Why is Bank of America Not Paying Any Taxes on $4.4 Billion in Income?
By Sara Flocks California Labor Federation
Around this time every year, Californians scramble to finish doing theirand pay what they owe to the government.
But not everyone is paying their fair share. Forbes Magazine recently analyzed the tax returns of the top 25 U.S. companies and found out that they’re not paying much in taxes. In fact, corporations such as Bank of America, General Electric and Citigroup will not be paying ANY taxes this year — they’re actually getting money back from the government. Forbes explains:
How did Bank of America not pay any taxes on $4.4 billion in income? Because of deductions like $860 million in tax-exempt income, $670 million in low-income housing credits and a $600 million loss on shares of foreign subsidiaries. With a provision for credit losses of $49 billion, Bank of America probably won’t be paying taxes for a long time.
After taxpayers bailed out Bank of America to the tune of $45 billion and helped boost their income to $4.4 billion, Bank of America is using every possible tax loophole to get out of paying their fair share.
Bank of America isn’t alone in using tax loopholes, shelters and other shell games to get out of paying taxes. A study by the U.S. Government Accountability Office found that two out of every three U.S. corporations paid no federal income taxes from 1998 through 2005.
In California, state legislators and Governor Schwarzenegger have made it even easier for corporations to use state resources, yet not pay a penny for them. Every year, California gives away $14.5 billion in tax breaks to corporations. Since 2007, Governor Schwarzenegger has signed into law numerous corporate tax breaks, exemptions and credits that will cost the state an estimated $3 billion a year.
Three tax breaks, passed as part of the 2008 and 2009 budget deal, will benefit a very small number of extremely wealthy corporations. According to Jean Ross at the California Budget Project: Nine corporations will receive tax cuts averaging $33.1 million each in 2013-14 due to the adoption of elective single sales factor apportionment. Eighty percent of the benefits of single sales factor apportionment will go to the 0.1 percent of California corporations with gross incomes over $1 billion.
Under existing law, it is nearly impossible to track how much of California’s budget is lost to corporate tax subsidies, what companies are getting the subsidies, and if those subsidies are creating jobs. Many of these tax expenditures are permanent and never reviewed. Companies are permitted to take taxpayer money and run – relocating jobs in other states or countries.
And guess who has to make up what corporations squirm out of paying? You, me and every other working person out there. When corporations don’t pay their fair share, the burden of funding schools, public safety, parks, libraries and infrastructure like roads and bridges falls on the rest of us.
California is facing a $20 billion budget shortfall. The state has cut every vital social service to the bone, and we’re facing more cuts to our schools, police, firefighters, medical clinics, roads and other services we depend on every day. Even though we are paying our fair share in taxes, middle class families are getting less in return and are bearing the brunt of the state’s drastic budget cuts.
$14.5 billion a year could go pretty far in filling the budget hole, if we got rid of corporate tax loopholes. The California Labor Federation is sponsoring a package of four bills to increase transparency and accountability of public spending on corporate tax expenditures. They are:
AB 2564 (Swanson) – Corporate tax breaks are not included in the budget, making it difficult to track their true cost. This bill requires that an analysis of all tax expenditures show up in the budget so that legislators can review tax expenditures and budget allocations at the same time. SB 1391(Yee) – Companies that receive tax subsidies and fail to meet the intended purpose and goals required by the Legislature should pay the state back the tax subsidies received. This bill allows the state to recapture, or “clawback,” tax breaks given to a business to create jobs if that company decreases employment in California. SB 1272 (Wolk) – Tax expenditures should be regularly reviewed for their effectiveness. This bill requires every new tax subsidy to state public policy goals and measures of effectiveness, and each subsidy will sunset after 5 years. AB 2666 (Skinner) – This bill will create a publicly accessible database that would display the names of all applicants for economic development subsidies, their stated intended purposes, the number of jobs created, their wage rates and benefits. Illinois has adopted such database, providing more information to policymakers and the public to assist in holding recipients of tax expenditures accountable to taxpayer goals.
Sara Flocks is the Public Policy Coordinator for the California Labor Federation (CLF). CLF is made up of more than 1,200 AFL-CIO and Change to Win unions, representing 2.1 million union members in manufacturing, retail, construction, hospitality, public sector, health care, entertainment and other industries.