America’s Blue Chip Tax Cheats

PHILADELPHIA – Like lots of kids his age, 17-year old Kevin Shields favors his hair long and his baseball cap backward. But Shields – who corresponds regularly with Noam Chomsky – isn’t a typical high school senior. On a chilly Saturday morning in late March, he is on a city street corner leading a group of fair tax advocates under the auspices of US Uncut Philly, protesting against Bank of America for its failure to pay any U.S. income taxes in 2009 and 2010.

In between chants of, ​“When they say cut back, we say fight back!,” Shields engages passersby, educating them on the finer points of corporate tax law with a level of proficiency and confidence that belies his youth. ​“I’ve always known that there were two sets of rules in this country: one for the rich elite and one for the rest of us,” Shields says. 

US Uncut Philly is one of more than 40 local chapters of a growing movement that took to the streets on March 26 to protest what its members see as a grave injustice: corporate tax avoidance. A 2008 Government Accountability Office report found that roughly a quarter of the largest U.S. companies reported zero tax liability in 2005. A more recent analysis conducted last year for The New York Times determined that of the 500 companies on Standard & Poor’s stock index, 115 paid a tax rate of less than 20 percent for the past five years, well below the 35 percent prescribed by tax law. 

But that’s nothing compared to companies like Boeing, which actually received a tax rebate totaling $75 million over the years 2008-2010 (while recording $9.7 billion in profits), or General Electric (GE), which had an effective tax rate of –15.8 percent between 2006 and 2010, thanks to a tax department often referred to as ​“the world’s best tax law firm,” according to the Times. Citizens for Tax Justice estimates that corporate loopholes will cost the U.S. Treasury Department $365 billion in 2011. 

How do corporations pull it off? Mainly through hundreds of so-called ​“tax expenditures” in U.S. tax law. One of the most expensive tax breaks is a rule that defers taxes on profits made by U.S. businesses overseas until that money is brought back to the United States. Industry estimates put the total earnings affected by the rule at $1 trillion.

“Special tax breaks are just another form of spending – instead of giving a corporation a government grant or contract, the IRS gives them a special break on their taxes,” says Seth Hanlon, director of fiscal reform for the Center for American Progress. President Barack Obama has come out in support of reforming the corporate tax code, but critics say his January appointment of GE CEO Jeffrey Immelt to head his Council on Jobs and Competitiveness is not an auspicious sign.

The March 26 protest was US Uncut’s second national action. The first, held February 26, spanned 50 cities and came just 12 days after its founding by a 23-year-old journalist named Carl Gibson. Gibson took a page from the British group UK Uncut to launch a grassroots movement in his native Jackson, Miss. US Uncut activists typically engage in low-level civil disobedience. 

The organization’s next major national action is scheduled for April 18, aka Tax Day. ​“The day I stop fighting,” Shields says, ​“is the day I start wasting my time on earth.”