I’m not lying, I’m writing fiction with my mouth.— Homer Simpson
Over a single malt whiskey at the Scruples Lounge in Bridgeport, Connecticut I spoke to Sam Johnels, junior deputy tax guy for General Electric.
“We totally could have gotten the Government to pay Mitt. The guys he hired? PricewaterhouseCooper? More like Pricy Underwater Houses Pooper! They couldn’t figure out how to get the IRS to pay him? Idiots. If we were in charge of his return, he would be getting $3.2 million from Uncle Sam instead of paying out one thin dime.”
“I suppose so, I hate all that political ‘What will it look like to the regular people?’ bullshit.
“Our job is to make the tax system our bitch. That’s why at GE we hire former IRS and Treasury people. It’s an embarrassment to our profession when people throw the game for political appearances sake. Frankly I’d be ashamed to sign my name to any multi-millionaires’ tax form that didn’t end up with my client getting huge tax credits.”
As the cocktail waitress brought over another drink (with the new Connecticut tax on liquor tacked on to the $29 shot) he explained how they structured income for a global firm. Figuring out how to get a 3% effective tax rate in some desperate country was exciting to him. He complained about how only the U.S. expects GE to pay on income earned in other countries and how they decided to teach the U.S. government tax collectors a lesson by indefinitely investing profits abroad.
Maybe it was the red head on the stripper pole or just because any talk of taxes makes my mind wander, but he said that if the US tax rate was more reasonable, like 25%, more companies would pay it.
I asked, “Really? Do you really think that the companies will be satisfied with 25% and not keep looking for 3% or less? Would you? Won’t everyone keep looking for countries to pay them instead of having to pay?”
He said he hadn’t thought about that, besides it’s not his job to be satisfied.
I asked, “Does your company get any benefit out of services that come from paying taxes? Should it ever have to pay for those benefits?” This was one of those gambits I learned from my friend Dave Johnson when I hear an anti-tax rant come on, I’m supposed to remind them of all the good things taxes can bring, starting with the military, cops, firemen and roads while leaving off anything that isn’t a benefit that they can’t see or touch.
He didn’t answer because he was focused on the dark-haired stripper in the leopard print bustier. I asked again and he said, “The CEO constantly pounds in everyone’s head, ‘maximize shareholder value, ‘maximize shareholder value.’ but even though we don’t make anything our division is measured as a profit center. We aren’t a “cost of doing business” division like those lame HR people, but a real driver of profits like the jet engine division. We are constantly try to figure out a tax plan that helps the company.”
“So how do you become a profit center?” I asked.
“Lots of ways, like back in 2008 we hired the guy from the IRS who was in charge of the transfer pricing program.” he said.
“The what? I don’t know what that is.”
“The transfer pricing program is where a company works with the IRS to figure out how to price products and services among subsidiaries. It’s kind of hilarious that the head of that IRS division now helps us screw the feds out of revenue by telling us how to shift profits to lower-tax countries.”
“Aren’t there laws to stop people from helping you do that?” I asked.
“Are you kidding? The only laws that still exist are the ones we haven’t lobbied to change yet. Besides, what are they going to do, get the IRS guy to sign a non-compete clause?’ Charge him with treason for keeping money from the United States Treasury? The head of our team is from Treasury! A lot of these IRS guys see ending up at “the competition” the whole point of going into the IRS in the first place. Kind of like congressional staffers on the way to lobbying firms.”
“Oh and then we play the whole, “We want to create jobs” card, but we don’t create them in the U.S. We cut this deal with back in 2004 where we moved a aviation leasing subsidiary to Ireland, with it’s 12.5% tax rate, and got a tax deferral from the U.S. I kid you not! Then we set up a new aviation funding corporation in Ireland with about $15 billion in assets, but no employees! HA!”
“That U.S. “Jobs Creation Act” actually required lessors to have “substantial” work done outside the United States to qualify for a deferral. They rewarded us for doing it! Hey, we were just following the law! Of course it helped that some of our guys wrote it, but is it our fault that the congress got rid of their in-house experts who could have told them about the loophole? Thank you Speaker Newt Gingrich!”
He paused as one of the strippers came over and bugged us for lap dances. I tried to explain about pon farr but she just pouted and started hitting on Sam again. He gave her a $20 just to go away for now so he could finish explaining the world to me.
“You see Spocko, for public consumption Mitt had to show he paid some taxes, but in private the real professionals know he wouldn’t had to even pay that much unless he wanted to. Did you know that over half of U.S. firms paid no federal income taxes during at least one year between 1998 and 2005? Throw that one out to your buddies who whine about the 53 percent who pay no taxes because they are poor. Taxes are for people who aren’t smart enough or rich enough to hire people like me. ”
“But don’t you understand the need for taxes and all the services that come from them?” I asked.
“You don’t get it, my pointy-eared friend, once people have accepted the primary purpose of corporations is to maximize shareholder value, we are always going to look at the minimizing of taxes as our goal, any other societal considerations aren’t our problem.
“Whose problem is it?” I ask.
“Yours. You or anyone who wants to do something together that requires taxes. But asking people like me to deny our corporate charters, our very reason for being, is asking us to break our own metaphors and laws. We will fight you every step of the way. We fought for years to get corporate personhood we won’t roll over unless we are forced.”
“We will tell you that rescinding corporate personhood will destroy the world as we know it. But the world existed before corporate personhood and it will continue afterwards.” he went on then stopped.
He leaned in closer, “But don’t tell anyone I told you that. As far as I’m concerned, professionally, getting rid of corporate personhood is the goddamn Apocalypse.”
“You want to change what it means to be a corporation at the fundamental conception level. Those hippies at Patagonia started one of those new benefit corporations,. Watch for lots of mocking from us on that. We’ll mock it until someone serious converts and they we will crush them to prove a point, just like we did those “socially responsible” mutual funds. We can’t have anyone breaking ranks with our idea of a corporation
“Personally I might believe that taxes are good and necessary for society, but professionally I have to divorce myself from that view. You have to remember how I’m paid and promoted. He gestured to one of the strippers:
“It’s like Tanya over there, she might be a great screenwriter outside the club, but when she is in here she is rewarded for how she looks. In the lounge she needs to focus on her looks, not her witty repartee. I’m not paying to hear her, I’m paying to see her, touch her and if I pay enough, maybe something more than touching.
“Our department is not judged on what a good “community partner” we are. That’s PR crap that we tell the HR folks so they can feel better working here. We are judged by the hard numbers of how much tax money GE has to pay at the end of the quarter. Remember the CEO’s mantra? ‘maximize shareholder value.” Has my section done that? Did I make my manager’s MBO goals? While I’m on the clock at work that is what all 975 of us are thinking.
“If you want to change how I do my job and how companies interact with the rest of the world, you need to start changing what being a corporation means. It’s about rewriting the rules and then it’s about changing the world’s understanding of those rules. But I’m telling you right now we are going to spend millions to fight you. We have an army of think tankers ready to spew FUD all over this new corporation idea. ”
“Now if you don’t mind I’d like to get a lap dance from Tanya before we go. Heck I’ll buy you one too, and since we talked about work, it’s tax deductible!”
Cross posted to Spocko’s Brain