Succeeding Part 10.
Standard Corporate Tax Complaints
Corporations are legal entities--"people," essentially. That is its own level of metaphysical growth, and absurdity, but don't worry about it for now. A corporation is assessed income tax just like a person, with some differences in rate. The common problems people will have about corporate tax are:
1) Corporations cleverly shifting their income from a higher-tax place to a lower-tax place ("jurisdiction-shopping"). A corporation may establish an office in Ireland, for example, and pretend that its U.S. income is actually income of its Irish subsidiary, thereby paying at a lower Irish rate. They may do the same even within a country, shopping for a lower rate between provinces, states, or other divisions.
2) Corporations buying exemptions for only themselves, purchasing Congressional votes and executive non-vetoes a la carte to achieve legislation saying things as audaciously specific as, "...and Corporation X shall henceforth pay no income tax for the year of 1987..."
That's the easy stuff, with as many variations as there are tax-years. The "loopholes" that serve as the grounds of reasonable tax-policy debate are the more blatant, segregable pieces of policy that provide specific exemptions from the overall scheme, or allow corporations to shift income to lower-tax venues.
Dance of the Murder Clowns
Like George W. Bush carrying a plastic Thanksgiving turkey, the "loopholes" are meant to be discovered and decried, providing an acceptable outlet for progressive vexation. Like Dubya's flight suit, the loopholes are audacious: they're objectively stupid; they're totally unfair; they're living proof of the failure of the American empire and the subjection of the populace to rule by all-powerful murder-clowns. They're created, "investigated," and occasionally closed, as proof that the system can address change.
Complaining about "loopholes," though, is dangerously erroneous for a number of reasons: to call something a "loophole" is to imply that it isn't legal. When a corporation purchases policy from a Congressional subcommittee, and that policy becomes law, the law is not a "loophole in the law"--it is the law. Loopholes work because they are supposed to work; because they were designed to work; because they properly reflect the tax that the I.R.S. wants to extract from that corporation that year. The standard rhetoric against western corporate tax policy is equivalent to calling it "lamentable" when Obama murders a houseful of swarthy children.
Similarly, calling corporate tax breaks "loopholes" implies that, if the loopholes were closed, the resulting system would be just. Every time the citizen of a modern state complains that corporations aren't paying the tax they're supposed to because of loopholes, they lend strength and legitimacy to the system that the corporations are exempting themselves from. This system, though, effects much greater theft in the non-loophole areas than the loophole-areas. The most basic elements of tax--whether "natural person" or "corporate"--are prescriptions for yearly violent, murderous state robbery. Their unfairness is so gross in both theory and practice that the loopholes are of no real concern. If all loopholes were suddenly closed, and all corporations (and super-wealthy individuals) began immediately paying what they were "supposed" to pay in a world without loopholes, it would be not even a drop in a pond; it would be a drop that evaporated before it reached the pond's surface. Some form of "loophole" has to always remain so that, by fighting them, radicals are kept busy tacitly supporting the underlying tax structure that ensures the continuation of the regime.
Greater than the TARP bailout, every single year, is the droll, mundane theft of fair taxes. Dubya was a Murder Clown, but he could never kill as many Africans as Obama already has.
Necromancy and Dividend Deductions
So, what are the real corporate thefts? All of the ones that the series has previously covered for individuals apply to corporations, too, only more so. A nascent fictional form of unreality is "property," which causes a lot of problems on its own. The creation of fictional entities, like corporations, magnifies lower conceptual larcenies. The pantheon of legal creatures is a brutal, heartless one, spawned, like Plato's Forms, as an affront to reality. The more advanced stages--the entities; the governments, interests, trusts, ventures, companies, estates, corporations, foundations--legitimize, by their existence, the lower concepts that created them, and provide vehicles for the fuller expression of the underlying profanities.
Think, again, about charities: Warren Buffett the person has pulled a lot of heists in his time, but to steal a dozen billion at once in his own name might be a little too much for even 21st century Americans to take.
