The 10 Most Corrupt Tax Loopholes

If Mitt Romney won't tell you which need to be closed, we will

But at least congressmen back in 1913 occasionally tried to do something beneficial to the country. Today's Washington is more interested in exploiting such beneficence. Take the yacht deduction.

The luxury sailing industry was able to buy its way into the mortgage break when Congress officially declared boats as homes. But not just any boat. The rules require they have sleeping quarters, a kitchen and toilet, leaving just 3 percent of U.S. boat owners to qualify.

"The mortgage deduction was never targeted for that," says Minnesota Democratic Congressman Tim Walz. "It was meant to make home ownership more affordable for the middle class."

Democratic U.S. Rep. Tim Walz (D-Minnesota) tried to pass legislation preventing the uber-rich from claiming the mortgage deduction on yachts. Dave Camp blocked that effort, too.
cursedthing/Creative Commons
Democratic U.S. Rep. Tim Walz (D-Minnesota) tried to pass legislation preventing the uber-rich from claiming the mortgage deduction on yachts. Dave Camp blocked that effort, too.
Thanks to the luxury sailing industry, taxpayers helped subsidize Microsoft CEO Steve Ballmer's $200 million yacht, Octopus.
Octopus: Wikimedia Commons
Thanks to the luxury sailing industry, taxpayers helped subsidize Microsoft CEO Steve Ballmer's $200 million yacht, Octopus.

So Walz wrote the Ending Taxpayer Subsidies for Yachts Act, hoping to bar the uber-wealthy from sponging off the mortgage deduction. Once again Congressman Dave Camp refuses to let it come up for a vote.

That leaves everyday taxpayers to subsidize toys like Microsoft co-founder Paul Allen's $200 million yacht, which comes equipped with an indoor pool, basketball court and its own submarine.

"It's a loophole in the tax code that benefits a few people at the very top," says Walz, a sergeant major in the National Guard and former teacher. "I certainly feel if they want to grab their luxury liners, I'm glad they do. And I'm glad we have people making them. I'm just not certain we subsidize that."

5. Big Oil's Cadillac welfare.

Last month, Mitt Romney traveled to Iowa, where wind energy has become an economic force, responsible for 7,000 jobs and 20 percent of the state's electricity.

He announced that, as president, he would kill the $3.3 billion in tax incentives that now go to this nascent form of electricity. In Romney's eyes, the industry has had more than enough time to stand on its own two feet.

"He will allow the wind credit to expire, end the stimulus boondoggles and create a level playing field on which all sources of energy can compete on their merits," Romney spokesman Shawn McCoy told The Des Moines Register.

It's a laughable position. After all, Romney has announced no similar crackdown on a much older and larger welfare queen: Big Oil.

The five largest U.S. oil companies collect a spectacular $20 billion a year in tax breaks. And they'd prefer that wind farms not compete for that lucrative welfare dollar. During this year's presidential race, the industry has paid Romney $3.4 million to ensure wind goes away.

Technically, the oil giveaway is supposed to defray the cost of searching for new sources. But even George W. Bush realized the industry didn't need subsidies back in 2005, when the price of a barrel was at $55. "We don't need incentives to oil and gas companies to explore," he said at the time. "There are plenty of incentives."

These days, the price of a barrel routinely hovers around $100. But the five biggest companies — BP, Chevron, ConocoPhillips, ExxonMobil and Shell — still get their breaks, despite collective record profits of $137 billion last year.

"The oil industry is doing fine," says Johnson, the University of Texas tax expert. "They don't need or deserve a dime of subsidy. It's all money thrown away to make shareholders richer. The private market will provide any subsidies by increasing the price. It's time to get the government out of the business of special subsidies. It's like Cadillac welfare."

4. A break for shipping your job to China.

In April, 750 workers at a Kimberly-Clark paper mill in Everett, Washington, lost their jobs when the company shipped them to lower-cost facilities overseas.

Steelworkers in Stevens Point, Wisconsin, suffered the same fate. Their mill's owner, Joerns Healthcare, took away 150 jobs last month by moving operations to Mexico.

Another 170 people making auto sensors at a Sensata Technologies plant in Freeport, Illinois, will be out of work by year's end. Their jobs are being carted off to China.

In each case, American taxpayers will subsidize the evacuation.

It's not just cheap labor that pushes work overseas. The U.S. tax code allows companies to expense every last cost of sending your job abroad.

At a time of 8 percent unemployment, one would think Congress would rush to kill a loophole that actually encourages economic misery. One would be wrong.

This summer, Senate Democrats introduced the Bring Jobs Home Act, which would kill the loophole and offer a 20 percent tax credit to companies that bring work back to America.

