My first pass through the stressful 1040 process made it clear that I will owe a lot of money again this year and that I can't avoid it without cheating, which I am opposed to for reasons of ethics and timidity.
So to get my mind off the unpleasantness, I turned on the news. A report stated that Caterpillar was threatening to leave Illinois because of a 2 percent increase in the state tax rate, which, according to a spokesperson, would burden the company with an additional $40 million tax bill.
It just so happens that members of U.S. Uncut Chicago have been doing research on corporate taxes for PayUpNow.org. "To the files," I exclaimed to myself, happy to take my mind off my own problems.
I went to the SEC website and looked up Caterpillar's 10-K, which would show their income and tax records in recent years. The company made a pre-tax income of $3.75 billion in 2010. The Illinois state tax rate of 4.8 percent would mean a state tax of $180 million. But they only paid $44 million. Could this be right? A company complaining about oppressive state taxes only paid a quarter of their required tax?
I poked around the 10-K a little more, ending up at the section with federal tax figures. Over the past 2 years, according to Caterpillar's own carefully prepared income statement, the company made $4.3 billion, but it received almost $200 million in federal tax refunds.
There had to be an explanation for this. Under Caterpillar's "General and Financial Information 2010," I found this: "We have recorded income tax expense at U.S. tax rates on all profits, except for undistributed profits of non-U.S. subsidiaries of approximately $11 billion which are considered indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested profits is not feasible."
By now my mind was drifting back to my own disagreeable tax situation, but I felt the need to compare these findings to that of other corporations. Maybe I was being too hard on the company that had provided jobs in Illinois when conditions were right. Other 10-Ks, dutifully prepared by corporate accountants, revealed the following:
o Exxon Mobil, with over $87 billion of pretax earnings in 2009 and 2010, paid less than 1 percent in federal taxes
o General Electric, with over $24 billion pretax earnings in 2009 and 2010, got a tax refund of over $4 billion
o Verizon, with over $26 billion pretax earnings in 2009 and 2010, got a tax refund of over $1 billion
o Banking leaders Citigroup and Bank of America, with a combined $8 billion of pretax earnings in 2009 and 2010, both got tax refunds two years in a row
o Chemical giants Dow and Du Pont, with combined pretax earnings of over $9 billion in 2009 and 2010, got more in refunds than they paid
Overall, the top 100 companies, with $5 trillion in 2010 revenue and $500 billion in pre-tax earnings, paid less than 10 percent in non-deferred federal taxes. If these 100 companies had paid the 35 percent tax designated by U.S. tax law, another $140 billion would have been collected. This is approximately equal to the total deficit for all 50 states.
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Paul Buchheit is a college teacher, an active member of U.S. Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, Rapping History.org), and the editor and main author of American Wars: Illusions and Realities (Clarity Press).
