Third World America - Arianna Huffington [21]
It’s as easy as opening up an island P.O. box, which is why another GAO study found that more than 18,000 companies are registered at a single address in the Cayman Islands, a country with no corporate or capital gains taxes.39
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 Caymans.40 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 Islands address to reduce its expenses.41 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, KBR 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.”42 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 published a tongue-in-cheek newspaper column announcing I was thinking of moving my syndicated newspaper column to Bermuda.43 “I’ll still live in America,” I wrote, “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 fifty years—JFK gave it a go in 1961.44 But time and again corporate America’s game fixers—a.k.a. lobbyists—and water carriers in Congress have managed to keep the loopholes open.
The battle is once again afoot. While Congress considers legislation that would clamp down on some of the ways corporations hide their income offshore to avoid paying U.S. taxes, corporate lobbyists are furiously fighting to make sure America’s corporate class can continue to enjoy the largesse of government services and contracts without the responsibility of paying its fair share.
The latest tax-reform bills are far from perfect—they leave open a number of loopholes and would only recoup a very small fraction of the $100 billion that corporations and wealthy individuals are siphoning off from the U.S. Treasury.45 And they 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 against the way average Americans are getting the short end of the stick.
But the bills would end one of the more egregious examples of the tax policy double standard, 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.46
According to former