Republicans filibustered the bill to death. Utah Republican Senator Orrin Hatch went so far as to call the measure "a joke," ensuring another nervous Christmas for the country's blue-collar workers.

3. The behaving-like-an-asshole deduction.

In 1989, third mate Gregory Cousins was negotiating the 986-foot Exxon Valdez through Bligh's Reef in Alaska while Captain Joe Hazelwood slept off a bender below deck.

The vessel crashed, spilling upward of 25 million gallons of oil into Prince William Sound. The disaster could have been avoided if the ship's collision avoidance radar was working. It had broken a year before, but Exxon chose not to fix it due to the cost of repair and operation.

Overnight, 1,300 miles of pristine shoreline turned to blacktop. Wildlife caked in oil looked like a Hollywood casting call for an Al Jolson biopic. The remote locale made clean-up difficult. Twenty-three years later, fish stocks have yet to return to their pre-spill levels.

« Previous Page
 |
 
1
 
2
 
3
 
4
 
All
 
Next Page »
 
My Voice Nation Help
18 comments
roo_ster
roo_ster

Businesses ought not be taxed at _any_ rate.  Businesses are owned by folks, privately or publicly, who already pay taxes on profits and capital gains and fuel, etc.  No need to tax the same dollar multiple times.

 

And think of the reduction in lobbying for business tax loopholes...when there is no business tax to worry about.

primi_timpano
primi_timpano topcommenter

You neglected to mention the capital gains treatment of carried interest, the life blood of real estate developers, VC funds, and hedge funds. Billions and billions of taxes are avoided with this treatment.

UnCoverUp
UnCoverUp

Woops. Chris Parker forgot the most lucrative lawbyer (lawyer-lobbyer) inspired rat-hole of all--the  foreign tax credit (FTC). By far the biggest single contribution to the US federal tax receipt deficit is  US-incorporated international oil companies (IOCs) using fraudulent tax receipts issued by the corrupt dictatorial regimes (Saudi Arabia, Iran, Iraq, Libya, China,...) that own most of the worlds oil/gas resources coveted by IOCs. Although the FTC tax-scam has been "legal" for more than fifty years (see Daniel Yergin's "The Prize"), labeling of an IOC's foreign government partner's share of oil/gas profits as a foreign "tax" to give a US-incorporated IOC the benefit of the FTC is a fraud against the United States government. Furthermore, corrupt dictatorial regimes understand the value of the fraudulent tax receipts they issue and demand compensation (bribes) for aiding and abetting these multi-billion dollar tax FTC frauds.

 

Regulatory capture of the IRS by tax lawbyers has prevented that agency from prosecuting US-incorporated IOCs for FTC fraud. However if IOCs bribed foreign officials to obtain fraudulent tax receipts as ConocoPhillips did with the Gaddafi Regime in Libya (http://UnCoverUp.net), the Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) can and should prosecute under the Foreign Corrupt Practices Act (FCPA). Although the DoJ and SEC also suffered from regulatory capture by lawbyers, the agencies may be more aggressive in prosecuting racketeer influenced IOCs to restore public confidence in the wake of revelations that the agencies employee-lawbyers knowingly allowed fraudsters Maurice Greenberg (AIG), Bernard  Madoff, and Allen Stanford (SIB) to carryout financial frauds that cost investors and tax-payers hundreds of billions of dollars in the collapse and resurrection of the US "financial services" industry in 2007-2009.

dlcole
dlcole

What the author failed to mention about Toyota closing the Ca plant that originally was a joint venture with GM.  GM bailed during the bankruptcy activities.  Toyota paid the UAW $250 million in benefits to close the Union plant and move activities to non-union Texas and Canada.  I find most of this tax article mis-leading and just plain wrong...full of 1/2 truths, etc.

 

 

http://online.wsj.com/article/SB10001424052748703909804575123941856957282.html

 

 

Lori312
Lori312

Ok, you are more business savy than I and you are more verbally on target than I.  You are right, and again, you are right.  I apologize for my sob comment - I just get so mad... Can't do anything about that.   So, you win,  I won't put my poor opinion on this site again....  Have a good one...

