Middle-class Americans who draw paychecks have little chance to elude income taxes, because the taxes are withheld automatically. But the rich 1 percent at the top, along with giant corporations, are different. They use smart lawyers and accountants to dodge about $100 billion per year in taxes -- chiefly by shifting wealth to low-tax foreign countries.
A report titled U.S. Tax Hackers says "crafty tax players" exploit law loopholes to pocket billions that otherwise would go to the U.S. Treasury. It explains:
"Between 2008 and 2010, 29 of America's largest corporations -- companies like G.E., Wells Fargo and Verizon -- paid nothing in corporate taxes. America's wealthiest escape billions in taxes through complex mazes of tax shelters, credits and subsidies.
"Google saves billions in taxes by shuttling its profits through two perfectly legal tax havens known to American corporations as the 'double Irish' and the 'Dutch sandwich.' Google first credits its U.S. profits to its Irish office, then funnels the money through a shell company in the Netherlands to tax-free Bermuda."
Most tax-ducking firms have no genuine subsidiaries in the Cayman Islands or other shelter spots. They merely maintain foreign mailboxes and offshore bank accounts where they send huge sums, pretending that the foreign businesses are real. The offshore accounts exist solely as devices to elude U.S. taxes.
Wealthy Republican presidential frontrunner Mitt Romney notoriously pays low taxes. The report (online at FrugalDad.com/tax/) says:
"Romney's net worth, between $190 million and $250 million, is greater than the combined wealth of the last eight presidents. In 2011, Romney made $21 million from investment income, of which only $3 million went to federal income taxes. Romney has millions of dollars set up in investment funds in the Cayman Islands, a Caribbean tax haven. Official documents reveal that Romney's former private equity partnership, Bain Capital, has around 138 secretive offshore funds in the Caymans."
President Obama once remarked sarcastically:
"There's a building in the Cayman Islands that houses supposedly 12,000 U.S.-based corporations. That's either the biggest building in the world or the biggest tax scam in the world, and we know which it is."
The "60 Minutes" program has shown that Zug, Switzerland, similarly has thousands of dummy subsidiaries that were created to elude U.S. taxes.
Congress could change laws and recoup the $100 billion lost revenue -- but the Republican-controlled House would block the reform. During a Charleston visit last year, Sen. Jay Rockefeller, D-W.Va., complained that Democrats can't halt the tax-ducking:
"It makes me so angry that we could just let that slither by. We say, 'OK, Republicans won't go for it,' so we don't push."
If future elections restore Democratic control in Congress, a top priority should be to end this sleazy tax-avoidance.