The invisible web of connections by which the rich get a sweeter deal is starting to be exposed. How America reacts is huge — especially for one of the top users of offshore tax havens, Microsoft.
When President Obama was asked Tuesday about how the elite shuffle money around the world to avoid paying taxes, he called it “gaming the system.” But he was careful not to name any names.
“Frankly, folks in America are taking advantage of this same stuff,” he said about the “Panama Papers,” documents revealing how some global elites have set up shell companies and offshore accounts to skirt taxes in their home countries.
Well here’s a few names you may have heard of: Microsoft. Amazon. Expedia.
These local companies haven’t shown up in the Panama Papers, 11 million documents leaked last weekend from a law firm that specializes in forming tax haven accounts. But the three Seattle-area companies are on the list of the top 300 firms in America for parking profits overseas, often in countries such as Bermuda that have zero corporate taxes.
Most Read Stories
- Your guide to enjoying the eclipse from Seattle
- Watch: Live video of the solar eclipse crossing the Northwest, Seattle WATCH
- Friends honor artist’s last wishes with water ballet in a Seattle kiddie pool WATCH
- Battling demons in a community looking to Trump for change VIEW
- Experts answer your burning questions about the 2017 solar eclipse
Microsoft now ranks third in the U.S. for having stockpiled $108 billion overseas. Only Apple and Pfizer have more (it’s Pfizer that had been trying to essentially renounce its U.S. citizenship and move its headquarters to Dublin, Ireland, for tax reasons.)
Amazon and Expedia both have $1.5 billion in profits in other countries, according to 2015 tax returns analyzed last month by Citizens for Tax Justice, a tax-policy think tank. Costco, Starbucks and Paccar also made the list.
The total amount of “unrepatriated profits” for all Fortune 500 companies has reached $2.4 trillion, an amount that if it were brought home could result in a federal tax bill of more than $600 billion, the report says.
This isn’t just money earned overseas by global companies. As The Seattle Times’ Matt Day showed in an outstanding recent report, Microsoft is No. 3 for a reason. It has pursued a strategy for decades of setting up what are essentially shell companies for low-tax routing of profits from its software sales.
Bottom line: When you buy a copy of Microsoft Office at the Northgate Best Buy, the money isn’t booked at Redmond. Much of it goes to Reno, Nev., (avoiding some Washington state taxes) then to Puerto Rico and Ireland before eventually settling in Bermuda.
The tax think tank estimated that by Microsoft sending its capital on a globe-trotting journey, the company avoided more than $34 billion just in federal taxes.
It’s all legal, the company says. Obama echoed that Tuesday even as he decried it.
“The big problem we have is that a lot of this stuff is legal, not illegal,” Obama said. “You can trace what’s taking place, but you can’t stop it.”
What’s interesting about all this, to me anyway, is how the invisible system by which the rich use slick lawyering and a web of global connections to get a sweeter deal than anyone else is slowly, but surely, being exposed.
But will anyone here care? Already the prime minister of Iceland has resigned due to news of his wife’s offshore account. But I’m guessing Icelanders have a lot more shame about naked capitalism than we do.
On the flip side, there’s definitely a sense of disgust in the ether about how the deck has gotten so stacked.
A few months back I baited Donald Trump supporters to tell me what they see in our first reality-show presidential candidate. Most responses were screeds about Muslims or political correctness. But a few said they back Trump because he alone gets the biggest problem.
“He is separate and apart from the power lobbies that are collusive with the two political parties,” said one Trumpian.
Wrote another: “Trump says ‘I know how bought off these people in politics are, because I buy them all the time.’ He is the only one saying that the system itself is a sort of sanctioned scam.”
Of course Bernie Sanders is sounding the same alarm (and it wouldn’t be a surprise if Trump himself has money parked in Bermuda.) But intriguingly, Trump and Sanders have at least one position in common: They both propose ending the use of offshore tax havens by corporate America.
When the right and the left start meeting on the other side, maybe something is happening here.