Our newest corporate tax avoider profile

In the third installment in our three-part series on corporate tax avoiders with strong connections to North Carolina, NC Policy Watch has released a profile of International Paper, Co.

Here are some of the fast and disturbing facts on the giant multi-national (the largest company of its kind in the world) that owns 18 separate facilities in North Carolina:

  • Total assets $27 billion
  • 2008-2012 profits combined: $2.8 Billion
  • Net 2008-12 federal tax rate: 2.6% (the offical corporate tax rate is 35%)
  • 2008-2012 federal taxes paid: $74 million (if paid at the 35% rate, this figure would have been $980 million)
  • Five-year compensation of CEO John Faraci (as of April 2012):  $49.3 million

Read more about International Paper (as well as two other large tax avoiders — Duke Energy and Merck & Co.) by clicking here.

21 Comments

  1. Doug

    April 12, 2013 at 3:17 pm

    So are you alluding that they are doing something illegal outside of the current tax code? Or are you saying they should ignore deductions that are in the tax code that they are legally able to take. If it is the first, then that is egregious of them. If you are alluding to the second it is egregious of this blog. If your premise is that a taxpayer shoudl ignore legal deductions, then I expect to see some stories on taxpayers who have utilized deductions like the EITC, medical care, charitable giving, education or home mortgage deductions.

  2. Doug

    April 12, 2013 at 3:24 pm

    I also notice that your profile only includes a cursory look at “loopholes” and other deductions without listing or detailing what they are. How is a reader to determine if these deductions are egregious or not without the details. All the deductions available are put into the code by your congressmen and serve to promote some type of activity or to not penalized the company for some reason or another.

    As an example, you do not detail if they have loss carry over from prior years, or some additional tax loss…you know that the tax income is different from what you are publishing which is the GAAP income. What about say R&D credits which create jobs? There are a lot of situations that your 500 word article could be glossing over for use in promoting leftist hysteria.

  3. Doug

    April 12, 2013 at 3:33 pm

    I also checked the Duke Energy article, now I dislike them as much as anyone else but the article does not pass the smell test.

    The main premise was that accelerated depreciation is a bad thing. Well that is likely due to the investement in something you leftists are whooly on board with. They have invested left and right in clean coal and new gas fired plants to replace the coal. All this depreciation does is move it up from say 30 years to a lesser time like 15 years. No matter what they would get some kind of deduction just for a longer period. The accelleration just gives them a break now that they have spent or borrowed millions….which the borrowing probably more closely matches the depreciation. It also allows them to keep more of their money to invest more in those cleaner plants instead of sending to Washington DC to do their form of “investment” in more leftist perks.

    Readers beware, you gotta dig a bit deeper than these guys and actually think about what they are publishing. If all you do is accept this one slant on things you are doing yourself injustice.

  4. david esmay

    April 12, 2013 at 5:19 pm

    Doug, you want to did deeper, read “Free Lunch” by David Cay Johnston. You’ll get all the details you need about how our tax code was written by lobbyists for Energy, Transportation, etc., that hands huge windfall profits to corporations through tax avoidance. I would focus on the structure of Master Limited Partnerships, which are really ponzi schemes for energy companies to collect phantom taxes that are never paid. Large amounts of the profits these companies claim on their balance sheets are nothing more than gifts from taxpayers. Here’s some more info. http://economix.blogs.nytimes.com/2011/05/31/are-taxes-in-the-u-s-high-or-low/

    When our economy was booming corporations paid about 30% of federal revenues, today about 8%.http://economix.blogs.nytimes.com/2011/05/31/are-taxes-in-the-u-s-high-or-low/

  5. david esmay

    April 12, 2013 at 5:24 pm

    Here’s something you right wing fascists are “whooly” on board with, allowing corporations to undermine the economy and redistribute common wealth into as few hands as possible passes for capitalism, it’s nothing of the sort. Caveat Emptor.

  6. david esmay

    April 12, 2013 at 5:26 pm

    Can a conservatroll produce any evidence that cutting taxes on corporations produces jobs and helps the economy? No.