How does a necromancer extend his life? By creating phylacteries; monstrosities; abominations; unthinking minions to carry out his will beyond the grave. The necromancer, on his own, may be a creature of brilliant cruelty, but he is also an impotent, shattered, bony old man, of no use to anyone, even himself. Once he has poisoned the population of a small village, though, and raised their corpses in his service, he becomes formidable. Once he has enchanted a phylactery crystal with pieces of his soul, he loses his connection to the lightspring, and is lost forever, while in return gaining the ability to have his body destroyed, then come back to terrorize other villages a thousand years later when an innocent young girl discovers a pretty crystal necklace at the bottom of the cave opened by the recent flooding.
Americans might balk at Bill Gates shooting up the Treasury for $20 billion, but if Bill Gates becomes deathless through the Gates Foundation, and the Gates Foundation keeps the dough, it becomes harder to criticize. So, too, corporations--an earlier form of charities.
Corporate Charity And Ships
What? Don't be ridiculous, right? Corporations were charities? Actually, yes. All of the warm, fuzzy things we're supposed to think about charities, now, were once thought about corporations (and governments/politicians, but stick with "corporations" for now). Corporations were special organizations chartered by governments for a limited purpose: building a bridge, fixing a road, or chartering a ship. Corporations were subject to (actual!) strict oversight, and granted the ability to be treated as fictional entities only in return for the service they were supposed to do the public, by accomplishing objectives in furtherance of the common good.
Even then, it was a ruse. Corporations promised to solve common problems and enrich all citizens, while shielding elite owners from the consequences of their actions. From their beginning, corporations--exactly like states--were vehicles of genocide. The very first "corporations" were created to allow western European investors to pool their money into a ship. The investors' captain, and a few brutal thugs, would impress or entice some lower-class sailors into crewing up, then sail their ship to the East Indies (later New World), rape and plunder the locals, and return. Upon their return, the lower-class sailors who had survived the voyage would get a tiny wage, booze it up a little, and sign up on a new ship. The common people would have the benefit of paying atrocious prices for salt, silk, cumin, and other consumer goods that the elite "owners" (who were only involved by virtue of having managed the ship from thousands of miles away, much like heroic businessmen now) had "provided" to benefit the nation.
It was a great racket, but sometimes, bad things happened. Nobles didn't want to hire competent seamen or captains, because those things cost money. They didn't want to provide good food, or top-quality ships, for the same reason. So ships frequently sank. Sometimes, they sank, and survivors reported how the problem had been avoidable (sort of like when military helicopters crash).
How do we fix these problems, without investing more? We create corporations--organizations that, by law, are "entities." Once corporations are entities, their owners--their "stockholders"--cannot be sued for problems caused by the corporations. Corporations allowed the aristocracy to knowingly send one in three shipfuls of sailors to watery graves without having to pay death benefits (as tiny as they would've been) to the sailors' families.
We can go further. Much, much further, but even back then, we can go further, by creating the idea of "insurance." With insurance, elites pooled a little capital ahead of time, so that external companies ("insurance corporations") would be responsible for paying the costs of colonial loss. Then, not only would the elites themselves never have to pay for what they had done--their corporations wouldn't even have to pay. For the cost of paying some barristers (their third sons, anyway) to set up "corporations," elites protected their personal holdings. For the cost of paying other barristers (their friends' third sons) again to set up insurance companies, their corporations paid premiums that protected the corporations themselves from having to pay for their losses.
In return, the world received all the wonderful benefits of colonialism ("globalism"): elites were able to sit on their asses, order people to die and kill for goodies, and then not have to be subject, in any way, to the market forces of "risk" that they had created in order to explain why it was okay for unemployed people to starve.
Okay, okay. The actual thefts.
Business deductions. Corporations buy hundred million dollar buildings. A hundred million dollars of profit vanishes from the public tax coffers. Inside those buildings, corporations house hundreds of millions of dollars of computer equipment, office chairs, prime downtown real estate, quickie secretary rooms, executive smartphone and cable accounts, fine coffee and cafeteria services, water, bathrooms, fitness centers, showers, saunas, and $1300 leather chairs, for use by top officers, members of the Board, and other friends of the company. Like church properties or private holdings, corporate wealth keeps massive assets, forever, off the tax rolls. Corporations pay comparatively nominal property taxes on their real estate, but by taxing only corporate income, other corporate assets just hang out there in limbo, getting enjoyed by the right people as part of that 9-5 grind.
