the
twenty-first-century global economy.

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Research by the Tax Justice Network suggests that "approximately
US $11.5 trillion" in assets are held offshore by "high net-worth
individuals." Furthermore, the taxes not paid as a result of these
funds being held offshore "might exceed US $255 billion each year."
See "The Price of Offshore" (March 2005) at TaxJustice.net;
GlobalPolicy.org/nations/sovereign/taxindex.htm.

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"Leveling the Playing Field" by Lou Dobbs [CNN 10/5/04]
[CNN.com/2004/US/10/04/corporate.taxes/]

We hardly need more evidence of the unparalleled political
power of Corporate America. But while Congress recently approved
billions more in corporate tax cuts, a new report showed that the
United States' biggest and most profitable companies have been paying less in federal income taxes over the past three years despite
reporting higher profits. And many of them are paying no taxes at all.

Rich corporate tax breaks and loopholes are not only making it easier
for large U.S. multinationals to shelter their profits earned from
operations in this country, but they're also putting pressure on
smaller American companies to cut costs just to compete. And that has
led to an increase in the number of jobs we've mindlessly outsourced
to cheap foreign labor markets. Closing these loopholes may not be
the sole solution to outsourcing, but it would serve the dual purpose
of making sure all American companies compete on a truly level
playing field and restraining our already unsustainable record twin
deficits.

A new study conducted by Citizens for Tax Justice found that the
average effective tax rate for the largest 275 American corporations
dropped by a fifth over the past three years, from 21.4 percent in
2001 to 17.2 percent in 2003. The 275 companies reported pretax
profits from U.S. operations of almost $1.1 trillion in that
three-year period, yet they reported and paid taxes on only $557
billion. That rate is about half of the statutory 35 percent
corporate tax rate that companies are obligated to pay to the
government.

Some corporations are paying no federal income taxes at all, and
others are actually making more money after taxes, mostly due to tax
havens and additional breaks from the Bush administration in recent
years. Twenty-eight of the 275 companies surveyed paid no tax at all
from 2001 to 2003, despite having profits in the period of nearly $45
billion. More than 80 paid no income tax in at least one of the past
three years, and last year, 46 of the 275 companies surveyed paid no
federal income tax.

The report echoes recent Commerce Department data, which showed
corporate tax payments fell 21 percent from 2001 to 2003. During that
same period, though, the Commerce Department reported that pretax
corporate profits rose 26 percent. U.S. multinationals are earning
higher profits, but they're also finding more ways to protect that
money from flowing back into our country.

Martin A. Sullivan, contributing editor for Tax Notes and former
Treasury Department economist, blames the corporate tax problem on
the laws rather than the U.S. multinationals themselves.

"I think Congress and the administration have dropped the ball on
enforcing and strengthening the laws," Sullivan said. "It's not just
the corporations on their own doing this, and they're not doing
anything illegal. They're doing everything within the law, but they
have a lot of leeway within the law right now."

Not only is the government weakening the laws to aid these
corporations, but they're also handing out more than just tax breaks.
The federal government has awarded billions in government contracts
to companies that shelter their profits or set up headquarters in
offshore tax havens. More than half of the top 100 contractors doing
business with the government also have subsidiaries in tax-haven
countries. That may explain why these corporations now pay only about
6 percent of federal revenue, the lowest level since World War II.

Both political parties in Congress should be doing more to prevent
these contracts from going to these U.S. multinationals. After
Accenture was awarded a $10 billion Homeland Security Department
contract in June, the department's largest contract ever, new
legislation was proposed to prevent these corporations from bidding
on Homeland Security contracts. That's a good first step, but all
government contracts should favor companies that do business here,
employ our country's working men and women and pay taxes here as well.

Hard-working men and women are certainly paying their share. It's
time for our business leaders to make sure they do their part as well.

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"Tiny Nations Home To Trillions" by David R. Francis
[Christian Science Monitor 4/25/05]
[CBSNews.com/stories/2005/04/25/world/main690492.shtml]

"The tax burden has been shifted from those who can afford it to
middle- and low-income households, and from businesses to working
people and consumers."
John Christensen, Tax Justice Network

As some Americans write checks on tax day (above, the New York City
main post office on April 15th), others have squirreled away an
estimated $60 billion in tax shelters. (AP)

Although they have only 1 percent of the world's inhabitants, they
hold a quarter of United States stocks and nearly a third of all the
globe's assets.

They're tax havens: 70 mostly tiny nations that offer no-tax or
low-tax status to the wealthy so they can stash their money. Usually,
the process is so secret that it draws little attention. But the sums
- and lost tax revenues - are growing so large that the havens are
getting new and unaccustomed scrutiny.

