opinion
Avoiding Taxes Like Big Corporations
“challenging People to Shape
a better Future Now”
b ErNIE F oStEr
Founder/Publisher
b obbIE D orE F oStEr
executive editor
t ED b aNkS
advertising Manager
J ErrY F oStEr
account executive
l ISa l ovINg
news editor
b rIaN S tIMSoN
reporter
D avID k IDD
graphic Designer
M oNIca J. F oStEr
Seattle office Coordinator
J ulIE k EEFE
S uSaN F rIED
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I
’m an accountant. My college
degrees and CPA license are
the intellectual properties that
enable me to earn a living. Now
suppose that I formed a corpora-
tion to deliver my services, then
took my diplomas and license off
my wall and placed them in a safe
deposit box in a Luxembourg
bank. When clients came to my
Oregon office, I would explain
that the value of my services was
represented by the diplomas and
license now held in the offshore
bank, and they should send their
payment to my corporation housed
at a PO Box in Luxembourg.
Using this little accounting trick, I
would be able to avoid paying
U.S. taxes, until I brought those
“foreign” funds back to the United
States.
If I spun this ludicrous tale to my
clients, I expect most of them
would leave my practice immedi-
ately and find a different account-
ant.
But this accounting acrobatics is
exactly the sort of transaction that
hundreds of U.S. multinational
corporations use to avoid paying
billions of dollars annually in U.S.
corporate
income
taxes.
Technology, pharmaceutical and
entertainment corporations, whose
profits depend heavily on patents,
trademarks and copyrights, have
aggressively shifted profits from
the United States, to one of dozens
of tax havens that charge little or
no taxes.
Bloomberg Business Week
recently illustrated examples of
this tax avoiding behavior: Forest
Laboratories “sells nearly 100 per-
cent of its drugs in the U.S. – and
cuts its U.S. taxes dramatically by
attributing the bulk of its profits to
t rI l IbrIuM
Brian Seltzer
a law office in Bermuda. …
Google reduced its income taxes
by $3.1 billion over three years by
shifting income to Ireland, then
the Netherlands, and ultimately to
Bermuda.”
These tax avoiding strategies
cost the U.S. Treasury more than
$100 billion a year. And they have
led to more than $1.2 trillion in
35% corporate income tax that
would otherwise be owed.
The coalition calls itself WIN
America, but the numbers
involved in the corporate tax holi-
day mean a real loss for America.
The
Congressional
Joint
Committee on Taxation has calcu-
lated this tax windfall would cost
$80 billion, money that would be
made up with higher taxes on
small business people like me, or
through reduced government serv-
ices and infrastructure upon which
all businesses, communities and
These tax avoiding strategies cost the
U.S. Treasury more than $100 billion a
year
liquid assets being stashed off-
shore by U.S. corporations.
A new coalition of corporate tax
avoiders including Google, Apple
Computer, Pfizer, Duke Energy
families depend.
Tax amnesty programs are noth-
ing new. The IRS has a couple of
times allowed individual taxpay-
ers to declare hidden offshore
Creating an incentive for such anti-
social behavior through preferential
tax rates will only serve to accelerate
the offshoring of U.S. profits through
fictional transactions
and an array of industry trade
groups are demanding that
Congress pass a special tax break
that would reward these tax
avoiders who “repatriate,” or bring
back their offshore stash to the
U.S., with a 5.25% tax rate, not the
assets and pay both the full tax due
and penalties in exchange for
avoiding prosecution and possible
jail time. While much corporate
tax-dodging through the use of tax
havens is neither hidden, nor ille-
gal under current law favoring
U.S. multinationals, it wholly
stems from corporations who
engage in these transactions for
the principle purpose of shifting
profits between countries in order
to avoid taxes. Creating an incen-
tive for such anti-social behavior
through preferential tax rates will
only serve to accelerate the off-
shoring of U.S. profits through fic-
tional transactions.
Indeed, this is exactly what hap-
pened in 2004, when Congress
enacted the American Jobs
Creation Act, a bill which prom-
ised that a 5.25% tax rate would
bring home billions of dollars that
supporters claimed would be rein-
vested to create American jobs.
