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 Rep. Tim Walz (D-Minn.). "It was meant to make homeownership more affordable for the middle class."

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

Sheryl Crow benefited to the tune of $2 million on a loophole put in place by Tennessee, Kentucky, and Texas lawmakers.
Kevin W. Burkett/Creative Commons
Sheryl Crow benefited to the tune of $2 million on a loophole put in place by Tennessee, Kentucky, and Texas lawmakers.
Facebook founder Mark Zuckerberg took advantage of a multi-billion-dollar tax scam during his company’s IPO.
Guillaume Paumier/Creative Commons
Facebook founder Mark Zuckerberg took advantage of a multi-billion-dollar tax scam during his company’s IPO.

That leaves everyday taxpayers to subsidize toys like Microsoft CEO Steve Ballmer'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 $20 billion a year in tax breaks. And they'd prefer that wind farms not compete for that lucrative welfare money. 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 $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, Wash., lost their jobs when the company shipped them to a lower-cost facilities overseas.

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

Another 170 people making auto sensors at a Sensata Technologies plant in Freeport, Ill., 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. Sen. Orrin Hatch (R-Utah) 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 Capt. Joe Hazelwood slept off a bender below deck.

The vessel crashed, spilling upwards 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, caking wildlife in oil. The remote locale made cleanup difficult. Twenty-three years later, fish stocks have yet to return to their pre-spill levels.

A court would eventually level $5 billion in punitive damages against Exxon — equal to a single year's profit at the time. The company appealed, chipping away at the sanction until the Supreme Court slashed that figure to $500 million 2008.

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22 comments
rgracom
rgracom

No wonder everything is made overseas!! Thats where the money goes...... and stays!! Close these black holes now!! Excellent reporting!! You never really know just how badly your gettin' screwed until someone steps up and says "what the hell is this?"

mtnplover
mtnplover

This is a refreshing article about tax policy that describes some of the tricks used by tens of thousands of companies and wealthy individuals to reduce their tax obligations. The techniques described are a little broad and overstated, but for a relatively short, well-explained article about complex tax issues, the author should be highly commended.

 

Most of the "loopholes" described involve tax deductions, which is one reason to support a gross receipts tax. It's fairly difficult to evade any tax based on gross receipts. Questionable tax deductions and loopholes are irrelevent under a gross receipts tax system and progressive tax rates can apply by exempting small businesses and taxing the largest businesses higher tax rates.

 

Another discussion worth having is whether any company or corporation actually "pays" taxes. My thought is that only "people" pay taxes. Thus, any taxes imposed on a business are actually paid by the business owners, employees, and/or business customers. For example, if Apple's effective tax rate goes from 17% to 35%, the company will send more money to the government, but it's really the investors and/or Apple customers/employees who will pay the tax.  Companies may be very efficient for collecting taxes for us, but that doesn't mean the companies are actually "paying" the tax.

 

Over the next year or two there are significant proposed changes to federal and state tax systems being proposed, including a national VAT (a sales tax on steroids) and "territorial taxation" of businesses that would exclude US taxation on any foreign sales made by US companies. Neither tax will benefit the lower and middle income groups in the US, but since there is very little consensus among the lower-income groups for alternative taxing systems, it's quite likely these negative taxes will be imposed at the federal level.

 

Of the hundreds of policy issues that face local, state and federal governments every week, tax issues may be the most important of all. Tax policy helps determine the cost of housing; how much working people have left from their paychecks; and whether business invest locally or shift jobs overseas.

CourtenayGass
CourtenayGass

@AdmStrange @LucasLilieholm "the uygur" cannot stop laughing

csalt
csalt

Will closing the loopholes cause companies to locate off shore? Costing the ecomony jobs, jobs, jobs? And costing the government what little taxes it collects now from them?

abys37
abys37

Where did you get that 1% tax rate for FedEx? I don't think that number is supported.

red.marcy.rand
red.marcy.rand topcommenter

There's nothing wrong with selfishness which merely means concern with one's own self-interest.

Why should anyone be forced to pay for government miseducation in the schools and government mismanagement of roads ? Taxation is legalized theft and there is nothing fair about it. Producers are being forced to support nonproducers or even anti-producers. Vote NO on 39.

red.marcy.rand
red.marcy.rand topcommenter

Why does my refutation to manylessons keep disappearing ?

manylessons
manylessons

If Proposition 39 closes these bogus tax loopholes for the rich, It has my vote.  While our state and nation wither away, these companies continue to rake in immense profits and hide away  their fair portion of taxes.  Money used to protect their companies in case of Fire, Theft or Threat, money used to pave roads for their trucks, money used to maintain schools to educate their children.  Plain selfishness is the cancer of the rich and their ultimate destruction.

red.marcy.rand
red.marcy.rand topcommenter

Why would any sane person have any interest in the government getting more of our money ?