For example: When London's Tax Justice Network (TJN) reported a month ago that rich individuals worldwide had stashed $11.5 trillion of
their assets in tax havens, it caused a fuss in Europe. "Super-rich
hide trillions offshore," blazed a British newspaper headline.

Although that report received little notice outside Europe, there are
rumblings of concern in the United States. That's not surprising.
Nations lose an estimated $255 billion in tax revenues a year because
of the havens, according to TJN. The US alone probably loses $60
billion a year, a tax expert estimates.

The loss hits not only prosperous industrial countries, but also
developing nations. As a result, dozens of church groups and other
nongovernmental organizations concerned with world poverty are
joining tax reformers in what will probably become a major political
battle. They aim to stem the outflow of money from poor nations into
tax havens - an outpouring that may exceed today's global foreign aid
of some $60 billion a year.

"If we are serious about reducing poverty, one of the first things we
need to tackle is an international financial system run by the rich,
for the rich, at the expense of the poor," states David Woodward,
director of the New Economics Foundation, a London think tank.

Corrupt officials in poor nations, illegally, and multinational
corporations, mostly legally, siphon huge amounts of money into bank
accounts and shell companies in 70 tax havens, such as the Cayman
Islands, Bermuda, and Jersey.

"It's going to be the next major issue," forecasts Lucy Komisar, a
New York journalist writing a book on offshore banking. She compares
the drive against tax havens with the civil rights movement of the
1960s, in which she participated, and the feminist and environmental
movements of more recent decades.

Ms. Komisar helped organize a meeting on Capitol Hill April 7 to get
an American branch of the TJN going. Representatives of several
members of Congress, the AFL-CIO and a few other unions, several
prominent tax research groups, and the United Church of Christ
attended. About a dozen well-known activist groups were also present,
including Public Citizen, Greenpeace, and the National Council of La
Raza.

By cracking down on capital flight and corruption in developing
countries, "we wouldn't have so much poverty in the world," says
Robert McIntyre, executive director of Citizens for Tax Justice. He
offered at that meeting to find funding for the TJN group in the US
and recruit a paid director.

Not everyone sees it this way. The Center for Freedom and Prosperity
in Washington, for example, sees tax havens as "an escape hatch for
overburdened taxpayers." It relishes "tax competition" between
nations. The center also argues that bank secrecy in countries like
Switzerland can protect the money of those who face persecution by
repressive regimes.

The tax-haven numbers in the TJN report were calculated by a British
research firm from conservative sources - such as Merrill Lynch's
"World Wealth Report" and the Boston Consulting Group's "Global
Wealth Report." The trillions of dollars reported don't include money
parked in tax havens by companies - probably also a massive sum.

There are about 3 million shell companies (set up largely to duck
taxes) in offshore tax havens, Komisar reckons. These tiny tax havens
hold 31 percent of total world assets and 26 percent of the stock of
US multinationals.

"As our economies have globalized, our tax systems remain nationally
based and measures that should have been put in place decades ago to improve international tax cooperation have not been put in place,"
says John Christensen, international coordinator in London of TJN.
"So the tax burden has been shifted from those who can afford it to
middle- and low-income households, and from businesses to working
people and consumers."

In the late 1990s, industrial-nation negotiators reached an agreement
to pressure tax-haven countries to stop facilitating money
laundering, drug dealing, and tax evasion. The deal was championed by the Clinton administration. But it was squashed by the new Bush
administration, keen for tax cuts.

Then came 9/11 and a recognition that terrorists and drug dealers use
the same international finance channels as tax dodgers. So the Bush
administration "has become less strident in its support for bank
secrecy and other nondisclosure policies," notes Mr. McIntyre.

Now, a pioneer opponent of tax evasion through tax havens, Sen. Carl
Levin (D) of Michigan, has joined with Sen. Norm Coleman (R) of
Minnesota to sponsor the Tax Shelter and Tax Haven Reform Act. It
would enable the Treasury secretary to designate a tax haven as
"uncooperative" with Internal Revenue Service investigations. Though
not a panacea, the bill, soon to be reintroduced in the current
Congress, would give tax investigators a weapon: Income from such
designated tax havens would lose some tax advantages.

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"Profit Laundering and Tax Evasion: The Dirty Little Secret of Financial Globalization"
by Lucy Komisar [Dissent Spring 2005; excerpted here below]
[DissentMagazine.org/menutest/articles/sp05/komisar.htm]

The debate about cutting taxes for corporations and the wealthy is a
false one. The issue is not whether transnational corporations and
the very rich benefit from tax cuts, but that many of them walk away
from all taxes. A General Accounting Office report found that between
1996 and 2000, 61 percent of all U.S. companies paid zero federal
taxes. They accomplish this primarily through "profit laundering," a
phrase that ought to be on the lips of every social critic.