  7. Alex

    April 12, 2013 at 6:07 pm

    The obvious argument david is that lowering corporate taxes on American corporations would entice them to bring back the trillions of dollars that are currently offshore and creating jobs here rather than other countries. Since we have the highest corporate tax rates in the world, there is obviously no way to test the theory unless we do something different. IBM would be a perfect example where they have made most of their recent investments overseas, and continue to cut their workforce here.

  8. Jeff S

    April 12, 2013 at 8:26 pm

    They cut their workforce here, like so many US companies because European labor laws protect their workers, making it much easier to fire people in the US.

    The trillions of dollars are overseas because it was funneled their through multiple subsidiaries, holding companies and national borders. A practice that is in the gray area of legal, but clearly dishonest to everyone who observes it.

    Corporate America is the only entity that the conservatives are willing to pardon for bad behavior. They steal, pollute, kill and someone is always there, ready to pardon them for being a “job creator”.

    Apply the situation to the average individual and they’re screaming about retribution and so-called morality.

    These companies had a choice. Pay the taxes, or hide the money overseas. They made their decisions and can deal with it. Besides, they’re not hoarding it because of taxes. They’re hoarding it because the worldwide austerity idiocy has trashed the markets. It’s easier for them to hold their money while the right-wing governments of the world make life miserable for their employees.

  9. Alex

    April 13, 2013 at 9:41 am

    I guess I’m somewhat surprised by Jeff’s comments and others on this site as they seem to express an utter disdain for corporations, capitalism, and American business in general.The free enterprise system that built such a great country seems to be scorned and ridiculed at every opportunity by progressives who have no problem though with enjoying the fruits of this success.It does make me wonder what they are proposing in it’s place, and where we are going as a nation when seemingly our more educated population feels that the government can do a better job of running the economy. Is it socialism they are proposing, perhaps a modified European model, or something entirely different ? There are certainly no models of success out there, if we are going in that direction. For me, it’s a sad picture and certainly breeds no optimism about the future of this country

  10. david esmay

    April 13, 2013 at 10:45 am

    Complete bovine scatology alex, the average effective corporate tax rate is 13.5%.

  11. Doug

    April 13, 2013 at 12:33 pm

    Good arguments Alex. It is a known fact that US corporations are holding a lot of overseas dollars since they know we have some of the highest tax rates in the world. While they are creating jobs overseas, they are foregoing investment that could be used to create jobs here. Any of you leftists wonder where all that cash the fed keeps pumping into the system goes? Corporations are just sitting on a lot of cash because they are afraid of what the socialists in DC are going to confiscate next. There is just not any incentive to attempt to grow and make more revenue, and thus hire more people. The leftist dream is coming to pass….and it turns out it is a nightmare to their constituents.

  12. Alex

    April 13, 2013 at 4:44 pm

    I think esmay must have gotten a new dictionary along with his legal primer !

  13. david esmay

    April 14, 2013 at 11:43 am

    I think Alex/Doug need to supply themselves with some new reality based talking points absent of false equivalencies!

    Arguing that corporate taxes should be lowered, even though both corporate and individual taxes are at historic lows, as a means to promote economic growth has no supportive evidence, while there are reams of evidence to the contrary. Our tax code is littered with thousands of schemes that allow business to earn now and pay later, the fine print of the tax laws are absolutely filled with private letter writings, that among other things allow businesses to keep two sets of books, book accounting and tax accounting.

    The whole purpose of tax accounting is to delay and avoid paying taxes, this let’s businesses profit now and pay later. Doug is being disingenuous with his description of accelerated depreciation, the ultimate corporate socialist handout that righties fought for and got in 1954, which allows companies to write of the cost of new equipment on tax returns faster than on their financial returns sent to investors. As long a the corporation keeps growing, the difference between the fast tax write-down and the slower shareholder write-down creates an expanding pool of money.

    If you look just at corporate owned utilities, an industry that accounts for about 2% of the economy, MSB Energy Assoc. found that this is worth about 12 billion a year, if you apply that to the entire period since accelerated depreciation began until now, that is 556 billion dollars in tax breaks, or about $1,853.33 for every man, woman, and child in America today.

