Much of the $2.5 Trillion in Corporate “Overseas Cash” Is Already in the U.S.

How can you miss what never leaves town?

by Gaius Publius

Coming out of the season of merry and bright we'll be coming into the full blast of news about "what Trump will do." One thing he's going to do is drastically lower taxes on the wealthy and on corporations. Another thing he'll do is declare a "tax holiday" on corporate profit that's (so-called) "held overseas", the (so-called) "unrepatriated" pile of cash that extremely favorable U.S. tax laws allow corporations to delay paying taxes on.

To be fair, Clinton would likely have done the same thing — declare her own version of a "tax holiday" — probably in return for private investment in a public-private "infrastructure bank." Will Trump's sweet deal to corporations take the same shape? It's possible.

For example, we find this, the possibility of a huge tax giveaway on "offshore profits" to Silicon Valley high-tech companies, via Americans for Tax Fairness (ATF):

Trump Tax Plan Would Let Tech Industry Permanently Dodge Hundreds of Billions in U.S. Taxes

High-tech corporations hold 29% of all untaxed offshore profits held by U.S. multinationals

WASHINGTON, D.C.—President-elect Donald Trump met with CEOs of some of the most profitable corporations in America today [December 14] and likely promised them a massive tax giveaway on their untaxed offshore profits, which would mean American families have to pick up their tab.

A spokesman for Trump said one of the topics of his meeting with high-tech executives would be “access to capital,” which likely referred to the huge tax break he plans to offer U.S. multinational corporations to bring home the untaxed profits they are holding offshore.

U.S.-based Fortune 500 companies have $2.5 trillion in profits booked offshore [pdf], mostly in tax havens, on which no U.S. taxes have been paid. Researchers calculate that these companies would owe more than $700 billion [pdf] in taxes if they were to pay what they owe.

Trump wants to cut the tax rate on profits held offshore from 35% to just 10%. That would cut their tax bill to just $150 billion, losing $550 billion in revenue [pdf] that could be used to fund education, infrastructure, healthcare, veterans’ benefits or other domestic priorities.

Trump’s guests today are all members of the technology and information sector. Technology corporations have 29% of all untaxed offshore profits reported to the U.S. Securities and Exchange Commission (Fig. 9). Just 10 corporations hold 40% of the total untaxed offshore profits, five of them attending today’s meeting with Trump: Apple, Microsoft, IBM, Google and Oracle.

As The Los Angeles Times reported, many of the executives invited to today’s meeting are “invested in Trump’s plan to enable corporations to move tens of billions of dollars currently sheltered in off-shore accounts back into the United States by slashing the taxes firms would owe on the money. The overhaul of the tax code Trump envisions would give Silicon Valley a financial boost.” ...

ATF smells a deal involving the high-tech portion of those trillions in "offshore" profits. So do I. (Note the estimate of the size of Fortune 500 "offshore" profits — $2.5 trillion.)

"Money doesn’t stop at borders. Tax accounting does."

But there's a "given" in this discussion — an unexamined assumption — that those trillions in corporate "overseas" profit is, in fact, held overseas. Wolf Richter is here to tells us the assumption is false. A great deal of that money, perhaps most or all, is already in the U.S.

Richter (my emphasis):

Come on Moody’s, Spare Us These Falsehoods: That $1.3 Trillion “Overseas Cash” Is Already in the US

Some falsehoods simply refuse to die. No matter how many times they get stabbed in the heart, and no matter who stabs them, they rise again in their full glory.

The falsehood that a vast amount of US corporate cash, including much of Apple’s $250 billion, is “locked away overseas” is one of them. We’ve known since May 2013 from the Senate subcommittee investigation and hearings into Apple’s tax-dodge practices that a big part of corporate “overseas cash” is actually invested in the US.

Now Moody’s Investor Services repeats the same falsehood and explicitly lobbies Congress to give our poor, multinational Corporate Titans with their hardscrabble businesses another tax break.

Here's the quote from Moody's itself:

Most of the cash that companies have is generated and being held overseas. Moody’s estimates that the amount of overseas cash will reach about $1.3 trillion, or 74% of total cash, in 2016. That’s up from an estimated $1.2 trillion, or 72% of total cash a year earlier.

Note that Moody's estimate of "$1.3 trillion" is considerably less than the AFT estimate of $2.5 trillion, but Moody's may have an interest in keeping its estimates conservative when it comes to companies that most of us would call "tax cheats."

Richter is having none of it, the claim that the most of the "overseas" money is actually overseas:

But here’s the thing. In May 2013, Apple got into a pickle because it had decided to fund its stock-buy-back and dividend program by taking on a record $17 billion in debt rather than “repatriating” part of its “offshore” cash and paying income taxes on it.

The Senate subcommittee investigation and hearings, chaired by Senator John McCain, showed that Apple had sheltered at least $74 billion from US income taxes between 2009 and 2012 by using a “complex web” of offshore mailbox companies. The investigation found untaxed “offshore” profits of $102 billion held by Irish subsidiaries – which Apple refused to “repatriate” in order to keep that income from being taxed in the US.

But according to the Senate report, Apple doesn’t have to repatriate that moolah because it’s already in the US. The Irish mailbox subsidiaries, on whose books this money is for tax purposes, transferred it to Apple’s bank accounts in New York. The money is managed by an Apple subsidiary in Reno, Nevada, and is invested in all kinds of assets in the US. Apple’s accountants in Austin, Texas, keep the books[.]

Money doesn’t stop at borders. Tax accounting does.

There's much more at the link, but you get the gist. A very large amount of that money is already in the U.S., invested in U.S. assets, held in U.S. banks, and is only nominally held by offshore "mailbox" subsidiaries, since those subsidiaries are free to invest it anywhere in the world, including in the U.S.

Will declaring a tax repatriation holiday on "offshore profits" create new investments in the U.S.?  It would seem that all of these companies, Apple for example, are already invested in the U.S. to whatever extent they want to be. So to answer the question, No.

Bottom line — When you hear Trump (or anyone) claim that "bringing the money back home" will mean "new investments" in the U.S., you're being lied to. You're also being treated like a fool, since Trump knows as well or better than anyone on the planet what hiding assets behind "holding companies" and post office addresses actually means.

It means you can do anything you want with your money, send it anywhere at any time in almost perfect secrecy.

 L'il Abner's goin' fishing for Saddam's WMDs. He's been told exactly where they are. He's also going to hunt for some of Apple's "offshore" money. Let's try not to join him (source).

These are just flat lies, that all "offshore" profits are really offshore. Believing them is like believing the Bush lies about WMDs in Iraq. Accept those stories if you like, but they'll call you a rube and a bumpkin if you do, then laugh as they dine on frogs' legs before heading to the bank. Just saying.

GP
 

Could A Battle Over The Carried Interest Loophole Determine Sean Duffy's Political Fate In Northwest Wisconsin?

