It is well past time that our government went hightailing after these corporate and wealthy individuals who hide their income in off-shore accounts to avoid paying taxes. President Obama is in hot pursuit of these tax cheaters so stand back and watch the sparks fly. The president estimates that Americans are being cheated out of $250 billion every decade by these well-designed tax evasion schemes through which many American companies and wealthy individuals camouflage their true income by depositing it in tax havens such as the Cayman Islands, Monaco, Liechtenstein and Luxembourg.
According to research released from the Office of Research at the IRS and The Citizens for Tax Justice, the art of tax avoidance or evasion has become a big business of its own. Most of our country’s major accounting firms, including Ernst and Young, Deloitte Touche, and Price Waterhouse have marketed abusive tax avoidance strategies and the general effort has been abetted by Bank of America, Citigroup, Merrill Lynch and other major banks.
Major American corporations are involved in these scams. ENRON paid no federal taxes in four out of five years between 1996 and 2000. Halliburton is reported to have hundreds of off-shore affiliates. Some of the most notable American companies, including Coca-Cola, have tax avoidance shelters in the Cayman Islands.
The tax scam business is not only off shore. Three years ago a Senate committee on Homeland Security found that tax shelter companies were using the Los Angeles Fire and Police Pension Fund as well as the Austin Fire Fighters in questionable scams to hide money.
In this country, corporate taxes paid to the federal treasury have fallen from 4.8 percent of the nation’s gross nation product in the 1950s to today’s paltry 1.5 percent. Another way to consider that freefall is to remember that if corporations had been paying the tax rate as when Dwight Eisenhower was president, the public’s treasury would have received an average of $380 billion per year more than it has.
What happened? A refusal by most presidents and Congress to chase down this problem and fewer IRS investigators and enforcement people on the ground. From Reagan to Bush, the ability of the IRS to pursue and catch the cheaters has been denuded.
The problem affects not only the federal government and its budget deficits, but we also feel the problem here in the Rocky Mountain West. Here in Montana, the Treasure State’s treasury is ripped off year after year by abusive tax avoidance scams, usually practiced by out-of-state individuals and companies. Non-residents who have Montana earned income fail to pay income taxes at an astonishing rate of 78 percent. A recent study of oil and gas royalty payments demonstrates that 88 percent of non-Montanans took the income and ran.
Why doesn’t government at both federal and state levels stop this business of tax scams? Barack Obama is trying. Closer to home, our Montana Department of Revenue under orders of Gov. Brian Schweitzer presented the 2006 state Legislature with two dozen ways that Montana could collect the money that is rightfully ours. That Legislature narrowly voted not to go after the tax scofflaws. We will see if Obama fairs any better with this Congress.
Pat Williams served nine terms as a U.S. Representative from Montana. After his retirement, he returned to Montana and is teaching at The University of Montana.