Corporate Tax Crackdown Faces Big Obstacles From Lobbyists

As millions of average americans are filing their tax returns, most are doing this without the help of lobbyists, working to make sure the tax code is tailored to minimize their obligations to Uncle Sam. Yet that’s exactly what many top U.S. corporations spend millions to accomplish, and it’s all legal.

In America, some of the largest corporations are publicly taking the heat paying relatively small tax bills, or none at all, they are operating legally as the tax code exists now. And GE is on the top of the list. Many are wondering how a company could report worldwide profits in excess of $14 billion, more than $5 billion from operations here in the U.S., and still owe nothing in taxes.

GE says it will have a “small” tax liability for 2010, but attributes that to losing “billions of dollars in GE Capital” because of the global financial crisis. Andrew Williams, GE spokesman, says the corporation is fully compliant with tax laws — “no exceptions.”

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But there are others benefiting from how the tax laws are written, such as, Bank of America, Boeing, Verizon. All are earning billions and either paying nothing or actually getting refunds. It’s all a result of laws heavily influenced by Washington’s top lobbyists.

Dave Levinthal, editor of OpenSecrets.org, which tracks lobbying and campaign spending, says most Americans are likely unaware of just how beneficial lobbying can be for big business. “They can gather up incredible amounts of resources in order to lobby the White House, lobby Congress — really cover the waterfront in terms of their political liabilities,” Levinthal said.

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And it’s no secret that GE has a cozy relationship with President Obama. Earlier this year, President Obama tapped GE CEO Jeffrey Immelt to head up his Council on Jobs and Competitiveness. Levinthal says GE is one of the best when it comes to putting together a “full frontal assault on politics in Washington.”

And if Obama gets his way, there could soon be big changes to these companies, and supposedly, including GE, but that’s skeptical.

At a town hall meeting in Pennsylvania last week the president noted, “We have so many loopholes that it turns out you’ve got a whole bunch of companies who are paying no taxes or barely paying taxes or they keep their money in offshore accounts.” Obama says it’s time to reform U.S. tax laws: “What you pay in taxes should not depend on how good your lawyer is.”

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Congress will have to be a partner in any revision to current tax law, and that could present a significant challenge for the administration. Even if Congress can be convinced to make real changes to U.S. tax laws, don’t expect corporate tax bills to skyrocket. Eric Toder, co-director of the Urban-Brookings Tax Policy Center, said, “It’s very hard in a world, which is global, for any one country to tax corporations where they have an ability to either shift where they report income or shift their residence,” Toder cautions, adding, “There’s no magic bullet.”

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Williams called the old system complex, and uncompetetive. According to Williams, reforming the law, should make sure that everyone pays their fair share. It remains to be seen whether this administration will find enough willing participants on Capitol Hill to bring about real, lasting change in the way U.S. businesses are taxed.