Duffy reports a $1,222,995 war chest against Mary Hoeft

You've heard about carried interest right? Do you understand what it is and why the carried interest tax loophole has to be shut down? After reading this OpEd from venture capitalist Alan Patricof in the NY Times over the weekend, I wish the loophole could be shut down retroactively and the billions of unpaid taxes by crooked Republicans like Robert Mercer, Steven Cohen, John Paulson and Paul Singer and crooked Democrats like John Arnold and Donald Sussman could be collected-- with penalties. As Patricof explains, "carried interest" is not an investment or a risk that needs to be rewarded. It's basically another form of a management fee that gets taxed at a much lower rate. It's the performance fee money managers charge to manage other people’s money. "Carried interest is the fund manager’s share of the earnings from a profitable investment, normally paid on top of a much smaller management fee." Almost all the candidates this year followed Bernie in denouncing it and pledging to close the loophole, from Jeb and Señor Trumpanzee to Hillary herself. In fact, Hillary "has vowed that if Congress does not close the loophole, as president she would ask the Treasury Department to use its regulatory authority to do so."

Ultimately, the controversy has to do with tax fairness, or the lack thereof. Instead of being taxed as wages or commissions earned, carried interest is currently taxed as if it were a personal investment, or capital gains. This gives us a significant tax advantage since the capital gains tax rate is about 50 percent lower than the top rate on ordinary income.

When I started my first fund, Alan Patricof Associates, in 1970, I vividly remember my accountant telling me about my first sale of an investment: “We’re going to treat this as capital gain, but sooner or later, it will be characterized as ordinary income.”

That was 46 years ago-- and virtually nothing has changed.

Other countries have taken action: Britain recently recognized the wisdom of doing away with the special tax treatment of carried interest by maintaining a much higher tax rate on such income. But not the United States.

It is past time for that to change, and for fund managers like myself to accept the reality: We should not be receiving a tax break meant for investors when our work does not involve the risk of our own investment of capital.

As the former Treasury secretary Larry Summers once said of carried interest, “Rarely has a policy existed so long with such weak arguments in its favor.”

The capital gains tax benefit was originally created for people who invested with their own capital at risk. It was established as an incentive for investors to take greater risk than they would with their ordinary income. But because of the nature of our work, carried interest does not merit that incentive.

...According to the Congressional Joint Committee on Taxation, carried interest costs the American people nearly $2 billion in tax receipts every year. While eliminating the carried interest advantage would make only a small dent in the national debt, it would send a meaningful message to the American people.

Most important, it comes back to a question of fairness. Our current political and cultural environment is marred by a toxic belief that the country’s economic order is rigged against ordinary Americans-- that the world of high finance unjustly supersedes their rights, needs and wants.

A new report by Gallup found that 86 percent of Americans agreed that members of Congress paid too much attention to what their major financial contributors wanted them to do. It feeds the cynicism that is fraying our democracy.

“Congress’s harshest critics,” Gallup reported, “feel more strongly about the undue influence that donors and lobbyists have on Congress than they do about any other major criticism of the institution.”

For that reason alone, my fellow venture capitalists and private equity investors should support the closing of the carried interest loophole: It would carry great symbolic weight.

There needs to be a more realistic attitude from those of us who have benefited from the carried interest loophole for too many years.

We need to demonstrate a little more patriotism, and a greater sense of fairness, even if it affects our pocketbooks.

Sean Duffy (R-WI) is an especially heinous member of Congress when it comes to serving the interests of the Wall Street banksters who pay him off rather than his own middle class constituents in Wausau, Superior, Marshfield, Rhinelander and Iron Mountain. We asked his progressive Democratic challenger, Mary Hoeft if we were missing something. "My opponent," she told us, "is Wall Street's best friend. He chairs a banking oversight committee and yet, found no ethical problem in accepting $300,000 in political contributions from bankers. In payback for that generous contribution, he authored legislation intended to cripple the Consumer Financial Protection Bureau, the agency shaped by Elizabeth Warren and others to make sure that Big Banks are never able to bring our economy to its knees again. More than 7 million Americans lost their homes to bankruptcy. Does Sean Duffy care? No. Does he care if taxation is soft on the wealthy and hard on ordinary middle class working families in Wisconsin? No. Wall Street has a fulltime lobbyist working for them, whose name is Congressman Sean Duffy. It's time for a change! The people of the 7th Congressional District deserve a representative who will work for them."

Not All Democrats Are The Same

Conservatives opposed Social Security and have been trying to undermine it since it was signed into law August 14, 1935, Right from the day it was proposed Republicans and conservative Democrats were howling at the moon that it was deepen unemployment-- their standard false argument against everything under the sun. The same crew also accused Social Security of being socialism-- since the words have many letters in common. Southern conservatives threatened to tank it if blacks were included and Republicans also worked hard to keep women from being covered.

The program has been successful and popular and has made it much more difficult for Republicans and conservative Democrats to attack it. But that doesn't stop them. Although, the conservative establishment Democrat running for president has not committed to to Social Security expansion, most Democratic lawmakers side with Bernie Sanders on this one-- as do nearly 80% of American voters, across the party spectrum.

Conservative Democratic Party leaders have overseen the loss of nearly 1,000 state legislative seats and 70 congressional seats because they implement insipid messaging as part of election strategies built around their fear of standing with the majorities who demand the rich pay their fair share of taxes and that Social Security expansion be a focus of Democratic electoral strategy. Instead you find mealy-mouthed New Dems sounding exactly like the Republicans who opposed FDR's original proposals. As Social Security Works reminded its supporters yesterday, "When Democrats run on milquetoast policies, such as opposing privatization instead of taking bold stances such as expanding Social Security, they fail to inspire voters and fail to truly address the major economic issues facing our country." Today's big NY Times story that everyone was talking about, For the Wealthiest, a Private Tax System That Saves Them Billions by Noam Scheiber and Patricia Cohen, lays out one of the ways how the super-rich, particularly billionaire hedge fund-operators, have systematized not paying their fair share of taxes. "The trick," they ask? "Route the money to Bermuda and back." And they finance the careers of shady politicians, crooks like Mitch McConnell and Paul Ryan on one side of the aisle and Chuck Schumer and his Schumercrats on the other side, to make it all legal.

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.

In recent years, this apparatus has become one of the most powerful avenues of influence for wealthy Americans of all political stripes, including Mr. Loeb and Mr. Cohen, who give heavily to Republicans, and the liberal billionaire George Soros, who has called for higher levies on the rich while at the same time using tax loopholes to bolster his own fortune.

All are among a small group providing much of the early cash for the 2016 presidential campaign.

Operating largely out of public view-- in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service-- the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans.

The impact on their own fortunes has been stark. Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent, which is just slightly more than the typical family making $100,000 annually, when payroll taxes are included for both groups.

The ultra-wealthy “literally pay millions of dollars for these services,” said Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, “and save in the tens or hundreds of millions in taxes.”

