The Tax Evasion Games

January 4, 2015 Updated: April 23, 2016

Senator Lindsey Graham from South Carolina once shared his view about the concept of taxation:

“It’s really American to avoid paying taxes, legally. As long as it was legal, I’m OK with it. I don’t blame anybody for using the tax code to their advantage. I blame us for having it so complicated and confused.

“It’s a game we play,” Graham added. “Every American tries to find the way to get the most deductions they can. I see nothing wrong with playing the game because we set it up to be a game – as long as they don’t cheat.”

Currently most corporations doing business in America pay a lower tax rate than the average citizen, while about one-fourth of the largest companies pay no federal income tax at all.

It’s hard to spot a true winner in a least-taxes-paid competition. The tax code is full of holes big enough for a lawyer to run through. Not all income is taxable, and taxes collected in one year often turn into refunds or credits the following year.

Some years it’s pretty easy. For example, Exxon Mobil earned the 2009 trophy – $19 billion in profits; $0 federal income taxes paid. That’s tough to beat, especially when you add the $156 million tax rebate Exxon Mobil received that same year.

Second place that year went to Bank of America for a unique trifecta: cashing a $1.9 billion tax refund while making $4.4 billion in profits and receiving a bailout of nearly $1 trillion from the Federal Treasury, all in the same year.

Citigroup landed in the top three for paying no income taxes on $4 billion in profits. It helps that they have 427 different foreign tax havens set up to transfer income out of IRS jurisdiction.

Goldman Sachs paid 1.1 percent of its 2008 income in taxes. Listed profits of $2.3 billion didn’t include the $800 billion bailout the corporation was given. Since it was taxpayer money to begin with, that income wasn’t taxed at all.

According to the Wall Street Journal, tax breaks during the past decade allowed General Electric to pay no taxes at all for the past two years. From 2005 through 2010, GE made $26 billion in profits in the U.S. – that’s after-all-expenses profit, not income. Despite those profits, GE also received $4.1 billion in tax rebates from the IRS.

As the NY Times stated in 2012, “GE is so good at avoiding taxes that some people consider its tax department to be the best in the world, even better than any law firm’s.”

And then there’s Gannett Corporation, owner of 23 television stations and 82 newspapers, including USA Today. In January of 2011, Gannett employees were told there would be no raises for the third year in a row and they would have to take a week off without pay. Two months later, $3 million in bonuses were given to the top two managers, along with about $17 million in stock options and other compensation – all of it handed to the two people who thought up that plan.

All of that might be acceptable if ethical behavior was a primary concern for corporate management teams, but many CEO’s and their underlings appear to be ethically challenged from a lack of practice.

The top 10 corporations doing business with the Dept. of Defense in 2009 received $144 billion in contracts. Going back to 1995, nine of those corporations have committed a total of 204 instances of contract fraud and environmental, ethics or labor violations.

The exception is Oshkosh Truck Co., which has committed no violations during the past 15 years. Oshkosh manufactures specialty trucks for the U.S. military, fire departments, and concrete and garbage hauling companies. It has annual sales of nearly $3 billion with products marketed under 10 different brand names.

Oshkosh Truck has followed the rules, it seems, and profited quite well. It’s too bad their behavior is so rare in Corporate America.