Crony Capitalism: Our President and his Parent Companies

So, by chance I happened to catch a tweet by Sen. John Cornyn (@JohnCornyn) which said, "Tax reform, anyone?" Followed by a link to a special report by the Tax Foundation (@TaxFoundation) titled: "Behind the Headlines: What Do Corporations Pay in Income Tax?" One of the first things that stood out to me was that in 2008, 1,937 corporations earning $2.5billion+/yr. pay 68% of all tax revenue at an effective tax rate of 21.2%. However, the report references an analysis from Citizens for Tax Justice (@taxjustice) titled, "Analysis: 12 Corporations Pay Effective Tax Rate of Negative 1.5% on $171 Billion in Profits; Reap $62.4 Billion in Tax Subsidies. This points out that the effective tax rate of the $2.5billion+/yr. group is heavily reduced by large companies paying little or no taxes.

For a quick reference the corporations on this list are: General Electric, American Electric Power, Dupont, Verizon Communications, Boeing, Wells Fargo, Fed Ex, Honeywell International, IBM, Yahoo, United Technologies, and Exxon Mobil. 

After months of hearing Barrack Obama talk about oil subsidies it wasn't much of a surprise to see an oil company make the list, but it's interesting to find that they are the lowest corporation on the list. They actually improve the effective tax rate by paying 14.2% on $19,655 profit over the last three years. GE makes the top of the list with an effective tax rate of -61.3%. This stood out to me. You don't have to be a political junkie to know the relationship between President Barrack Obama, and Jeffrey Immelt, CEO of GE.

GE

Not only did Obama appoint Jeffrey Immelt to be the head of his jobs council, he actually sat next to Michelle Obama during Obama's recent speech touting his American Jobs Act. It pays to be friends with Barrack Obama. While receiving $4.7 billion in federal subsidies, and enjoying a 0% tax rate, they have decreased their US jobs by 36,000 people. Under the Paul Ryan plan for Tax Reform, GE would owe $1,930,500,000, but under the current plan we place the burden on smaller, less connected businesses. BTW, the difference in what they receive with Obama and what they would pay under the Ryan plan is $6.630,500,000. That actually only leaves about $1 billion in profits over 3 years, and that hasn't factored in other taxes. Based on those numbers, the success of GE is completely dependent on shady accounting and political connections. This is Obama's idea of a strong American business! Good thing he's picking the winners! (Unless of course you're Solyndra)

 After considering the facts around GE's incredible tax benefits, I remembered a Huffington Post article I ran across titled, "Obama's Close Ties to CEO's Whose Firms Dodge Taxes." This list goes on to name GE, Honeywell, Ford, Boeing, Verizon, eBay, Qwest(CenturyLink), Dow, Motorola, and International Paper. That claimed that 3 of the top 5 on my list closely tied to our president. As well as Honeywell, who is 8th on the list, and enjoys a -0.7% average tax rate over the last 3 years.

Verizon & Boeing

According to the HuffPo article the CEO's of Boeing and Verizon both served on Obama's Export Council. Their tax rates averaged -2.9% and -1.8% over the last three years. Recently Verizon made the news asking for favors from the president on patent wars. Must be nice!

American Electric Power & Dupont

So I figured I might as well do a little research. See what ties the other companies had to our president and I was a little shocked by the results. It turns out that in 2004, eight states decided they wanted to take preemptive steps against climate change, and sued 5 power companies to cut plant emissions. Through the requests of AEP, DuPont, and others, Obama actually stepped in to try and throw out the suit. On top of that, Obama has been quite generous to DuPont and Monsanto by giving them high ranking positions in the FDA and agriculture areas of government. To be honest, I didn't think DuPont would be tied to Obama, and to learn he is in so close with Monsanto, well that actually made me pause. If you've ever watched a documentary involving the production of food in America, you have seen the left's opinion of Monsanto and DuPont. According to these documentaries the companies have used some pretty shady practices through the courts and lobbying to expand their profits while crippling farmers. One of the more famous cases involves seed patents that make it illegal to save seeds from last year's crops, and then going after farmers with any trace of their crops on the their land. While my knowledge on this is limited, the point remains that these are interesting bed fellows for a liberal president. AEP has enjoyed an average tax rate of -9.2% and DuPont -3.4% over the last 3 years.

Between AEP and DuPont, Barrack Obama shows a great willingness to put campaign finance well before political ideals.

These examples aren't the rule. Most corporations pay much higher rates. According to the Tax Foundation's report, which I linked to originally, businesses profiting between $5 million and $2.5 billion pay between 29.6 and  32.5%. The companies listed are the epitome of crony capitalism. They create arguments for politicians like Obama to claim corporations aren't paying their fair share while increasing benefits to their friends, and sticking it to the other guy. I'm of the opinion that the leftist elite use their base to hold down competition in their industry. The Paul Ryan plan decreases taxes on the corporations paying in excess of 25%, and increasing taxes on the well connected companies relying on the government to prop up their earnings.With a corporate wide effective tax rate of 26%, the burden would spread evenly, while maintaining revenues, and decreasing costs on the private sector.

To quote Scott Hodge, from the Tax Foundation, in his recent testimony to the House Budget Committee, "Taxes should be neutral to economic decision making, they should be simple, transparent, stable, and they should promote economic growth.


In other words, the ideal tax system should do only one thing - raise a sufficient amount of revenues to fund government activities with the least amount of harm to the economy."

By simplifying the tax code we decrease the cost of paying taxes, change the focus of business back to production rather than complex accounting, and encourage entrepreneurship in every industry. We also preserve the ideals of our parties by removing a powerful tool that leads politicians to sell their ideals for a better funded campaign. It still leaves plenty of areas for government reform, but it would be huge for encouraging economic growth.