Some of the biggest current tax battles are being waged by some of the most generous supporters of 2016 candidates. They include the families of the hedge fund investors Robert Mercer, who gives to Republicans [and just dropped a tidy $30 million on Ted Cruz's SuperPAC], and James Simons, who gives to Democrats; as well as the options trader Jeffrey Yass, a libertarian-leaning donor to Republicans.

Mr. Yass’s firm is litigating what the agency deemed to be tens of millions of dollars in underpaid taxes. Renaissance Technologies, the hedge fund Mr. Simons founded and which Mr. Mercer helps run, is currently under review by the I.R.S. over a loophole that saved their fund an estimated $6.8 billion in taxes over roughly a decade, according to a Senate investigation. Some of these same families have also contributed hundreds of thousands of dollars to conservative groups that have attacked virtually any effort to raises taxes on the wealthy.

You see former Treasury Secretary Larry Summer's opinion piece in today's Washington Post? He's not from the Bernie Sanders/Elizabeth Warren wing of the Democratic Party but his point was that "Sanders is right in his central point that financial policy is overly influenced by financial interests to its detriment and that it is essential that this be repaired... Sanders is right that Fed governance has been and is overly tied up with the financial sector. Each of the 12 regional Feds has a board of directors that is made up of nine people-- three banking representatives, three private-sector non-banking representatives and three public interest representatives. The fact that a member of Goldman Sachs’s board at the time of the 2008 crisis was the “public interest” chairman of the New York Fed board is, to put it mildly, indefensible." Don't get too excited though; he then takes a more conservative, establishment, Hillary-oriented "we better not do much of anything" approach, the approach that has made the Democratic Party so worthless to most Americans in recent decades.

Not all Democrats are the same-- nor have they ever been. There have been conservative Democrats working against American families with Republicans for generations. The Democratic Party may be going into a dark period, as Wall Street-owned New Dems take over more and more of the House leadership and the Senator from Wall Street, Chuck Schumer and his pack of vile Schumercrats prepares to take over leadership of the Senate Democrats. The only hope for Democrats in the short run is nominating Bernie Sanders and dedicated progressives who are running on his platform. You can find them here. But not on the 7 second video of the deceitful, wormy little Schumercrat below:

Tax Loopholes And DC's Most Disgraceful Revolving Door

Yesterday, Justin Amash celebrated Ronald Reagan's birthday with a tweet quoting his hero: "I believe the very heart and soul of conservatism is libertarianism." Far be it from me to lionize the right right-wing icon, but on the occasion of his 104th birthday, I found a not completely unrelated celebratory quote (above) from 1985. It could have come from a Barack Obama speech as easily as from a Ronald Reagan speech-- or, even more likely-- from a Bernie Sanders speech.

Lawyers may be the most common job in DC in recent years, but that doesn't mean they're all hustling off to court. Most DC lawyers are negotiators, deal-makers and lobbyists. They range from genuine consiglieres to run-of-the-mill purveyors of corporate bribes to Members of Congress. It gets really messy when so many of these lobbyists-- many looking for more and "better" tax loopholes for their clients-- are former Members of Congress themselves.

This week, Vocativ.com, did a quick run-down of 6 men who started 2015 as Members of Congress and are, just a month later, already raking in gigantic cash payoffs as K Street lobbyists. There have been half-assed attempts to tip-toe around regulating this particularly unseemly and virulent form of political corruption but... half assed doesn't work in DC and cashing out as a lobbyist is a perfectly respectable career path among Beltway politicians.

While Washington’s contentious revolving door spins in perpetuum-- allowing a stream of money, influence and access to flow seamlessly between the private and public sectors-- the speed with which these public servants have offered themselves up to big business may raise a few eyebrows.

“It’s not like they were calling up their new employers on the morning of Jan. 5 and asking for a job,” says Russ Choma, a Center for Responsive Politics spokesman. “It would seem very likely that as these lawmakers were still voting on bills and debating policies, they were simultaneously negotiating with lobbying firms whose clients may have a direct interest in these issues.”

By law, ex-House members are required to wait one year before they can officially lobby lawmakers on the Hill, while former senators must wait twice as long. Many, however, are able to work around those requirements at firms by signing on as consultants, counsel and strategic advisors, as a recent analysis by CRP and the Sunlight Foundation shows. That study’s conclusion: “The many loopholes limiting who can lobby whom in Washington and whether that lobbying must be disclosed to the public make a hunk of Swiss cheese look like the Berlin Wall.”

These are the half dozen Members singled out for scrutiny, a bipartisan lot in terms of political parties but, notice, all sleazy careerist conservatives:

• Saxy Chambliss (R-GA)

Title: Partner
Firm: DLA Piper
2014 Lobbying Income: $8 million
Notable Clients: PGA Tour, Royal Bank of Scotland, Pfizer

• Lee Terry (R-NE)

Title: Senior Advisor
Firm: Kelley Drye Warren
2014 Lobbying Income: $3.5 million
Notable Clients: Exxon Mobil, Kroger, Alliance for American Manufacturing

• Jim Gerlach (R-PA)

Title: Senior Legislative Advisor
Firm: Venable LLP
2014 Lobbying Income: $8 million
Notable Clients: Lockheed Martin, Blackstone Group, Verizon

• Jim Matheson (Blue Dog-UT)

Title: Principal
Firm: Squire Patton Boggs
2014 Lobbying Income: $30 million
Notable Clients: Amazon, Goldman Sachs, General Electric

• Jim Moran (New Dem-VA)

Title: Senior Legislative Advisor
Firm: McDermott, Will & Emery
2014 Lobbying Income: $4.5 million
Notable Clients: Brewers Association, Trinity Health, Coalition for Fair and Rational Taxation

• Bill Owens (New Dem-NY)

Title: Senior Strategic Advisor
Firm: McKenna Long & Aldridge LLP
2014 Lobbying Income: $830,000
Notable Clients: University of Georgia, Canadian Association of Petroleum Producers

Not Bernie Sanders, not Barack Obama, not Ronald Reagan was able to do anything substantial about tax loopholes for the wealthy-- and no one ever will, not while the revolving door between Capitol Hill and K Street is spinning madly.

State Of The Union Preview: Making The Tax Code Fairer-- Much Fairer-- For Working Families

No, this isn't a Bernie Sanders infographic

Paul Ryan's spokesperson has already chirped in that the bold tax plan President Obama is including in his State of the Union Tuesday is "not a serious plan. We lift families up & grow the economy with a simpler, flatter tax code, not big tax increases to pay for more spending." Ryan's plan is, of course, is based on the Austerity Agenda that has mired Europe in endless recession and on the so-called "dynamic scoring" (i.e., trickle down economics) that has bankrupted Kansas. I can't wait to hear Joni Ernst's response. The White House released the plan Saaturday evening, giving her plenty of time it read it and figure out how to denigrate it.

