The kindly 87-year-old man who took all the school kids’ lunch money
He seems to stand out as the one beloved billionaire among us, a man who admitted he doesn’t need a tax cut and promised much of his fortune to charity.
But Warren Buffett’s company, Berkshire Hathaway, hasn’t paid much in real taxes over the years, choosing to defer $77 billion through the end of 2016. And now the company has taken advantage of the Trump tax law to claim a $23 billion 2017 federal tax benefit, ironically the same amount as the cost of the Child Nutrition Programs, which provide school lunches and other nutritional needs for millions of America’s children.
Paying hypothetical taxes until the tax bill expires
Berkshire Hathaway has declared nearly $200 billion in U.S. income over the past ten years, but including the 2017 writeoff has paid only $16 billion in current (non-deferred) taxes. The company’s annual tax obligation has been announced to shareholders as satisfied by a “hypothetical” tax payment. Now, suddenly, with Trump’s corporate tax break, $23 billion of its deferred tax liability just fades away, never to be paid, never to be used for the vital public services that are dependent on tax revenue.
Other financial institutions: Turning tax bills into assets
Berkshire Hathaway is not the only Big Finance tax avoider. Bank of America and Goldman Sachs together underpaid their current U.S. federal income taxes by about $5 billion in 2017 (almost $10 billion at the old tax rate). The information about their tax avoidance is taken from 2017 SEC 10-K filings. Details are here.
Here’s the bankers’ excuse for tax trickery: Deferred Tax Assets, which are writeoffs against previous losses (specifically due to the 2008 recession) or advance payments on their tax bills. But an examination of their 10-Ks over the past 12 years shows that both companies made profits every year since 2006 (with the exception of relatively small losses for Bank of America between 2010-11), and that they never paid more than the required 35% tax rate, and sometimes paid much less. Goldman Sachs reported a 61% tax rate for 2017, but almost all of it was deferred, and their announced tax was grossly inflated by a one-time (and relatively small) tax expense on a very large repatriation of offshore money.
As for any mysterious writeoffs against recession-related losses, Business Insider notes: “The banks did not actually lose money during the crisis. [It] is the difference between what the banks made during the last five-year crisis period compared to what they would have made if they would have continued to make money at the rate they did prior to the crisis.” Any losses that might be claimed by these financial institutions are imaginary losses, according to their own SEC filings.
The great disgrace: Billions in benefits from society, but they cheat the kids anyway
There seems to be no corporate recognition of the shameful act of taking decades of societal largesse and then doing everything possible to avoid paying for any of it. Financial institutions are the beneficiaries of decades of public support:
- Technology: Internet-related stock market trading and communications.
- Finance and Law: Patent and copyright systems, intellectual property, contract law.
- The Military: National defense, local police forces, the National Guard.
- Infrastructure: In the physical form of highways, railroads, airports; the energy grid; the communications grid.
- Federal Agencies: The Federal Reserve, SEC, FTC, SBA, FAA.
Taxes are long overdue on tens of billions in profits, but they remain unpaid, or deferred to some unknown time in the future.
But food for the children can’t be deferred.
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Reposted from Nation of Change