 

unify
unify

well written, well researched article.  thank you

Myrna.Minkoff-Katz
Myrna.Minkoff-Katz topcommenter

Romney is a loophole.  The man doesn't what the hell he stands for.  One day he's pro-choice, next day he says he'll get Roe v. Wade overturned.  One day he vilifies half the nation, the next he says he's totally behind all Americans.  One day he'll cut taxes on the rich.  Next day he says he won't.  Flip-flop.  That's what they said about him when he started his primary campaign, and he's proven it in spades.

bullard.randyj
bullard.randyj

The problem isn't that they pay too little, or that they pay too much.  It's that they pay anything at all.  The article talks about companies as though they're people, or entities with personalities.  A company is a collection of assets designed to generate and distribute profits to the OWNERS of the business.  Our tax code taxes OWNERS.  In my opinion, companies should pay 0% in taxes, because the OWNERS are already going to get taxed.  If the owners aren't getting taxed enough, then address the problem there.  But when Company X doesn't "pay fair their share" in taxes, that "fair share" instead goes to the retirement fund, or mutual fund, or whoever else owns those shares, and that's a good thing.

 

This article takes the typical liberal, anti-corporate, anti free enterprise mentality that companies are evil.  Companies aren't good or bad or evil or virtuous, any more than money itself is good or bad or evil or virtuous.  Companies are companies, and they operate in the best interest of their OWNERS, who are overwhelmingly me and you.  

Sotiredofitall
Sotiredofitall topcommenter

Yep that's right; the tax code is corrupt, a giant game of three card monte.    Who do you see running for office that has specifics on reforming the tax code; Gary Johnson does.   Keep railing aginst the Repukes and the Libertards, different flavor kool-aid is still kool-aid.

primi_timpano
primi_timpano topcommenter

@UnCoverUp Very true. I did not know about false tax receipts, but I do know that the oil companies convinced Saudi Arabia to take its oil royalties in the form of income taxes so the companies could take advantage of the foreign tax credit. If the payments were a 25% royalty, then a $100 of revenue would pay SA 25, leaving 75 to be taxed by the US. As a tax, SA and Exxon get the same revenues, but Exxon gets to claim a 25 credit from the US government, increasing its income back to 100.

dlcole
dlcole

 @unify

 Hardly researched...and full of 1/2 truths and incomplete stories...DO YOUR RESEARCH

primi_timpano
primi_timpano topcommenter

@bullard.randyj. . Without taxes there would be no government. Without government there would be nothing to establish property rights. Everything you own would be subject to conversion by the biggest, strongest, meanest, best armed person or persons. Since the rich receive greater benefits from government (the ability to enjoy and transfer their property) than regular people with jobs, a single home, and less than seven figure investment accounts, it makes sense the rich pay more. Look at it as insurance: a million of coverage costs more than a 1000 of coverage.

bifftannen
bifftannen

 @bullard.randyj The Supreme Court considers corporations as people. They should be taxed and subject to criminal law as such.

unify
unify

 @bullard.randyjWhat are you talking about??!  Corporations ARE people!  At least that's what the supreme court thinks and last I checked, they have a little bit of street cred.  Southern Pacific Railroad vs Santa Clara County circa 1886.  more recently citizens united.  if they are to be treated like people, they better pay taxes like people.

poppa_who
poppa_who

 @Sotiredofitall  Your statement might carry a little more weight if you could refrain from name calling,  "Repukes and the Libertards".  It makes you sound like a politician!

bullard.randyj
bullard.randyj

 @Lori312 Wow.  Such a warm and literate and "self righteous" response.

 

This isn't a "blue collar" / "white collar" issue.  That "blue collar" worker likely has a pension or a 401k.  And that pension or 401k is funded with assets.  And those assets are overwhelmingly equities in U.S. corporations.  And when Uncle Sam taxes the profits of those U.S. corporations, they're taking the money out of the 401k/pension of that "blue collar worker" you seem to be so concerned about.  So when you talk about "evil" corporations, just remember that the VAST MAJORITY of equities are owned by those 401Ks, and pensions, and insurance pools.  And you know who owns those?  YOU.  YOU own those.  

 

And you know who is going to get taxed on those assets already?  YOU are going to get taxed on those assets.  When you draw down your 401k, or your pension that you've worked so hard for all those years, YOU are going to pay Uncle Sam his fair share in the income taxes you file in those years.  The only question is HOW MUCH will be in those accounts for you to draw on as a function of Uncle Sam having already taxed the money going into them in the form of corporate profits.  

 

Your response shows a typical simplistic thought process on the topic - CORPORATION=EVIL.  "Blue Collar Workers"=VIRTUOUS.  CORPORATE PROFITS=BAD.  And most transparently "Anybody that has the audacity to make money and understand the economy" = "S O B"

 

What you clearly fail to understand is that corporate profits are what makes the economy work, and those profits are GOING TO BE TAXED ALREADY BY THE PEOPLE THAT RECEIVE THEM, which is you and me and all the "institutions" that we support with our insurance premiums and savings.

 
Loading...