The White House press release emphasizes that "Middle class families today bear too much of the tax burden because of unfair loopholes that are only available to the wealthy and big corporations. In his State of the Union address, the President will outline his plan to simplify our complex tax code for individuals, make it fairer by eliminating some of the biggest loopholes, and use the savings to responsibly pay for the investments we need to help middle class families get ahead and grow the economy." That sounds a lot more like the Obama who ran in 2008 than the Obama so many of his early supporters didn't vote for in 2012.

The President will put forward reforms that include eliminating the biggest loophole that lets the wealthiest avoid paying their fair share of taxes:

•  Close the trust fund loophole-- the single largest capital gains tax loophole-- to ensure the wealthiest Americans pay their fair share on inherited assets. Hundreds of billions of dollars escape capital gains taxation each year because of the “stepped-up” basis loophole that lets the wealthy pass appreciated assets onto their heirs tax-free.

 •  Raise the top capital gains and dividend rate back to the rate under President Reagan. The President’s plan would increase the total capital gains and dividends rates for high-income households to 28 percent.

 •  Reform financial sector taxation to make it more costly for the biggest financial firms to finance their activities with excessive borrowing. The President will propose a fee on large, highly-leveraged financial institutions to discourage excessive borrowing.


By ensuring those at the top pay their fair share in taxes, the President’s plan responsibly pays for investments we need to help middle class families get ahead, like his recent proposal to make two years of community college free for every student willing to do the work. The savings will pay for additional reforms that will help the paychecks of middle-class and working families go further to cover the cost of child care, college, and a secure retirement: 


•  Provide a new, simple tax credit to two-earner families. The President will propose a new $500 second earner credit to help cover the additional costs faced by families in which both spouses work-- benefiting 24 million couples.

 •  Streamline child care tax incentives to give middle-class families with young children a tax cut of up to $3,000 per child. The President’s proposal would streamline and dramatically expand child care tax benefits, helping 5.1 million families cover child care costs for 6.7 million children. The proposal will complement major new investments in the President’s Budget to improve child care quality, access, and affordability for working families.

 •  Simplify, consolidate, and expand education tax benefits to improve college affordability. The President’s plan will consolidate six overlapping education provisions into just two, while improving the American Opportunity Tax Credit to provide more students up to $2,500 each year over five years as they work toward a college degree – cutting taxes for 8.5 million families and students and simplifying taxes for the more than 25 million families and students that claim education tax benefits.

 •  Make it easy and automatic for workers to save for retirement. The President will put forward a retirement tax reform plan that gives 30 million additional workers the opportunity to easily save for retirement through their employer.


Ryan, Ernst and their allies are, no doubt, flipping out over the new tax on the 100 biggest financial institutions-- with north of $50 billion each-- basing the fee on liabilities in order to discourage risky borrowing (i.e., reckless gambling with taxpayer-insured funds), although there are some responsible mainstream conservatives that actually embrace this idea and it is similar to the one proposed last year by the pre-Ryan chairman of the House Ways and Means Committee, Dave Camp (R-MI). Matt O'Brien, writing for the Washington Post calls this Obama's Piketty moment-- "Piketty with an American accent." He wrote that "Obama's State of the Union... will call for $320 billion of new taxes on rentiers, their heirs, and the big banks to pay for $175 billion of tax credits that will reward work. In other words, it's fighting a two-front war against a Piketty-style oligarchy where today's hedge funders become tomorrow's trust funders. First, it's trying to slow the seemingly endless accumulation of wealth among the top 1, and really the top 0.1, no actually the top 0.001, percent by raising capital gains taxes on them while they're living and raising them on their heirs when they're dead. And second, it's trying to help the middle help itself by subsidizing work, child care, and education." Republicans are no doubt rending their clothes and tearing out their hair. Can you imagine daring to propose raising the top capital gains tax rate from 23.8 to 28%? It should be interesting to see how Wall Street fave Hillary Clinton reacts to this proposals that will be so hated by the people she's counting on the finance her presidential run.

Note: Picketty moment or not, late last week the White House was heavily lobbying freshmen Democrats to back away from signing a letter circulating that adamantly opposes fast-tracking the Trans-Pacific Partnership, Obama's horrific, job-killing trade bill detested by progressives and demanded by Big Business and Wall Street. Many freshmen had their first experience of telling the White House, "Sorry, but no."

Will Illinois Elect A Sleazy Billionaire Sociopath As Governor? Meet Bruce Rauner

There is no way to shame a Republican. None of their selfish, narcissistic behavior ever seems to embarrass them. As Wall Street attorney Oliver Budde explained, "[O]ur ethos in a nutshell: grab every dollar you can, for as long as you can, using every scheme you can think of, and pay out to yourself and your cronies as much as you possibly can, as quickly as you can. You don't sweat morals or ethics; if it looks doable without getting caught or at least without serious risk of penalty to the executives (who couldn't care less if the corporation has to kick back some of the loot later), you do it. So subprime MBS and CDOs rated safe as mothers' milk, lying to and stealing from clients, misleading investors and the public (including Congress, even under oath), cheating on taxes, financing drug lords, laundering terrorist and Ponzi cash, ripping off the central bank that just saved your bacon, hell, even proclaiming love for America while simultaneously raking in hundreds of millions persuading American corporations to move offshore or even driving your own bank right off the cliff if the money's right: it's all good in the 'hood if you like the odds."

Last week, Senate Democrats tried shutting down the Republican filibuster of a bill meant to close tax loopholes that actually encourage corporations to avoid paying American income taxes. S.2569, had 25 cosponsors, from liberals like Brian Schatz (D-HI), Jeff Merkley (D-OR), Elizabeth Warren (D-MA) and Tammy Baldwin (D-WI) to so-called "moderates" like Mark Pryor (D-AR), Joe Manchin (D-WV), Kay Hagan (D-NC) and Chris Coons (D-DE)… but no Republicans; not one. Although a majority of the senators voted to end the filibuster and move on to a vote, they couldn't get the 2/3 majority they needed for that, but the Republicans had decided to obstruct the bill and kill it. It failed 54-42, only one Republican voting with the Democrats, scared that she could be defeated in November.

Elizabeth Warren called the Republicans and their corporate allies out for free-loading. "These companies," she told her fellow senators, "are renouncing their American citizenship, turning their backs on this country, simply to boost their profits. They are taking advantage of all the good things that our government helps provide-- educated workers, roads and bridges, a dependable court system, patent and copyright protections-- and then running out on the bill. If a person did that, we'd call them a freeloader. For a person who doesn't want to pay a fair share, our message is clear: you can renounce your citizenship, but don't come back and expect the rest of us to pick up your tab. But we don't do that for corporations. Corporations can renounce their American citizenship-- and make absolutely clear in legal documents that they're doing so to avoid their US tax obligations-- and not suffer any consequences. In this corner of the tax code, we've gone way past treating corporations like people. In this corner of the tax code, we treat corporations better than people." Water off a duck's back. It's part of the nature of conservatism.