The promise never materialized;
most of the funds went instead to
boost shareholder dividends and
stock buybacks. Many of the
biggest beneficiaries of the tax
break,
including
Pfizer,
Honeywell, and Hewlett Packard,
laid off thousands of workers just
months after receiving their tax
windfall. That tax holiday, and the
promise of another, has dramati-
cally accelerated the amount of
U.S. profits shifted offshore.
All of my education took place
in the United States, as do all of
my client meetings. The vast
majority of Americans find it right
and logical that I have a duty to
pay taxes in the U.S. It is time that
the same logic applies to multina-
tional corporations, and that we
stop accepting fairy tales about
patents and trademarks held in
some far-away bank vault.
Setzler is President and founder
of trilibrium, a public accounting
and business advisory firm located
in Portland, or
Drug Policies Have Led to Broken Prisons
I
f there was any doubt about the
broken state of our prison sys-
tem, the news this week should
put it to rest.
The Global Commission on
Drug Policy, made up of former
presidents and other luminaries
from the United States and abroad,
concludes that the Drug War is an
expensive failure. The California
prison system—which the U.S.
Supreme Court declared to be in
violation of the 8th Amendment
due to overcrowding and neg-
lect—has yet to develop a plan to
bring it into compliance with the
court order.
Less well publicized, but also
disturbing, is a letter from Tom
Lutz in which he resigns from his
post as department chair at the
University of California Riverside.
Lutz warns that the state is dis-
mantling in just a few years a
world-class system of higher edu-
cation. Funding has shifted dra-
matically
from
educating
California’s young to imprisoning
them—not a way to build a strong
country.
Meanwhile, massive state budg-
et deficits are worsened by the
expense of locking up more of our
own citizens than any other coun-
try in the world.
Perhaps we’re finally ready for a
reassessment. What might a more
effective and rational system look
like?
Page 4 The Portland Skanner June 22, 2011
YES! M agazINE
Sarah van Gelder
People behind bars for drug pos-
session make up the greatest share
of the massive uptick in the prison
population. The experts we talked
to, including a former police chief
and a medical doctor who special-
izes in addiction, called for an end
to the war on drugs. Instead of
punishing drug addicts—many of
whom are victims of trauma—
treatment, needle exchanges, and
safe housing lessen addiction, dis-
skills training in businesses run by
ex-inmates and addicts, and their
success record is impressive.
Traditional approaches to crime
hold special promise. In New
Zealand, instead of locking up
young offenders, a council made
up of family, community mem-
bers, and crime victims holds them
accountable for their crimes, and
then gives them an opportunity to
make restitution and be reintegrat-
ed into the community. This
approach, which borrows from the
Maori people, has become the
norm in New Zealand, reducing to
almost zero the number of young
Funding has shifted dramatically from
educating California’s young to
imprisoning them
ease, and the crimes caused by
drug use.
Most of the 2.3 million now in
prison will eventually be released.
Education and job training are
proven ways to reduce the number
who reoffend and return to prison.
Ex-offenders and ex-addicts can
be the best mentors of those
released from prison; the
Delancey Street Project, for exam-
ple, offers peer support and job-
people locked up in expensive and
violent detention facilities.
This
“restorative
justice”
approach is spreading. Studies
show crime victims who are
involved in victim-offender medi-
ation processes are less likely to
experience long-term post-trau-
matic stress.
The involvement of the broader
community is key to the success of
restorative approaches. A welding
instructor who volunteers to
instruct inmates, a Girl Scout
leader who brings girls to visit
their imprisoned mothers, or a gar-
den club that helps inmates start
prison gardens all do their part to
create vital links to the outside.
There are people we might agree
should be locked up: psychopathic
killers, rapists, and others who
endanger their families or commu-
nities.
But most of those in prison are
people with few resources who
have committed nonviolent
offenses—especially poor people,
people of color, drug users, alco-
holics, and the mentally chal-
lenged. Imprisoning millions of
these people does not make us
safer. But imprisoning 2.3 million
people does deplete government
coffers resulting in massive cuts in
programs—like California’s sys-
tem of higher education—that
have proven track records for
reducing crime.
A smarter and more compassion-
ate criminal justice system could
not only save lives and restore
communities especially hard hit
by imprisonments, it could save us
from fiscal meltdown.
Sarah van gelder is executive
editor of YeS! Magazine and
yesmagazine.org. the Summer
2011 issue of YeS! Magazine is
“Beyond Prisons.”