The Real Story In America: a Tale of Two People
Graham Summers
June 30, 2010
I propose that the real division amongst the American people is based not on social issues (race, religion, political views) or biological issues (gender). I believe the real divide is based on LAW.
Remember, the US as a political system is entirely based on a complicated legal framework. And while the boundaries erected by race, religion, even gender, have begun to blur, the legal boundaries are as rigid today as they were the day the Constitution was framed.
With that in mind, by law, the American public is broken into two groups of people.
- Individuals
- Legal entities or businesses[1]
Under American law, a business entity receives the same rights as an individual. It can own property, it has freedom of speech… in fact, a recent Supreme Court ruling permits corporations to directly spend on political campaigns just like individuals. This means that Goldman Sachs and Exxon Mobil are now freely permitted to use their billions in direct donations to political candidates.
However, while having the same rights, individuals and business entities have very different responsibilities. Let’s say I go dump a gallon of oil into a local river. If I’m caught doing this, I can face a fine of up to $2,000, potentially serve six months in jail, and perform up to 200 hours of community service (depending on where I do it).
In contrast, Exxon Mobil dumped 15,000 gallons of oil into Boston’s Mystic River last year and was fined $6 million. That sounds like a lot of money, except it’s basically what Exxon makes in three hours of business. No one went to jail. No one spent an afternoon cleaning up a highway or some other civic project. The fine (a joke) was it.
The distinctions between individual and corporate responsibility extend to taxes as well. You or I have to pay taxes on our income according to basic tax law. However, large-scale corporations are regularly permitted to prepare two sets of tax books (one for the public/ SEC, the other for the IRS).
I realize this point sounds a bit “conspiracy theorist” but it is commonly known in the financial community. Consider the Goldman Sachs or GE stories located below.
Goldman Sachs’s Tax Rate Drops to 1%, or $14 Million
Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007… The company’s effective income tax rate dropped to 1 percent from 34.1 percent… The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits.
()http://www.bloomberg.com/apps/news?pid=20601110&sid=a6bQVsZS2_18
GE: 7,000 Tax Returns, $0 U.S. Tax Bill
General Electric filed more than 7,000 income tax returns in hundreds of global jurisdictions last year, but when push came to shove, the company owed the U.S. government a whopping bill of $0…
() http://money.cnn.com/2010/04/16/news/companies/ge_7000_tax_returns/index.htm
Many politicians and media outlets like to lament the US’s high corporate tax rate. However, according to SmartMoney magazine, between 2000 and 2005, US corporate taxes amounted to only 2.2% of US GDP. In contrast the average for the 30 countries that comprise the Organization for Economic Cooperation and Development (OECD) was 3.4% (54% higher).
Regarding tax responsibility, the following article helps explain how Big Business is permitted to get away with such low taxes:
Tax Audits of Big Business Are Declining, Study Says
An analysis of data from the U.S. Internal Revenue Service by a nonpartisan research group shows that the agency is reducing its auditing of the biggest businesses. The Transactional Records Access Clearinghouse found that the IRS audited one of four of the largest companies in 2009, the lowest rate in more than 20 years…
() http://www.nytimes.com/2010/04/12/business/12audit.html?ref=business
Some of these tax differences are due to the inherent differences between individuals and large-scale business. I, as an individual, am required to remain a citizen of a particular tax jurisdiction. If I choose to remain a US citizen, I have to pay the US income taxes on any earned amount over $87K even if I reside in a foreign country year-round and make all of my income abroad.
Large-scale corporations, on the other hand, can move their business segments to whichever tax jurisdiction they please. A few years ago Halliburton and other large multinationals moved their headquarters to Dubai drawn by the 0% corporate tax rate there.
Never mind that Halliburton’s “headquarters” were only two floors of one building located on Sheikh Zayad road (suspiciously unmarked on the building’s directory when I was there) or that it retained its offices in the US. Halliburton, for legal and tax purposes, was officially “headquartered” in Dubai.
I propose that this is the real divide in the US: that between individuals and large corporations. The former group comprises the majority of the US population. However, the latter group is granted the greatest freedom. It also holds the greatest political clout due to its massive cash coffers and extensive lobbying efforts.
In this sense, I believe we are truly in something of an Oligarchy in which the political process, proposed legislation, and various regulations are largely controlled by an extremely tiny portion of the population.
So while we’re taught in school that the US is a Democracy founded on The Declaration of Independence’s proclamation that “all men are equal,” I believe that the reality is that the same economic imbalances that governed the US’s political system at the signing of the Declaration (namely that only wealthy, white landowners could vote) still exist today… though the system is no longer controlled by votes but by money.
And corporations happen to have the most of it.
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