Take Bruce Rauner, a typical crooked financial manipulator, a tax-cheat, and a shady billionaire who bought himself the Illinois Republican gubernatorial nomination, writing himself a nice $9.6 million check to crush his opponents. His three main priorities are lowering taxes on the super-wealthy, lowering the minimum wage, and wrecking the public schools system and replacing it with for-profit charter schools.

Would it surprise you to know that Rauner also hides much of his wealth offshore to keep from paying his fair share of taxes? Chicago media has been reporting that he has refused to release a full set of his most recent tax returns that would show the full extent of what many know is a great deal of unethical and probably criminal behavior.

Brooke Anderson, the spokesperson for Governor Pat Quinn, pointed out that Rauner "doesn’t just use exotic methods to dodge taxes. He even uses exotic, offshore locations. No wonder why Mr. Rauner won’t release his full tax returns. He’s been stashing money in the Cayman Islands to avoid paying U.S. and Illinois taxes." He's a real sleaze bag and was once caught in an elaborate scheme to cheat on his property taxes for just a $1,600. He's just a greedy, selfish sociopath who can't help himself.

Margaret Niederer a former long-term care ombudsman in Springfield penned an OpEd for the State Journal-Register last week, Bruce Rauner is not the change Illinois needs.

Nursing homes and disability homes owned by Republican governor candidate Bruce Rauner’s firm have been implicated in numerous and repeated incidents of abuse, neglect, rape and even death of residents.

As a former Illinois Long Term Care Regional Ombudsman who protected the rights of residents in long-term care facilities for more than a decade, I am appalled.

Leading up to the primary election, I was horrified by the stories of elderly individuals suffering preventable deaths because of avoidable falls, pressure ulcers and infections in nursing homes owned by a company that Rauner helped found.

Rauner shrugged off responsibility and refused to explain to the voters of Illinois why these patients received such atrocious care.

Now we know that the extreme negligence that occurred in Rauner’s nursing homes were not isolated incidents. Illinois voters recently learned from news reports the gruesome stories of sexual abuse, assault and death at facilities for people with developmental disabilities owned by another company Rauner’s firm created. These crimes were so horrendous that one of the facilities was shut down by the state of Texas.

Rauner simply blamed the management team and called the company a bad investment.

I am all too familiar with long-term care companies skirting their responsibility of providing person-centered care to their patients. Horrendous incidents like this don’t happen repeatedly by accident. They occur in poorly run facilities owned by companies that value profit margins over the lives and well-being of residents.

Rauner and his investor buddies cut staff, which subsequently led to poor patient care. I have seen first-hand the effects of this scheme before. Residents are left frightened for their safety and personal well-being and, inevitably, a resident unnecessarily suffers or even dies from lack of care.

Rauner says he will come to Springfield and run it like a business. If the morally bankrupt and slipshod manner in which he ran his health-care companies is any indication of how he will run government agencies, including the Illinois Department of Public Health, which is responsible for oversight of long-term care facilities, then this is indeed, a very scary situation.

I personally have serious doubts that Rauner would be the kind of governor Illinois needs. If he is elected, will he ignore problems in the state’s long-term care system, public education and our rapidly deteriorating infrastructure?

The voters of Illinois deserve a governor who puts people first, always.

I sense Illinois voters hunger for change, but I know that Bruce Rauner, who has shown no interest in protecting our most vulnerable citizens, is not the change Illinois needs.

Elizabeth Warren: "The Time For Free-Loading Is Over"

Just a week ago we warned about how conservatives were eager to prevent progressives to end a tax loophole that allows corporations to do "inversions" that allow them to pay no taxes. Yesterday, the Senate failed to break a Republican filibuster lead by Wisconsin corporate whore Ron Johnson. Breaking the filibuster requires 60 votes and the Democrats only mustered 54, so it failed 54-42, all but one Republican joining the filibuster this time.

Elizabeth Warren was up on the floor of the Senate (as you can see in the video above), denouncing the corporations that are taking advantage of this country. "These companies," she told her fellow senators, "are renouncing their American citizenship, turning their backs on this country, simply to boost their profits. They are taking advantage of all the good things that our government helps provide-- educated workers, roads and bridges, a dependable court system, patent and copyright protections-- and then running out on the bill. If a person did that, we'd call them a freeloader. For a person who doesn't want to pay a fair share, our message is clear: you can renounce your citizenship, but don't come back and expect the rest of us to pick up your tab. But we don't do that for corporations. Corporations can renounce their American citizenship-- and make absolutely clear in legal documents that they're doing so to avoid their US tax obligations-- and not suffer any consequences. In this corner of the tax code, we've gone way past treating corporations like people. In this corner of the tax code, we treat corporations better than people."

Robert Cyran tried explaining to NY Times what exactly had happened a few minutes after the vote.

Inversions are starting to spin out of control. A quest for tax savings has made digestible overseas targets attractive to United States buyers. Hospira’s potential $5 billion deal for a Danone unit highlights a fresh supply, for “spinversions.” The odd combination also reflects the perverse incentives distorting corporate decisions.

Health care companies lead the way trying to move domiciles. In just the past six months, there were $319 billion of announced deals in the sector, a figure that already exceeds the record volume in 2007. Companies with Irish headquarters like Covidien, Elan and Warner Chilcott have already been devoured. Pfizer tried unsuccessfully to do the same with AstraZeneca for nearly $120 billion. Certain post codes now carry premium valuations.

There’s a clever new twist on the situation, though. Big companies can spin off a suitably sized division in a favorable jurisdiction, and if an American company acquires it using shares, the acquirer can advantageously change its address. When Pennsylvania-based Mylan acquired a division of Abbott Laboratories, for example, it suddenly became Dutch for tax purposes.

Buying Danone’s medical nutrition business would accomplish something similar for $9 billion Hospira. Other European companies are also getting the idea they might fetch top dollar for unwanted divisions. Consumer goods giant Reckitt Benckiser said this week that it plans to separate its pharmaceutical division. GlaxoSmithKline is also studying disposals. Even United States conglomerates could do the same by spinning off unwanted divisions to investors and then having them merge with overseas businesses.

The trouble is that tax motives are increasingly trumping strategic logic. Hospira itself was spun off from Abbott a decade ago, leaving Abbott with a sizable and profitable medical nutrition business. While there might be competition concerns, Abbott is nevertheless a far more natural home for Danone’s competing operation than is Hospira, which specializes in drugs that are injected. To justify these otherwise implausible sorts of deals will require a whole different kind of spin.