...And every time a new asset is purchased, it's deductible. Things that even wealthy individuals cannot get away with, corporations can, because the distant presence of their "stockholders" is presumed to be a hedge against anything being purchased which is not a legitimate business expense. If you've ever had lemon-artichoke halibut en papillotes at an eighteen-thousand-dollar conference table while idly batting around details of a deal that everyone knows was settled two months ago, you know of what I speak. The presence of high profits makes the "necessity" of high spending appear reasonable--and the resulting government revenue void is made up by payroll taxes.
(The "stupid" corporate policies and "wasted money" that Dilbert laments are not, actually, stupid. The networking, consulting, analyzing, meeting, traveling, face-timing, and oversight are ways of creating a smokescreen for elite socialization, celebration, the employment of children, and the transfer of deductible wealth from one company to another.)
Dividends. The cruel I.R.S. "double taxes" corporate income, by taxing the income corporations actually declare for themselves, and then taxing stockholders again on their "dividend income" when corporations distribute that income. Good stockholders (controlling interests) get around this by timing dividends, and by retaining corporate income in the corporation, instead of distributing it to themselves. As long as the corporation spends the profit on something like a new corporate fitness center, the controlling stockholders get a new free place to work out, and no one has to pay any tax except the sucker janitor.
Still, if you actually need some cash, why should you have to pay when you tell the Board to issue a dividend that year? That's why dividends are only really used to entice minority shareholders ("middle" class investors, and the pension plans that extract investment money from lower class unions) to give their money to corporations: those who already own liquid cash use capital gains, instead of dividends, to get income. As discussed in detail in Part 4 (there as to individuals), capital gains can be put off indefinitely, until the death of the nominal owner(s), when the next elite generation gets to turn the gains into liquid cash at a zero percent tax rate. Any actual dividends paid to elites can be eliminated using individual tricks.
Business Investment. Corporations are like super-elites in the sense that their conglomeration of elite holdings allows them even more fluidity in using elite tricks to reduce, on paper, the income they actually have. Among the cleverest of these is the ability of corporations to invest in each other. When corporations have a profit that would be taxable, they invest (deduct) that profit by investing it in the stock of other corporations.
Corporations owning corporations owning corporations--a logical next step in believing in them at all. Say Microsoft has a profit, for which it would be taxed. It makes the gutsy business decision to invest its earnings in a sector stock fund that holds stock in, among other things, Apple Computers. This investment is deductible, so Microsoft wipes out that troublesome profit.
The same year, Apple Computers has a profit, for which it would be taxed. It makes the gutsy business decision to invest its earnings in a sector stock fund that holds stock in, among other things, Microsoft Corporation. This investment is deductible, so Apple Computers wipes out that troublesome profit.
Look at all this investment! The economy is clearly doing well, so stock prices rise. Both companies make a profit, but not one they have to report, because the gain is a "capital gain," and they'll defer it until they make a like-kind exchange of the stock a few years later, when the gain is removed entirely. The rise in prices of assets that have no real value contributes to inflation, devaluing proletariat wages and the tiny savings of the middle class.
Trickle Down Losses
Corporations don't just invest in stock funds--they often buy other businesses entirely. If a corporation buys a cruddy, speculative little corporation that had losses, the parent gets to absorb the subsidiary's losses. Here's the example:
Bill Computers has a $70 million profit. Blow Computers, after painstaking work trying to break into the industry, has a $7 million loss (and four computer entrepreneurs who had tragic, unexpected nighttime crashes into highway overpasses after taking out life insurance policies on themselves). The formerly-hopeful computer entrepreneurs' wives meet with the Board of Bill Computers, which offers, amazingly, to buy their company, even though it's little more than a small plot of land with a bunch of their husbands' old contraptions inside it. Having lost their life savings, and getting a hard time from the insurance companies' claims investigators, the wives agree to sell. They're so happy it all finally worked out!