    If a company earns a billion dollars in profit, with a corporate tax rate of 35%, the company’s profit and loss staement to shareholders show $1B of pre-tax profit, reported as a $350M tax and $650M after tax profit. But because of accelerate depreciation and other tax loop holes enjoyed by corporations like, say Duke, one only has to scan the fine print of their cash flow statement to a line “cash paid for taxes”, which in Duke’s case, is less than zero.

    This is how right-wingers have socialized corporate profits and taxes, most of us have taxes immediately deducted from our incomes, not so with business, and especially big business, which congress allows to pay into the future.

    That accelerated depreciation which has become the hall mark of the 1954 tax over-haul, was sold as a mechanism to increase economic growth and create jobs, it did neither, and this was proven by Nobel Laureate Robert Solow in 1956. Also, tax economists Dale Jorgenson and Robert Hall came to the same conclusion, and in 1957, Evsey Domar, the architect of accelerated depreciation publicly admitted he was wrong.

    In spite of all the evidence that this accounting mechanism doesn’t deliver anything more than a huge windfall profit for business at the tax payer’s expense, Reagan put in an even faster accelerated depreciation and in 2003 Bush arranged to add a temporary bonus depreciation on top of that.

    This is where to insert the right wing canard our resident conservatrolls like to hype, the absurd notion that Washington somehow is moving towards socialism. In his first year in office, President Obama, who is strangely described as anti-business, sponsored 100% immediate write-offs of all new investment during most of his first term and 50% for the rest of it.

    The next time anyone hears an Alex, or a Doug, or McCrory, or a Rucho, or business leader, or a tax adviser complain about the complexity of the tax code and the burden it places on business, they are lying through their teeth.

    The fact is they love the complexity because it turns taxes into profits and shifts the burdens of corporations and government on to us.

  14. Alex

    April 14, 2013 at 12:42 pm

    Esmay is more confused than a Democrat in a budget-cutting contest !

  15. david esmay

    April 14, 2013 at 1:08 pm

    Whatever Civitas is paying Alex, it’s not a bargain, but conservatives are notorious for spending five dollars to save a nickle and tout it as fiscal responsibility.

  16. Alex

    April 14, 2013 at 8:04 pm

    Liberals are notorious for spending five dollars to save nothing and then tout it as fiscal stimulus david.

  17. Emma

    April 15, 2013 at 9:52 am

    “But charters and corporations have a more extensive evil effect than what relates merely to elections. They are sources of endless contentions in places where they exist, and they lessen the common rights of national society.” Thomas Paine The Rights of Man

  18. Doug

    April 15, 2013 at 10:46 am

    dave,
    You can say what you want about tax accounting, but as a licensed CPA I think I know a bit more about the true purpose of accounting, both tax and GAAP. If the government wants to discourage investment, they would keept the 30-50- or whatever time frame they want. They could even do away with allowing the deductions for those expenses altogether, but they don’t because they want to target things like that “green” investment by power companies as an example.

    But, don’t forget one other thing, the corporations are not really being taxed….you are! Yes the poor and middle class are all paying that same tax rate as the corporation by increased prices to cover the cost of taxes. It is actually helping the people you guys care for soooooo much in reduced prices for goods and servcies.

  19. david esmay

    April 15, 2013 at 10:54 am

    Doug, I have one major problem with your argument, the rise in the price of goods and services has out paced by far the rise in wages and economic growth. Which means cutting taxes does not promote growth or job creation, if it did we wouldn’t have the unemployment problem we are experiencing and the ensuing drop in revenue.

  20. Alex

    April 16, 2013 at 10:08 am

    Of course david ,the rise in the price of goods and services has come about from the cheap dollar policy advocated by Obama and Bernanke so that we can keep interest rates down. The rich have gotten richer by funneling more of the cheap dollars to the stock market , the middle class has shrunk, and the poor have gotten poorer. Nice results unhhh !

  21. Doug

    April 16, 2013 at 10:58 am

    Thanks for responding Alex.

    And back to the tax breaks for corporations. Don’t forget that accellerated depreciation was a part of the Obama “stimulus” giveaways a few years ago. The profile on Duke Energy did not bring that up, but I am sure they blamed Republicans instead of their fellow progressives who if I remember correctly were in power at taht time.