These 'loopholes' are all that's left of our freedom and money. We need more of them !

This is the kind of nonsense that caused me to stop reading the Bay Guardian and the East Bay Express aka The Gammon Gazette, mostly one man's recycled boring leftism.

csalt
csalt

 @mtnplover

 The corporate tax rate is supposed to be 35%. That is why they try to get out of with loopholes and deductions. The other thing that everyone confuses is the 15% capital gains tax. That tax is on already-taxed money that purchased the capital to begin with. I am not for taxing the middle class more, either, it is just everyone is muddying the waters with misinformation. I have a small business, an LLC and I definitely get taxed both ways, personally and in the company.

cliche_guevara
cliche_guevara

 @abys37

I guess you missed the very first sentence in the article? Here I copy and pasted it for you.

"A year ago Citizens for Tax Justice, a Washington, D.C., nonprofit, studied the tax returns of 280 corporations..."

 

cliche_guevara
cliche_guevara

  Okay, I don't think I can put crazy back in the bottle for you.

Taxation is a necessity for a advancing society. Where do you think the roads come from, the street lights, clean drinking water, your sewer system, etc... It's called taxation. Some of it is misappropriated, that's why there are watchdog groups to point out extravagances and errors, but a majority does what it needs to in order to keep order.

If you don't like taxation then move to a third world country and live off the land, but if you don't like the politics here, believe me it doesn't get any better in a less advance society.

As for nothing being wrong with selfishness you couldn't be more wrong. But a point for your side, you are being a great example of it.

 

"Every man must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness."  (Martin Luther King Jr.)

 

"Great achievement is usually born of great sacrifice, and is never the result of selfishness." (Napoleon Hill)

 

 

 

red.marcy.rand
red.marcy.rand topcommenter

 @manylessons Selfishness means concern with one's own self-interest. It's a great thing. Stealing money via the legalized theft of taxes is evil. The government miseducation and road maintenance is something no one should be forced to pay for. It should be totally privatized with no strings. We need more companies with more profits, not more lousy government services. I wasn't aware of Prop 39 but I will now vote against it because of your recommendation.

powertothepeople
powertothepeople

 @red.marcy.rand

 Here is an excellent example of pure unadulterated greed, with no  trace of compassion or empathy.  Some people can only think of themselves, but  thank goodness its limited to the 1%.   Fortunately the 99% is dumping the 1% and their self serving tax exemptions, by voting yes on Propostion 39.

cliche_guevara
cliche_guevara

 @csalt  "...everyone is muddying the waters with misinformation", including yourself.  A capital gains tax is just that a tax on gains made from capital.  If you invest $100,000 and that investment doubles to $200,000 you get taxed on the gains of $100,000 not the entire amount. The next year if it doubles again you get taxed on the increased $200,000 not the entire amount of now $400,000.  If you are... you need a better accountant.

abys37
abys37

 @cliche_guevara ...and yet it appears no to be an accurate percentage.  Financial statements are publicly available.  I didn't mean to ask who provided that number. I meant to ask how.....

cliche_guevara
cliche_guevara

 @red.marcy.rand  Actually the word that means concern for one's own interest or welare is egoist, but what do I know, I didn't make that up, I got that from the Oxford English Dictionary. 

jefemuygrande
jefemuygrande

 @powertothepeople  @red.marcy.rand 

PTP, ARE YOU AWARE THAT THE TOP 1% OF EARNERS PAY OVER 37% OF ALL FEDERAL INCOME TAX WHILE EARNING ONLY 22% OF THE INCOME? AND THAT THE TOP 10% PAY OVER 70% OF ALL FEDERAL INCOME TAX? OR DOES THAT EVEN MATTER TO YOU AS THERE IS NO SUCH THING AS THE "GREEDY RICH" EVER PAYING THEIR FAIR SHARE? TO WHICH GOVERNMENT  TEAT(S) ARE YOU  ATTACHED? 

jefemuygrande
jefemuygrande

 @cliche_guevara  @csalt CHE, YOU TOTALLY MISSED THE POINT (OR ARE COMPLETELY IGNORANT OF THE DIFFERENCE) THAT THE INITIAL INVESTMENT OF CAPITAL WAS ALREADY TAXED, EITHER AS ORDINARY INCOME OR CAPITAL GAINS.

 
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