In exchange, Bill Computers gets whatever the small company came up with. Four or five years later, it "discovers," patents, and releases an improvement to one of its products, based on what it got from Blow Computers' files. More importantly for tax purposes, though, Bill Computers, by buying Blow Computers, gets to reduce its taxable income from $70 million to $63 million. Repeat as many times as necessary until Bill Computers has lowered its profits as much as it wanted to. If it had paid 35% income tax on $70 million, its outlay would've been $24.5 million. By making a "terrible" investment in Blow Computers, though--buying a failing company with a negative net worth and negative local image, for the ridiculous high price of a million dollars--it reduced its income to $63 million, lowering tax to $22.05 million--e.g., it spent $1 million to save $2.45 million (net gain $1.45 million).
Every time a small company fails, its losses are worthless. Its owners do not have the income necessary to fully utilize the deductions of their losses. Anyone with liquid cash and high income can take advantage of the losses, though, by buying the company, absorbing the losses (often through a subsidiary), and getting payroll taxes to foot the bill.
Pretty Women and Pretty Big Companies
Big companies can do this between one another, as well. Like the British Labour and Conservative parties, and the American Democratic and Republican parties, big companies pretend to be at odds--when one of them is down and out, the other one may buy a "struggling" division, thereby absorbing its losses. What these transactions actually conceal are the shifting of gains and losses between companies, depending on how they've allocated income that year. If Company A does poorly and Company B does well, Company B can buy a division of Company A, to which Company A's accountants can attribute most of Company A's loss (regardless of where the loss actually originated from). Company B gets to wipe out as much of its gain as Company A had, and when they have reserved fortunes next year, they can switch the renamed division back again (after laying people off and re-hiring in-between).
What appears to be corporate "waste"--the American takeovers and breakups of the 1980s, say, or the Japanese reorganizations of the 1990s--is indeed wasteful, but not to the corporations or their elite shareholders. It harms minority shareholders (powerless middle class mutual funders) through increased costs over which they have no control and receive no benefit, and it harms the middle and lower classes, who have to work to pay taxes to make up the missing corporate "share," but it saves elites and their pet corporations trillions of assessed dollars. In Pretty Woman, Julia Roberts (the face of bland, dumb, feminine ideal) gushes over Richard Gere's (the face of bland, overworked, helpless, miserable male ideal) billion-dollar corporate takeover, like so many young women in the 2000s would gush over Donald Trump's Apprentice. Richard Gere was a silver-haired Trump in that movie, celebrating the ways that corporate "raiders" could buy the love of ditzy, shallow, otherwise futureless prostitute-fantasies, who were swept away by the raiders' derring-do nature.
The corporate raider in actuality is as much a myth as the clever investor or the visionary CEO: the corporate "raider" is a massive modern army, representing majority stockholder interests in both companies, hostilely taking over and parting out losses, profits, and assets to the detriment of puny little failed-state mutual fund investors. Even a literal bank robber has to risk the police, or a security guard, taking a shot at him on the way out; Trump and the rest of the boardroom thieves weren't even at the level of clever, risk-taking scum, but rather, cowardly Goliaths picking on ninety-eight-pound Davids (whom their friends had already tied down and rendered unconscious before Goliath would so much as risk showing up).
Oh, and Recessions
Macroeconomic side-note: anytime Bill Computers and its friends want to cause a recession, all they need to do is invest heavily in each others' failing subsidiaries. The titles of a few labs get changed around, companies post reduced profits, and the corporate media begins squealing wildly about dropping economic potential. The drop in posted profits justifies corporate layoffs, which numbers justify a slowdown in trading, and make it seem legitimate when corporations pay even less to the government than normal. Layoffs provide realistic stories of personal hardship and destroyed communities, continuing the appearance of recession. When people are scared enough, corporations beg for government money to spur economic development and save the economy. A surge of payroll taxes is handed out to elites, who drag things out a while longer before allowing a few more jobs to open up.
All goes well until consistent employment causes personal income and savings to rise. Elites then enact another recession to gobble up personal savings and reduce (or eliminate entirely via layoffs) personal income.
Continued in Tax Theft, Part 12.