“America is the wealthiest nation on Earth, but its people are mainly poor, and poor Americans are urged to hate themselves…. It is in fact a crime for an American to be poor, even though America is a nation of poor. Every other nation has folk traditions of men who were poor but extremely wise and virtuous, and therefore more estimable than anyone with power and gold. No such tales are told by American poor. They mock themselves and glorify their betters.”
-Kurt Vonnegut, “Slaughterhouse Five”
“Parasites,” “pests,” “mooches,” “lazy-asses,” “freeloaders,” “losers,” “idiots” and “the entitled” are all terms that have come to define the American poor. Beyond my utter disgust with such sweeping generalizations, they do raise many questions.
During my research, I spoke with a wide array of Conservatives. While not all held this belief about the poor, many did believe that every single individual on welfare was lazy. While I searched high and low, no studies have been conducted on the productivity effect of those on social programs. So these notions stem from only personal experience and bias (but to be fair, this can be said about those who believe social programs help.)
I’ve experienced many different forms of welfare and the people who use it, some deserving of the assistance and others not. In fact, I was one of those parasites who grew up food programs. When my mother could not feed her two toddlers, she took advantage of what she could.
It is the phrase “take advantage” that I believe leads to the negative characterizations of those on social welfare: “Take, take, take” is the poor’s motto. America takes so much time pointing the finger at the poor for draining the economy, they forget that there are others who could be considered the leeches of the economy. These people not only take, but demand. We live in a country with two forms of welfare: social and corporate.
Corporate Welfare comes in many different forms, including tax breaks, subsidies, grants; pretty much any incentive to encourage a business to stay or come to a town or state. Politicians have tried to shield massive businesses from taxes while handing them cash. The purpose of this series is to show the true parasites of America, businesses.
Passing Profits to “Offshore” Accounts
It starts with the way businesses declare income. The different classifications connect back to the taxes corporations pay.
Pass-through companies make up the majority of all businesses. The main purpose of pass-through is to avoid double taxation. Company owners will claim the business’ profits as their own personal income to avoid taxation on a corporate level.
The significance of pass-through companies is what happens to profits once they are in the owner’s name. Understandably, companies do not want to be taxed twice. But instead, many avoid taxes altogether by using “offshore” accounts (more on that in a second.)
“Offshore” accounts have long been a favorite device of the wealthy. J.P. Morgan found that 70 U.S.-based companies have stashed a total of $1.7 trillion in assets in “offshore” accounts.
In 2012, General Electric Co. and Pfizer Inc. led the way with “offshore” accounts, hoarding $187 billion “overseas.” By dodging domestic taxes, they saw an 18.4 percent increase in “offshore” holdings.
Tech leaders have also reaped ludicrous benefits from this tax-evading system. Bloomberg reported that Apple, Google and Microsoft all saw over 40 percent increase in profits in 2011.
But the best and most ridiculous part of this whole cluster-f#@%, is that most of the money in “offshore” accounts is actually in America.
The Wall Street Journal reported that giants like Google, Microsoft, and EMC Corp. were all found to keep over 75 percent of cash owned by foreign subsidiaries in American banks. The money is also divided among U.S. government and corporate securities. They do not even take the time to convert the money into currency of the country they are supposedly indefinitely parking it in.
The Wall Street Journal quoted Professor Edward Kleinbard at the University of Southern California Gould School of Law and former chief of staff of Congress’s Joint Committee on Taxation as saying, “If it is a U.S.-dollar asset, that means ultimately it is in the U.S. economy in some fashion, where it is not is in the hands of the firm’s shareholders.”
So, how is this even possible? Semantics. While the money may be physically on American soil, it just takes checking the right box on paper. A company will have a CFO or treasurer declare funds permanently or indefinitely overseas. They report this to the company’s auditors who will simply rubber-stamp it. This practice is considered okay as long as the company is consistent and does not make a habit of cycling the money back into the U.S. economy. In the eyes of the IRS and the law, this money is technically “overseas,” allowing companies to side-step taxation.
How “Job Creators” Invest
So, setting aside the absurdity of this notion for a moment, major companies continue to lobby Congress to no end, insisting there is a need for more tax breaks to expand and create jobs. The thing is, they already receive enough breaks to offset most of the cost of bringing money back to America.
Bloomberg analyzed public filings and reported on 70 American-based companies that claimed at least $4 billion in untaxed profits. According to Bloomberg, companies with money overseas receive credits from other governments while they see their cash stockpile grow. These companies then apply the credits to offset U.S. taxes when the money is brought back. Profits are taxed only after subtracting these foreign credits.
