The Taxonomist: Standing Up Against America

Everybody's annoyed at big American corporations that renounce their citizenship and move to Bermuda to avoid taxes. The public heat has forced even most Republican politicians to feign outrage. In recent months, PricewaterhouseCoopers Consulting abandoned its plan to incorporate in Bermuda, as did the Stanley Works, the poster child for unpatriotic corporate behavior. Who could defend this disreputable practice? Well, it turns out that quite a few people are weird enough, or have been paid enough, to have done so.

On Aug. 29, a collection of right-wing ideologues sent a letter of praise to House Ways and Means Chairman Bill Thomas (R-Calif.) for introducing legislation generally calling for more offshore tax abuses. But they complained bitterly that Thomas had felt forced to take a small step to address the specific Bermuda loophole albeit temporarily. According to the right-wingers, even briefly creating "barriers against companies that wish to re-charter" is "misguided" and would "undermine economic growth."

Who signed this astonishing endorsement of unpatriotic corporate behavior? Representatives for 30 Republican groups, including the Heritage Foundation, the Cato Institute, Citizens Against Government Waste, Citizens for a Sound Economy, the National Taxpayers Union, Paul Weyrich's Christian-right Coalitions for America and, of course, Grover Norquist's Americans for Tax Reform. These guys ought to consider changing their names. How about the Coalitions Against America? Or Citizens for an Insane Economy? Or in Norquist's case, Bermudians for Tax Reform?

Not surprisingly, the unpatriotic expatriating companies themselves are also waging a fierce battle to keep their tax shelter. The former Andersen Consulting, for example, which renamed itself Accenture as part of its Bermuda tax dodging, has hired big-time GOP political consultant (and Bush family confidant) Charlie Black, the disgraced almost-House Speaker Bob Livingston (R-La.), former Sen. Dennis DeConcini (D-Ariz.) of the Keating Five and Ken Duberstein, chief of staff in the Reagan White House.

The notorious Tyco International has persuaded the previously honorable Bob Dole to defend its Bermuda tax abuses. Former House Ways and Means Chairman Bill Archer of PricewaterhouseCoopers is flacking for two Houston oil companies that have renounced their U.S. citizenship.

In defense of the indefensible, the lobbyists offer two contradictory arguments. The funniest claim is that tax avoidance wasn't why the companies moved offshore -- merely "a minor factor," as Livingston put it on behalf of Accenture. Actually, he asserts, Accenture's European partners suddenly decided they couldn't stand being headquartered in the United States, while the American partners were adamant that they wouldn't accept European control. "So they picked a nice island, Bermuda," Livingston told The Washington Post.

Well, gee, if avoiding taxes isn't a big deal, why are the companies so upset about proposals to close their tax loophole? And if Accenture really was only seeking "neutral turf," why does its Securities and Exchange Commission filing note that "Accenture Ltd is a Bermuda holding company with no material assets other than ... shares in ... Accenture SCA, a Luxembourg partnership"? Last time I checked, Luxembourg was in Europe.

The lobbyists' second claim concedes the obvious: Avoiding taxes was indeed the only reason their clients moved offshore. Sadly, we're told, they were forced to do so because U.S. law would otherwise unfairly tax their foreign earnings -- under our "worldwide" corporate tax system. This claim is also a ridiculous falsehood. In calling our tax system "worldwide," the lobbyists conveniently ignore a huge exception to that supposed rule: U.S. taxes on foreign profits are deferred indefinitely. And in the rare cases in which companies decide to waive deferral, U.S. taxes are almost always completely offset by a credit for taxes paid to foreign governments.

Rather than taxing companies on their foreign profits, we try, with insufficient success, to tax companies solely on what they earn in the United States. For their part, the multinational companies try, with considerable success, to style their U.S. profits as "foreign" in order to avoid paying taxes on their U.S. earnings. That's precisely the goal of the Bermuda shelter, as it is for a wide array of other abusive offshore tax machinations.

Despite the poverty of their arguments, the lobbyists against patriotism are not without influence. Speaking for President Bush, Treasury Secretary Paul O'Neill has swallowed the companies' bogus "worldwide taxation" complaint hook, line and sinker. So have all the Republican members of the House Ways and Means Committee, along with many of the Democrats. Reporters, too, often are confused by the relentless onslaught of corporate lies.

Fortunately, on this issue the general public seems smarter than our leaders and scribes. Unfortunately, that may not be enough to win the battle.

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