Massive profit laundering sucks resources out of the United States
and other countries, beggars public programs, and lays waste the
social contract on which taxation must be based: that everyone pays a
fair amount. It hobbles legislators and officials who want to spend
money on social programs but can't dispute right-wing arguments that
"there is no money." There is no money because it's been filched from
public coffers with the help of the world's big banks, investment
companies, and offshore financial centers. The scam is accomplished
via offshore shell companies and bank accounts, and it is happening
on a global scale.

Figures on the amount of wealth offshore are hard to come by, as none
of the international financial institutions has seen fit to lay out
the global picture. In 1999, Merrill Lynch's "World Wealth Report"
estimated that one-third of the wealth of the world's "high net worth
individuals" (as banks like to call them), then $11 trillion, might
be held offshore. In 2004, Merrill Lynch revised its wealth figure to
$28.8 trillion, but it was no longer estimating how much of that was
hidden in tax havens. As the percentage of wealth offshore has been
growing, the number would likely be $10 or $12 trillion. Such an
estimate was made by "The Global Wealth Report" for 2003 by the
Boston Consulting Group (BCG). It estimated the total holdings of
cash deposits and listed securities of high-net-worth individuals at
$38 trillion and then broke that down by North America-$16.2
trillion, of which less than 10 percent was controlled offshore;
Europe-$10.3 trillion of which between 20 percent to 30 percent was
controlled offshore; Middle East and Asia-Pacific area-$10.2
trillion, with assets controlled offshore ranging from 10 percent
(Japan) to 70 percent (ME); and Latin America-$1.3 trillion, of which
more than 50 percent is held offshore.

How much of the money that moves around the world is offshore? The
International Monetary Fund estimates that assets held in tax havens
equal about 50 percent of total cross-border assets. And according to
Merrill Lynch and BCG estimates, assets held in tax havens, beyond
the reach of effective taxation, would equal one-third of total
global gross domestic product, the value of goods and services, which
in 2003 was $36.2 trillion.

If the U.S. government were able to collect these evaded taxes, they
would fully fund every social program currently on the books. During
the 1950s, U.S. corporations accounted for 28 percent of federal
revenues. Now, corporations represent just 11 percent. If big
corporations paid taxes of 35 percent on their U.S. profits, as the
law requires, corporate income taxes in 2002 would have been $308
billion instead of an estimated $136 billion. The reverberations of these losses extend to the states. The Multistate Tax Commission estimates that state governments lose as much as $12.4 billion a year to various forms of tax sheltering.

How It Works

This is how the international tax-evasion system works, both for
corporations and for individuals. In both cases, the system is based
on the seventy "offshore" centers-tax havens-where secret shell
companies and bank accounts are used to carry out transactions that
create paper profits and losses, and where the legerdemain is immune from the eyes of tax authorities and law enforcement. There are about three million shell companies. Offshore centers, with 1.2 percent of the world's population, hold 31 percent of the assets and 26 percent of the stocks of American multinationals.

The offshore venues assess little or no taxes on foreign-owned shell
companies. Some of these shells have no function other than to hold
the assets of corporations or individuals. The offshore banks that
handle the shell company money are not underground operations run by unknown shady characters. The banks' managers may indeed be shady, but most of them work for subsidiaries of the multinationals--
Citibank, Bank of New York, Credit Suisse, Barclays, Sociйtй
Gйnйrale, Deutsche Bank, and others.

More than half of world trade is within corporations, not between
them. And half the world's trade goes through offshore centers, as
corporations shift profits to where they can avoid taxes. Companies
set up offshore "subsidiaries" that, on their books, perform
functions that allow the firms to cut their taxes. The simplest ploy
is the "sale" and "rental" back of a company's logo or other
intangible assets. Or money stashed in tax havens is "loaned" back to
the U.S. company, which then deducts interest payments on its tax
returns.

Even more important is transfer pricing: allocating profits for tax
and other purposes among parts of a multinational corporate group.
Offshore "trading" offices or companies handle imports and exports,
buying a U.S. export from a company at a sharply reduced paper cost
and selling it abroad for the real-world market value, so the
exporting company makes no profit. That stays with the tax haven
trading company. In the reverse, a company buys goods at a real price
and "sells" to the U.S. firm at a grossly inflated one, so the U.S.
firm has a huge cost to deduct when it uses the item in manufacture
or resells it at a loss...