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The Ex-Patriot Game of Hide and Seek

As they lay out their finances and financial holdings -- whatever andthey may be -- we need to demand that the candidates for our highest office tell us how they plan to address the financial shell games that are bankrupting our country. Not just what they're hiding.
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The finances of the candidates for President can provide a view into their values and policies. Do they give to charity? What's their tax bill? How did they make their money? Do they have several homes? Do they have student loans?

The recurring story and questions surrounding the financial holdings of Mr. Mitt Romney, and more specifically, their location, should cause all Americans to pause and consider the broader impact of the off-shoring of jobs and revenues. The Obama campaign ad asks pointedly, "What is Mitt Romney hiding?" But really, we should be seeking answers as to why these games are even possible and why our leaders have done little to change it.

Regardless of what you believe the role and size of the government should be, there's got to be a common interest in securing our homeland, putting out fires, catching bad guys, protecting our people, keeping our air and water clean, educating children, curing disease and caring for veterans.

These things cost money. Average taxpayers are funding these basic and critical items, with diminishing contributions to the Treasury by corporate America and wealthy individuals thanks in part to the use of offshore tax loopholes. Taxpayers should know that they're also paying for tax breaks, tax avoidance and tax evasion for wealthy individuals and our largest corporations. And demand that our candidates for President explain just how they plan to remedy this injustice.

The $100 billion revenue shortfall caused by the off-shoring of assets and corporate revenues cannot be ignored. Our very flawed system not only makes off-shoring standard operating procedure for over 80% of the top 100 publicly traded corporations, but it also provides incentives to do so through myriad deductions for doing business offshore.

Large multinational corporations aren't satisfied with getting something for very little; they want it all while paying nothing. This has been demonstrated by their mammoth lobbying efforts for tax holidays, both temporary and permanent. They've mastered a series of shell games and have increasingly exploited tax loopholes to avoid U.S. taxes. In some cases, they revoke their U.S. citizenship altogether.

All the while, many lawmakers are abdicating their constitutional responsibilities, pledging allegiance to Washington lobbyists, and casting aside solutions that could bring more revenue to the United States while keeping tax breaks in place for corporations that don't need them.

Industry behemoths rely on people buying their predictable talking points, and we continually hear that they are victims, the "real" job creators, and they can barely compete as it is, because the U.S. corporate tax rate is the highest in the world.

These arguments are misleading at best.

The U.S. statutory tax rate is in fact the highest in the world. But the joke is on us. According to the Congressional Budget Office, the average tax rate that corporations pay on domestic profits in the U.S. is about 12 percent. If tax cuts and widespread tax avoidance and evasion have created jobs, someone should tell the thousands of unemployed and under-employed individuals where to fill out the applications. And if multinational corporations can't compete within a system that barely taxes them as it is, someone should explain that to the owners of a local bakery or gym or camera store, who don't have subsidiaries in the Cayman Islands.

The current tax system is easy to game. A creative accounting department can move revenue out of the United States, while reporting their costs of doing business here. They can assign "ownership" of a patent or intellectual property to an offshore subsidiary and then claim that all the revenues they make based on these assets should be taxed in that country (which is often a low- or no-tax location, not surprisingly). These practices are entirely legal and very difficult for the Internal Revenue Service to track or challenge. Often these are the same companies that receive lucrative government contracts and subsidies for their product development.

But the tide is turning. Corporations and individuals using offshore tax havens is no longer a mysterious issue. Offshore tax loopholes and financial secrecy have been making headlines and headlining campaign ads. It is becoming increasingly clear that neither Democrats nor Republicans can defend this system any more with a straight face.

The players of these ex-patriot games are quite easy to identify, and the most recent round of charges against Mr. Romney continue the narrative. These are names we all know.

Google has paid an overseas tax rate of 2.4 percent since 2007.

The same year that Goldman Sachs received a $10 billion taxpayer bailout, it paid an effective tax rate of just one percent on profits.

Remember Transocean? The offshore drilling contractor was made infamous by the explosion on its rig that tragically took 11 lives and resulted in nearly five million gallons of oil leaked into the Gulf of Mexico. After transporting itself from Texas to tax-friendly Delaware, it made the voyage to the Cayman Islands, then traversed the Atlantic to low-tax Switzerland. By doing so, Transocean shaved 15 percentage points and billions of dollars off of its U.S. tax bill. Transocean is an ex-patriot that revoked its U.S. citizenship while still largely residing in the U.S. and passing its tax burden to the rest of us.

Senator Charles Grassley, a Republican member of the Finance Committee has called this type of re-incorporation and expatriation "immoral."

More recently, Apple made headlines. Thanks to a report by economist Martin Sullivan we learned that "Apple booked 70 percent of its worldwide profits overseas in 2011, even though 69 percent of its retail stores, 39 percent of its sales and 54 percent of its long-term assets were in the United States." How can two-thirds of this money parked overseas be categorized as foreign income? After all, Apple is an American company that performs the bulk of its operations in the U.S.

Senator Tom Coburn of Oklahoma, another Republican on the Senate Finance Committee responded to Apple's tax games on MSNBC: "Absolutely, I'm livid about that...First of all, we have a tax code. Why should Apple pay at 10 percent and some other company that can't export their technology... why are they paying 35 percent?" he said.

General Electric has averaged only a 1.8 percent effective U.S. federal income tax rate the past 10 years. In 2010, G.E. reported worldwide profits of $5.1 billion from its operations in the United States; its tax bill, however, was zero. The idea that most taxpayers have paid a higher rate of tax than the likes of G.E., Google and countless other giants of industry is getting them fired up. And rightly so.

In 2002, Senate Finance Committee Chairman Max Baucus made a critical connection between this issue of corporate ex-patriots and the impact on our country. "Prominent U.S. companies are literally re-incorporating in off-shore tax havens in order to avoid U.S. taxes. They are, in effect, renouncing their U.S. citizenship to cut their tax bill. ...This is very troubling, especially now, as we all try to pull together as a nation."

We still need to pull together as a nation. We see our people struggling to pay their bills, find a job, keep a job and retire with dignity. Things didn't bounce back as quickly for families as they did for the banks and corporations now making record profits.

These same corporations continue to shift profits around the globe, avoiding U.S. taxes while at the same time reaping every advantage of doing business here.

Corporations and their lobbyists will defend their actions as legal and submit that it is within their responsibilities to shareholders to minimize their tax burden. But just because these loopholes are legal doesn't mean they're right. In fact, it is wrong to keep asking taxpayers to sacrifice and endure painful cuts, while also funding the court system, national defense and roads that corporations use to build and protect their empires.

Will our candidates for President defend these tax loopholes as well?

As they lay out their finances and financial holdings - whatever and wherever they may be - we need to demand that the candidates for our highest office tell us how they plan to address the financial shell games that are bankrupting our country. Not just what they're hiding.

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