Michael Wager is the Blue America-endorsed candidate running in the most winnable Republican-held seat in Ohio, OH-14, a swing district just east of Cleveland where clueless backbencher David Joyce is spending gigantically-- $1,190,471 already-- to hold the seat. But Joyce isn't saying anything to the working families of Ashtabula, Cuyahoga, Lake, Portage, Summit and Trumbull counties, all of which were won in 2012 by Sherrod Brown. (The only county in the district won by Republican Josh Mandel was Geauga). This morning Wager explained why this is a real issue for people in northeast Ohio:

As some of the largest, most profitable American companies have "moved" their tax residence to off-shore tax havens to avoid paying their fair share under U.S. tax law, the Congress has failed again to address this corporate tax abuse and close the loopholes. Don’t expect too much of an outcry from Republicans; they’re too busy accepting millions in PAC contributions from the very companies engaged in this  tax dodge. For example, Ohio-based Eaton Corporation moved its tax residence to Ireland, but my  opponent, Congressman David Joyce, has failed to speak out on behalf of American taxpayers. Why?  Well, perhaps it’s because he’s the single largest recipient of PAC contributions from Eaton’s PAC as well as generous contributions from its CEO.

It’s time to amend our rigged and deformed tax code and put an end to tax avoidance by the corporations. Today’s filibuster by Senate Republicans is disgraceful.

Open Secrets shows that Eaton CEO Alexander Cutler has spent 6 pages worth of his own cash on making sure Republicans don't close any corporate loopholes that will disadvantage Eaton after his decision to leave Ohio and move to Ireland. He's given thousands and thousands of dollars to Joyce but also to Republican candidates and committees all over America, including ole filibustering' Rob Portman. And the Eaton corporate PAC gives large sums to candidates and incumbents as well. So far the biggest recipient of their largesse this cycle has been… David Joyce ($4,600).

Too Many Millionaires In The Class War Against American Democracy?

No one likes the tax collector; no one ever has. But the anti-IRS hysteria generated by Fox News, Rush Limbaugh and Congress' richest (and most crooked) Member, was way beyond the ginned up Tea Party Scandal merited-- even by right wing standards of hollow victimology and martyrdom. But it was never very difficult to figure out why they worked so hard to undermine the IRS and delegitimize its authority-- and slash its budget. The pigs at the trough, who still-- teabaggers or not-- call the shots for the GOP and for the Republican wing of the Democratic Party, knew the big crackdown on tax cheats was coming. Writing for the A.P. yesterday, Stephen Ohlemacher helped explain just how real the IRS crackdown on offshore tax cheats like Mitt Romney and Darrell Issa is about to get. Until their crooked accountants figure something else out, it's about to get a lot harder to use overseas accounts to hide income and assets from the IRS-- a step, albeit maybe just a small one-- towards what Thomas Piketty must happen to keep democracies from disintegrating entirely.

More than 77,000 foreign banks, investment funds and other financial institutions have agreed to share information about U.S. account holders with the IRS as part of a crackdown on offshore tax evasion, the Treasury Department announced Monday.

…Nearly 70 countries have agreed to share information from their banks as part of a U.S. law that targets Americans hiding assets overseas. Participating countries include the world's financial giants, as well as many places where Americans have traditionally hid assets, including Switzerland, the Cayman Islands and the Bahamas.

Starting in March 2015, these financial institutions have agreed to supply the IRS with names, account numbers and balances for accounts controlled by U.S. taxpayers.

Under the law, foreign banks that don't agree to share information with the IRS face steep penalties when doing business in the U.S. The law requires American banks to withhold 30 percent of certain payments to foreign banks that don't participate in the program-- a significant price for access to the world's largest economy.

The 2010 law is known as FATCA, which stands for the Foreign Account Tax Compliance Act. It was designed to encourage-- some say force-- foreign financial institutions to share information about U.S. account holders with the IRS, making it more difficult for Americans to use overseas accounts to evade U.S. taxes.

"The strong international support for FATCA is clear, and this success will help us in our goal of stopping tax evasion and narrowing the tax gap," said Robert Stack, deputy assistant treasury secretary for international tax affairs.

Under the law, U.S. banks that fail to withhold the tax would be liable for it themselves, a powerful incentive to comply. U.S. banks are scheduled to start withholding 30 percent of interest and dividend payments in July, though recent guidance from the Treasury Department gives U.S. banks some leeway on timing as they gear up their systems.

The withholding applies to stocks and bonds, including U.S. Treasurys. Some previously owned securities would be exempt from the withholding, but in general, previously owned stocks would not.

Private investors who use foreign financial institutions to facilitate trades also face the withholding penalty. Those private investors could later apply to the IRS for refunds, but the inconvenience would be enormous.

A couple months ago ace Bloomberg reporter David de Jong broke the story about Wyoming resident Amy Wyss, the daughter of Switzerland’s second-richest man, Hansjoerg Wyss, being outed as a billionaire in a Senate report on offshore tax evasion. She had transferred $1.8 billion from Goldman Sachs Group Inc. to Credit Suisse. By shifting the assets on paper from the U.S. to Switzerland, Credit Suisse obfuscated a decline in asset inflows at its private-banking unit, possibly misleading buyers of the bank’s stock, the Senate panel said.

Credit Suisse counted the funds as new assets under management, a move it only should have made after receiving a signed agreement from the customer, according to several executives interviewed by the subcommittee. The bank classified about 4.3 billion Swiss francs ($4.6 billion) of the family funds as net new assets, raising the total inflow to 5.8 billion Swiss francs for the first quarter of 2012.

At the end of that year, the bank reclassified another 900 million Swiss francs of the Wyss’s money, even though most of it hadn’t been invested, the report says. Rolf Boegli, former chief operating officer of the Swiss private banking operation, said the funds “would be a great favor for our division,” according to an e-mail cited in the Senate report.

Credit Suisse Chief Executive Officer Brady Dougan called Boegli’s e-mail “disturbing” and “very objectionable,” according to the Senate report. Dougan said the decision to reclassify assets based on a desire to help the appearance of the private banking division’s financial condition didn’t seem to follow the bank’s principles.

Wyss called it “the bank’s problem” in the interview with the Swiss newspaper and said it didn’t concern him.

A year earlier De Jong had written that crooked billionaires were already fleeing tax havens as their accountants told them what was in store.

Billionaire Dmitry Rybolovlev, Russia’s 14th-richest person, and his wife, Elena Rybolovleva, have been brawling for almost five years in at least seven countries over his $9.5 billion fortune.

In a divorce complaint originated in Geneva in 2008, Rybolovleva accused her husband of using a “multitude of third-parties” to create a network of offshore holding companies and trusts to place assets-- including about $500 million in art, $36 million in jewelry and an $80 million yacht-- beyond her reach.

She has brought legal action against the 48-year-old Rybolovlev in the British Virgin Islands, England, Wales, the U.S., Cyprus, Singapore and Switzerland, and is seeking $6 billion.

The suits provide a window into the offshore structures and secrecy jurisdictions the world’s richest people use to manage, preserve and conceal their assets. According to Tax Justice Network, a U.K.-based organization that campaigns for transparency in the financial system, wealthy individuals were hiding as much as $32 trillion offshore at the end of 2010. Fewer than 100,000 people own $9.8 trillion of offshore assets, according to research compiled by former McKinsey & Co. economist James Henry.