So, with all these miraculous savings, where the hell is all this “job creator” money going? Well, according to Market Watch and a 2011 survey, the wealthy only contribute 5 percent of their wealth to “alternative investments” (investing outside stocks, bonds, or cash). Twenty-Two percent of that money is in commodities (i.e. agricultural products, fuels and metals), accounting for less than 1 percent of the wealthy’s total income.
Common Dreams compiled evidence, and came to this conclusion on wealthy spending habits:
“Marketwatch estimates that over 90% of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), the stock market, and real estate. According to economist Richard Wolff, about half of the assets of the richest 1% are held in unincorporated business equity (personal business accounts). The Wall Street Journal notes that over three-quarters of individuals worth over $20 million are invested in hedge funds.
The Mendelsohn Affluent Survey confirmed that the very rich spend less than two percent of their money on new business startups.”
Even with all this welfare assistance, there seems to be little evidence showing the wealthy go on to invest these savings back into building the American economy. The only thing the wealthy seem interested in investing in is what will increase the money in their pocket. There is nothing wrong with that, either; just don’t do it on my dime.
Leeches of Corporate Welfare
So while contributing essentially nothing to the system, companies then go on to bleed the taxpayers dry.
Recently, The New York Times did a 10-month, in-depth report on the number of government handouts given across the nation each year to corporations. In total, $80 billion in incentives was given to companies on federal, state and local levels.
Thousands upon thousands of grants, subsidies and tax breaks were given to every type of business imaginable. Such an overwhelming amount of data exists, in fact, that no full account of every handout is available.
The worst part of the billions being poured into these companies is that officials have no idea if it’s actually worth it. The Times found that government officials do not track the number of jobs created versus incentives given out. Even when they do track results, officials admit that they have no way of telling if the aid had any role in job creation.
With no data indicating improvement of the overall job market, one would think such programs would die, but the free money just keeps rolling in. The Times dubbed one lucky group the “$100 Million Club.” This includes giants like GM, Shell, Ford, GE, Microsoft, Apple, Amazon, IBM, Sears, Google and 38 others. So all it takes to collect millions from a defaulting government is to own a multi-billion dollar company. Good to know.
Hands-down, manufacturers are the biggest “parasites” of the Corporate Welfare system. Each year, this sector collects $25.6 billion from taxpayers.
GM is the leader in taking manufacturing incentives. Since 2007, the company has received 208 grants, totaling $1.76 billion (remember, a grant is free money with no expected repayment.)
This top beneficiary of state and local aid thanked these towns by closing dozens of factories. They even had the nerve to list 50 properties the company received for free from states on their liquidation list when going bankrupt in 2009.
Agriculture came in next, with a total of $8.22 billion in welfare. Despite what some would have you think, small farms are not the ones who significantly benefit. Tyson Foods received $111 million, Leprino Foods (a “global leader in dairy nutrition”, with “some of the largest, most modern, and technologically advance plants in the world”) collected $73.7 million, Farmer’s Coop Creamery, a giant eighty-dairy farm company, received $71.3 million. Even candy giant Mars acquired $22.2 million in welfare.
The growing system of government handouts is only attracting more in search of dodging taxes. Twitter, Facebook and other major technological companies have begun pressuring states to give the tech industry the same breaks sectors like agriculture, manufacturing and energy receive.
Recently, Twitter threatened to pack up and move out of San Francisco if the city refused to give the company tax breaks. Officials panicked and gave into the demands of the company who already had a single Saudi investor contribute $300 million, along with $800 million provided from a group of private investors.
The Times went onto report how Twitter was investing their savings. Fresh from enjoying the rooftop garden, an employee of Twitter Tweeted:
“Tanned on Twitter’s new roof deck this morning as some dude served me smoothie shots. This is real life?”
The corporate world should be Darwinist. For politicians to suggest that any business is in need of public assistance is bullshit. Companies who could not manage to execute a profitable business strategy, died off. The ones left standing were sharp enough to not only sell a product worth buying, but also survived the cutthroat world of business. These are intelligent people who can stand on their own. It is the single mother of three, who works two jobs and still cannot feed her kids, or the elderly person choosing between electricity and medication, who are struggling to survive. There are people suffering in this country, but it is not the ones with multi-million dollar bonuses.
I hear the argument over and over again that the government cannot create demand. I present you with the flip-side: the government cannot create supply. Corporations will always follow the money. Before corporate welfare, the only source of cash was their customer base. Now corporations can collect profits before they even break ground. They have turned their version of welfare into an ATM, and no one really knows if they have a withdraw limit.