Originally posted on June 1 on The Huffington Post.

The bracing reality that America has two sets of rules -- one for the

corporate class and another for the middle class -- has never been more

indisputable.

The middle class, by and large, plays by the rules, then watches as

its jobs disappear -- and the Senate takes a break instead of extending

unemployment benefits. The corporate class games the system -- making

sure its license to break the rules is built into the rules themselves.

One of the most glaring examples of this continues to be the ability

of corporations to cheat the public out of tens of billions of dollars a

year by using offshore tax havens. Indeed, it's estimated that

companies and wealthy individuals funneling money through offshore tax

havens are evading around $100 billion a year in taxes -- leaving the rest of

us to pick up the tab. And with cash-strapped states all across the

country cutting vital services to the bone, it's not like we don't need

the money.

You want Exhibit A of two sets of rules? According to the White

House, in 2004, the last year data on this was compiled, U.S.

multinational corporations paid roughly $16 billion in taxes on $700 billion

in foreign active earnings -- putting their tax rate at around 2.3

percent. Know many middle class Americans getting off that easy at tax

time?

In December 2008, the Government Accounting Office reported

that 83 of the 100 largest publicly-traded companies in the country --

including AT&T, Chevron, IBM, American Express, GE, Boeing, Dow, and

AIG -- had subsidiaries in tax havens -- or, as the corporate class

comically calls them, "financial privacy jurisdictions."

Even more egregiously, of those 83 companies, 74 received government

contracts in 2007. GM, for instance, got more than $517 million from the

government -- i.e. the taxpayers -- that year, while shielding profits

in tax-friendly places like Bermuda and the Cayman Islands. And Boeing,

which received over $23 billion in federal contracts that year, had 38

subsidiaries in tax havens, including six in Bermuda.

And while it's as easy as opening up an island P.O. Box, not every

big company uses the dodge. For instance, Boeing's competitor Lockheed

Martin had no offshore subsidiaries. But far too many do -- another GAO

study found

that over 18,000 companies are registered at a single address in the

Cayman Islands, a country with no corporate or capital gains taxes.

America's big banks -- including those that pocketed billions from

the taxpayers in bailout dollars -- seem particularly fond of the Cayman

Islands. At the time of the GAO report,

Morgan Stanley had 273 subsidiaries in tax havens, 158 of them in the

Cayman Islands. Citigroup had 427, with 90 in the Caymans. Bank of

America had 115, with 59 in the Caymans. Goldman Sachs had 29 offshore

havens, including 15 in the Caymans. JPMorgan had 50, with seven in the

Caymans. And Wells Fargo had 18, with nine in the Caymans.

Perhaps no company exemplifies the corporate class/middle class

double standard more than KBR/Halliburton. The company got billions from

U.S. taxpayers, then turned around and used a Cayman Island tax dodge

to pump up its bottom line. As the Boston Globe's Farah

Stockman reported, KBR, until 2007 a unit of Halliburton,

"has avoided paying hundreds of millions of dollars in federal Medicare

and Social Security taxes by hiring workers through shell companies

based in this tropical tax haven."

In 2008, the company listed 10,500 Americans as being officially

employed by two companies that, as Stockman wrote, "exist in a computer

file on the fourth floor of a building on a palm-studded boulevard here

in the Caribbean." Aside from the tax advantages, Stockman points out

another benefit of this dodge: Americans who officially work for a

company whose headquarters is a computer file in the Caymans are not

eligible for unemployment insurance or other benefits when they get laid

off -- something many of them found out the hard way.

This kind of sun-kissed thievery is nothing new. Indeed, back in

2002, to call attention to the outrage of the sleazy accounting trick, I

wrote a column announcing I was thinking of moving my

syndicated newspaper column to Bermuda:

I'll still live in America, earn my living here, and enjoy

the protection, technology, infrastructure, and all the other myriad

benefits of the land of the free and the home of the brave. I'm just

changing my business address. Because if I do that, I won't have to pay

for those benefits -- I'll get them for free!

Washington has been trying to address the issue for close to 50 years

-- JFK gave it a go in 1961. But time and again Corporate

America's game fixers -- aka lobbyists -- and water carriers in

Congress have managed to keep the loopholes open.

The battle is once again afoot. On Friday, the House passed the American

Jobs and Closing Tax Loopholes Act. The bill, in addition to

extending unemployment benefits, clamps down on some of they ways

corporations hide their income offshore to avoid paying U.S. taxes. Even

though practically every House Republican voted against it, the bill passed 215 to 204.

The bill's passage in the Senate, however, remains in doubt, with

lobbyists gearing up for a furious fight to make sure America's

corporate class can continue to profitably enjoy the largess of

government services and contracts without the responsibility of paying

its fair share.

The bill is far from perfect -- it leaves open a number of loopholes

and would only recoup a very small fraction of the $100 billion

corporations and wealthy individuals are siphoning off from the U.S.

Treasury. And it wouldn't ban companies using offshore tax havens from

receiving government contracts, which is stunning given the hard times

we are in and the populist groundswell at the way average Americans are

getting the short end of the stick.

But the bill would end one of the more egregious examples of the

double standard between the corporate class and the middle class,

finally forcing hedge fund managers to pay taxes at the same rate as

everybody else. As the law stands now, their income is considered

"carried interest," and is accordingly taxed at the capital gains rate

of 15 percent.

The issue was famously brought up in 2007 by Warren Buffett when he noted that his receptionist paid 30 percent of her

income in taxes, while he paid only 17.7 percent on his taxable income

of $46 million dollars.

As Robert Reich points out, the 25 most successful hedge fund

managers earned $1 billion each. The top earner clocked in at $4

billion. And all of them paid taxes at about half the rate of Buffett's

receptionist.

Closing this outrageous loophole would bring in close to $20 billion

dollars in revenue -- money desperately needed at a time when teachers

and nurses and firemen are being laid off all around the country.

Hedge fund lobbyists are currently hacking away at the Senate's

resolve with, not surprisingly, some success. And it's not just

Republicans who are willing to do their bidding, but a number of

Democrats as well. Indeed, it was a Democrat -- Chuck Schumer -- who led the fight against closing the loophole in

2007.

"I don't know how members of Congress can return home and look an

office manager, a nurse, a court clerk in the eye and say 'I chose hedge

fund managers instead of you and your family'," said Lori Lodes of the SEIU.

Nicole Tichon, of the U.S. Public Interest Research Group, framed the debate in similar terms:

It's hard to imagine anyone campaigning on protecting hedge

fund managers, Wall Street banks and companies that ship jobs and

profits overseas. It's hard to imagine telling constituents that somehow

they should continue to subsidize these industries. We're anxious to

see whose side the Senate is on and what story they want to tell the

American people.

Up until now, the story has been a familiar narrative of Two

Americas, with one set of rules for those who can afford to hire a fleet

of K Street lobbyists and a different set for everybody else. It's time

to give this infuriating tale a different -- and far more just and

satisfying -- ending.

AMP Section Name: Money & Politics