“For a lot of people, it’s not just the objective of not paying taxes,” Philip Marcovici, an independent Hong Kong-based tax lawyer and board member of Vaduz, Liechtenstein-based wealth adviser Kaiser Partner Group, said in a telephone interview. “It’s the objective of obtaining the human right to privacy and seeking confidentiality about their financial affairs.”

There ya go… so now ya know. We often write about how revolting it is the with the Republican Party already exclusively serving the interests of the ultra-wealthy, to see corporate shills like Steny Hoyer, Steve Israel, Debbie Wasserman Schultz and Rahm Emanuel crushing the aspirations of working class candidates and recruiting wealthy self-funders. I was excited to see Lee Drutman writing on the subject for the Sunlight Foundation yesterday after he read Nicholas Carnes’ new book, White-Collar Government. While Members of Congress, he writes, "sure hear from a lot of millionaires outside of Congress, they also hear from many millionaires inside Congress too-– namely, themselves. (More than half of sitting members of Congress now have $1 million or more to their names).

The book’s thesis is simple and straightforward: If you elect mostly wealthy representatives, you’ll get policy that represents the interests of the well-off. Or, as Carnes puts it in the converse logic: “[T]he shortage of people from the working class in American legislatures skews the policy-making process toward outcomes that are more in line with the upper class’ economic interests.”

About two percent of members of the U.S. Congress came from a working-class occupation. About three percent of the average state legislature and about nine percent of the average city council also come from a working-class background. But more than half (54 percent) of U.S. citizens are in working-class jobs. Something is off. And this distortion has real effects on policy.

White-Collar Government documents what you might have already guessed: that working-class representatives tend to be more concerned about working-class issues. They have more progressive voting records, and they introduce more progressive economic legislation.

Carnes suggests that one reason for their comparative lack of success is that few other members of Congress-- and for that matter, relatively few people in Washington-- share that same progressive economic worldview because they just can’t relate to those concerns. They’ve always had it relatively easy, and never lived paycheck to paycheck. Carnes asks a very good question: “What happens when a social group has few or no advocates in our policy-making process, when almost no one in government truly understands the group’s needs or perspectives?” The answer, of course, is that they fare poorly.

Finally, there is the question of what to do about it. Carnes’ suggestion is straightforward: Get more working-class people to run for office. Of course, there are challenges. As Carnes notes, “What little evidence there is suggests that blue-collar workers are underrepresented not because of some deficiency on their part, but because of discouraging circumstances, like the high cost of running a campaign, the practical burdens associated with holding office, and the gate-keeping decisions of party leaders and interest groups.”

Running for Congress is insanely expensive. To be taken seriously as a candidate, you need to raise significant sums of money. I suspect this simple fact keeps many working class aspirants out of politics. Rich people tend to have rich friends who will support them. Working class people, not so much.

And that's where Steve Israel, Steny Hoyer, Wasserman Schultz and Emanuel come in-- undermining working class candidates and instead promoting wealthy conservatives to a point where the Democratic Party today is heading to where the GOP was when I was a kid, while the Republicans are heading straight towards over fascism.

The G.E. Loophole-- Bankrupting America To Make G.E. Executives Richer, Part I

On April 2, the Senate Finance Committee is planning to renew 55 major tax breaks worth $700 billion over 10 years, which is mostly to the benefit of the corporations like General Electic, Goldman Sachs and Citigroup, which underwrite the political careers of our political elite in general and the members of the Senate Finance Committee in particular. They will move the tax extender package, which guarantees that some of these mega-corporations and crooked Wall Street banks will continue to rake in billions of dollars in profits every year while paying a far lower tax rate than families and small businesses. $80 billion of the $700 comes from 2 major loopholes-- pardon the jargon: the Active Financing Exception and the CFC look-through rule, both of which were designed and maintained to assist corporations shift U.S. profits offshore to tax havens.

But, but, but… this isn't the House, controlled by corrupt corporate whores like Boehner, Ryan and Cantor. The Senate is controlled by the Democrats. This could never happen without the Democrats being on board. Precisely. Let's begin with the members of the Committee. The new chairman, replacing Big Buisness-owned Max Baucus, is Ron Wyden (D-OR) and the ranking member is Orrin Hatch (R-UT). There are 22 other members:

• Jay Rockefeller (D-WV)- $2,000
• Chuck Schumer (D-NY)- $2,000
• Debbie Stabenow (D-MI)- $27,750
• Maria Cantwell (D-WA)
• Bill Nelson (D-FL)- $4,000
• Bob Menendez (D-NJ)- $5,750
• Tom Carper (D-DE)- $17,800
• Ben Cardin (D-MD)- $14,000
• Sherrod Brown (D-OH)- $32,600
• Michael Bennet (D-CO)- $8,000
• Bob Casey (D-PA)- $9,000
• Mark Warner (D-VA)- $10,500
• Chuck Grassley (R-IA)- $4,000
• Mike Crapo (R-ID)
• Pat Roberts (R-KS)- $7,500
• Mike Enzi (R-WY)- $7,000
• John Cornyn (R-TX)- $15,000
• John Thune (R-SD)
• Richard Burr (R-NC)- $2,000
• Johnny Isakson (R-GA)- $3,000
• Rob Portman (R-OH)- $14,800
• Pat Toomey (R-PA)- $4,000

Partisanship and ideology aside, a bigger bunch of bribe-taking crooks won't be found anywhere in American government. The only member who could be counted to to consistently put the well-being of his consistence first is Sherrod Brown. General Electric has countless ways to funnel legalistic, thinly veiled bribes to senators. The numbers next to each member's name indicates direct payments by just one of the many General Electric PACs made during the 2012 cycle and so far this cycle. Why G.E.? These men and women are about to decide whether or "not" to extend the G.E. loophole that allows one of the most profitable corporations in history to pay no taxes. Time to go back to David Kocieniewski's classic NY Times investigative piece about GE's tax chicanery from March 24, 2010, G.E.'s Strategies Let It Avoid Taxes Altogether. Profits that year were $14.2 billion and their U.S. tax bill was zero; in fact, G.E. claimed a $3.2 billion tax benefit!

That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

…A review of company filings and Congressional records shows that one of the most striking advantages of General Electric is its ability to lobby for, win and take advantage of tax breaks.

Over the last decade, G.E. has spent tens of millions of dollars to push for changes in tax law, from more generous depreciation schedules on jet engines to “green energy” credits for its wind turbines. But the most lucrative of these measures allows G.E. to operate a vast leasing and lending business abroad with profits that face little foreign taxes and no American taxes as long as the money remains overseas.

Company officials say that these measures are necessary for G.E. to compete against global rivals and that they are acting as responsible citizens. “G.E. is committed to acting with integrity in relation to our tax obligations,” said Anne Eisele, a spokeswoman. “We are committed to complying with tax rules and paying all legally obliged taxes. At the same time, we have a responsibility to our shareholders to legally minimize our costs.”

