Thanks to Globe and Mail for this one.

Ever wonder how large corporations avoid paying income tax?

Most of America’s largest publicly traded corporations — including several that are receiving billions of dollars from U.S. taxpayers to finance their recovery — have set up offshore operations that could help them avoid paying U.S. taxes on their profits, a government study released yesterday found.

American International Group, Bank of America, Citigroup, and Morgan Stanley are among the companies that are getting bailed out by U.S. taxpayers while having subsidiaries in locations where they can avoid paying U.S. taxes, according to the Government Accountability Office.

Read the full story here.

It’s not a new thing for companies to try to lower their tax burden in order to maximize profits.  That has occurred since the beginning of taxing coporations.

However, what is relatively new in capitalist economies is for government to bail out these institutions when they begin to fail.  So, I’m still curious as to exactly how these guys will ever be allowed to fail…  What will it take for GM or Citigroup to actually declare bankruptcy and shut down entirely?

Perhaps they could invest all of the bailout money into toxic toys for children.  Would that be enough to outrage the public and make the politicians fear giving away more taxpayer money to these greedy bastards?

What if they decided to publicly burn all of the cash on their front lawns?  Besides that being a federal offense, I bet Nancy Pelosi and George W. Bush (and soon to be Barack Obama) would still stand up and shout, “We can’t allow these companies to fail!  It would bring about dire consequences for the economy!”

How about if they fired all of their workers and made a public display of clothing the executives in golden underwear?  Perhaps that would entice the politicians to disavow support for the corrupt practice of gambling with the public’s money.

I’ve lost all faith.

Courtesy of NaturalNews.com. Thanks again to Jim for finding this one for us.

Priceless

One of our readers, Jim, is strongly in favor of the auto industry bailout.  He pointed me to this article at Time Magazine:

On Monday, an auto industry consulting firm, Planning Perspectives Inc., reported that 68% of participants in a survey of executives for industry suppliers said their companies would have to downsize if General Motors declared bankruptcy, while 12% said their businesses would likely close or would definitely do so. In the Midwest alone, some 275,000 jobs would be lost as a result of a GM bankruptcy. “If they go into bankruptcy, it’s going to have a catastrophic effect on businesses across the board,” says John W. Henke Jr., president of PPI, based in Birmingham, Mich.

There will certainly be a large wave of financial pain felt by many people if these companies fail now. Michigan will likely be one of the hardest hit states in the country if the Big Three fail, and as a former resident of the state, I would hate to see it happen. So many companies are intrinsically tied to the health of the automobile manufacturers, it’s almost terrifying to think of what would happen to those communities if the companies died overnight.

We saw a similar event happen with Flint, Michigan when General Motors pulled out of that city decades ago. That city went into a spiraling decay from which it has never fully recovered.  Crime went through the roof, real estate prices plummeted, and whole communities were abandoned.  This was because the company made the decision to abandon those factories which weren’t profitable enough to maintain.

Nearly 60,000 GM jobs were cut in Flint from the 1980’s to the 1990’s, resulting in massive unemployment.  The loss of the factory jobs led to lower demand for local suppliers, restaurants, and entertainment venues.  Only in the last couple of years has Flint started to recover in terms of lower crime and population growth.  It took roughly 25 years to accomplish this.

Today, we face the prospect of the entire U.S. automotive industry failing.  If this occurs, we will see a very similar story play out in many large U.S. cities.  But, the question shouldn’t be “how much taxpayer money should we hand them?”

There’s a whole slew of questions that need to come out of this situation:

• How did all 3 companies end up in an “imminent failure” position after only a couple of consecutive years of financial losses (shortly after record profits in the late 1990’s)?
• How much restructuring did they do when profits began their decline a few years ago? Why didn’t it work?
• How much of their current losses are attributable to excessive salaries (both at the corporate executive level and at the grunt labor level)?
• Which overseas divisions remain profitable, and what are the major factors which differ there?
• What government regulations are costing the companies the most money to live up to?  Can they be modified to achieve profitability?
• How far will a taxpayer-funded gamble of $25-40 billion really go since GM managed to lose $38.7 billion in 2007 alone (granted, some of that was just a “paper loss”, but…)?
• What have each of them done in the last week to reduce costs in their organizations?
• Why hasn’t fuel efficiency changed dramatically since the Ford Model T (which could get up to 21 mpg)?
• What guarantees do we have that they won’t just close down the U.S. factories anyway and increase foreign production once they have the money?  After all, most of the screaming politicians don’t care about these companies.  They just care about getting votes from the workers and receiving UAW endorsements.
• What’s the criteria that we’re going to use for the “Too Big to Fail” slogan to apply?  10,000 employees? 100,000?
• Should the government have stepped in to prevent the closing of the factories in Flint in the 80’s? Or, was that type of “failure” okay because it was a private-sector business decision?

There are countless more questions to ask, but the “solution” will still be to just hand over more taxpayer money.  We’ll consider it an “investment”, since there are immediate social and economic consequences whenever a large employer shuts down completely.

What are the long term consequences of these actions, though?  How much are we, the taxpayers, willing to give away before actually letting these companies die?  Will we nationalize the auto industry like we did with the banks?  Are there any lines left to be drawn?

I’m interested in your feedback.  Leave a comment below, or sign up for our newsletter.

From the Associated Press:

Stock intended to eventually earn taxpayers a profit as part of the Bush administration’s massive bank bailout has lost a third of its value — about $9 billion — in barely one month, according to an Associated Press analysis. Shares in virtually every bank that received federal money have remained below the prices the government negotiated.

“We’re not day traders, and we’re not looking for a return tomorrow” said Neel Kashkari, the director of Treasury’s Office of Financial Stability…

Of course you’re not day traders.  You are thieves that didn’t bother to listen to the public when we told you NOT to bailout the banks with our money.  You’re also terrible business people.  Making bad investments is one thing.  Making bad investments with other people’s money is something else entirely.

As an example, let’s say that someone were to give me $3,000 to protect them and for the general welfare of their family for a few weeks.  Now, an appropriate use of that money would be something like installing some sort of security system in their home (e.g., a local police force) or ensuring that they have enough food to survive.  What’s entirely inappropriate would be something like me taking that money and buying 10,000 rotten eggs with the hope that the eggs will get better with time.

Well, the U.S. Federal Government has just spent a few billion of our collective money on spoiling eggs.  If they aren’t “day traders”, then they should stay the hell away from the stock market.  We the people gave our government very explicit authorities in the Constitution.  Under no circumstances did we give them the authority to take our money and throw it at failing companies with no regard for the risks involved.