The assortment of tax breaks G.E. has won in Washington has provided a significant short-term gain for the company’s executives and shareholders. While the financial crisis led G.E. to post a loss in the United States in 2009, regulatory filings show that in the last five years, G.E. has accumulated $26 billion in American profits, and received a net tax benefit from the I.R.S. of $4.1 billion.

But critics say the use of so many shelters amounts to corporate welfare, allowing G.E. not just to avoid taxes on profitable overseas lending but also to amass tax credits and write-offs that can be used to reduce taxes on billions of dollars of profit from domestic manufacturing. They say that the assertive tax avoidance of multinationals like G.E. not only shortchanges the Treasury, but also harms the economy by discouraging investment and hiring in the United States.

“In a rational system, a corporation’s tax department would be there to make sure a company complied with the law,” said Len Burman, a former Treasury official who now is a scholar at the nonpartisan Tax Policy Center. “But in our system, there are corporations that view their tax departments as a profit center, and the effects on public policy can be negative.”

The shelters are so crucial to G.E.’s bottom line that when Congress threatened to let the most lucrative one expire in 2008, the company came out in full force. G.E. officials worked with dozens of financial companies to send letters to Congress and hired a bevy of outside lobbyists.

The head of its tax team, Mr. Samuels, met with Representative Charles B. Rangel, then chairman of the Ways and Means Committee, which would decide the fate of the tax break. As he sat with the committee’s staff members outside Mr. Rangel’s office, Mr. Samuels dropped to his knee and pretended to beg for the provision to be extended-- a flourish made in jest, he said through a spokeswoman.

That day, Mr. Rangel reversed his opposition to the tax break, according to other Democrats on the committee.

The following month, Mr. Rangel and Mr. Immelt stood together at St. Nicholas Park in Harlem as G.E. announced that its foundation had awarded $30 million to New York City schools, including $11 million to benefit various schools in Mr. Rangel’s district. Joel I. Klein, then the schools chancellor, and Mayor Michael R. Bloomberg, who presided, said it was the largest gift ever to the city’s schools.

…As it has evolved, the company has used, and in some cases pioneered, aggressive strategies to lower its tax bill. In the mid-1980s, President Ronald Reagan overhauled the tax system after learning that G.E.-- a company for which he had once worked as a commercial pitchman-- was among dozens of corporations that had used accounting gamesmanship to avoid paying any taxes.

“I didn’t realize things had gotten that far out of line,” Mr. Reagan told the Treasury secretary, Donald T. Regan, according to Mr. Regan’s 1988 memoir. The president supported a change that closed loopholes and required G.E. to pay a far higher effective rate, up to 32.5 percent.

That pendulum began to swing back in the late 1990s. G.E. and other financial services firms won a change in tax law that would allow multinationals to avoid taxes on some kinds of banking and insurance income. The change meant that if G.E. financed the sale of a jet engine or generator in Ireland, for example, the company would no longer have to pay American tax on the interest income as long as the profits remained offshore.

Known as active financing, the tax break proved to be beneficial for investment banks, brokerage firms, auto and farm equipment companies, and lenders like GE Capital. This tax break allowed G.E. to avoid taxes on lending income from abroad, and permitted the company to amass tax credits, write-offs and depreciation. Those benefits are then used to offset taxes on its American manufacturing profits.

G.E. subsequently ramped up its lending business.

As the company expanded abroad, the portion of its profits booked in low-tax countries such as Ireland and Singapore grew far faster. From 1996 through 1998, its profits and revenue in the United States were in sync-- 73 percent of the company’s total. Over the last three years, though, 46 percent of the company’s revenue was in the United States, but just 18 percent of its profits.

Martin A. Sullivan, a tax economist for the trade publication Tax Analysts, said that booking such a large percentage of its profits in low-tax countries has “allowed G.E. to bring its U.S. effective tax rate to rock-bottom levels.”

…Minimizing taxes is so important at G.E. that Mr. Samuels has placed tax strategists in decision-making positions in many major manufacturing facilities and businesses around the globe. Mr. Samuels, a graduate of Vanderbilt University and the University of Chicago Law School, declined to be interviewed for this article. Company officials acknowledged that the tax department had expanded since he joined the company in 1988, and said it now had 975 employees.

At a tax symposium in 2007, a G.E. tax official said the department’s “mission statement” consisted of 19 rules and urged employees to divide their time evenly between ensuring compliance with the law and “looking to exploit opportunities to reduce tax.”

Transforming the most creative strategies of the tax team into law is another extensive operation. G.E. spends heavily on lobbying: more than $200 million over the last decade, according to the Center for Responsive Politics. Records filed with election officials show a significant portion of that money was devoted to tax legislation. G.E. has even turned setbacks into successes with Congressional help. After the World Trade Organization forced the United States to halt $5 billion a year in export subsidies to G.E. and other manufacturers, the company’s lawyers and lobbyists became deeply involved in rewriting a portion of the corporate tax code, according to news reports after the 2002 decision and a Congressional staff member.

By the time the measure-- the American Jobs Creation Act-- was signed into law by President George W. Bush in 2004, it contained more than $13 billion a year in tax breaks for corporations, many very beneficial to G.E. One provision allowed companies to defer taxes on overseas profits from leasing planes to airlines. It was so generous — and so tailored to G.E. and a handful of other companies-- that staff members on the House Ways and Means Committee publicly complained that G.E. would reap “an overwhelming percentage” of the estimated $100 million in annual tax savings.

According to its 2007 regulatory filing, the company saved more than $1 billion in American taxes because of that law in the three years after it was enacted.

By 2008, however, concern over the growing cost of overseas tax loopholes put G.E. and other corporations on the defensive. With Democrats in control of both houses of Congress, momentum was building to let the active financing exception expire. Mr. Rangel of the Ways and Means Committee indicated that he favored letting it end and directing the new revenue-- an estimated $4 billion a year-- to other priorities.

G.E. pushed back. In addition to the $18 million allocated to its in-house lobbying department, the company spent more than $3 million in 2008 on lobbying firms assigned to the task.

Mr. Rangel dropped his opposition to the tax break. Representative Joseph Crowley, Democrat of New York [one of the most blatantly corrupt Members of Congress in history], said he had helped sway Mr. Rangel by arguing that the tax break would help Citigroup, a major employer in Mr. Crowley’s district.

…While G.E.’s declining tax rates have bolstered profits and helped the company continue paying dividends to shareholders during the economic downturn, some tax experts question what taxpayers are getting in return. Since 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment. In that time, G.E.’s accumulated offshore profits have risen to $92 billion from $15 billion.

“That G.E. can almost set its own tax rate shows how very much we need reform,” said Representative Lloyd Doggett, Democrat of Texas, who has proposed closing many corporate tax shelters. “Our tax system should encourage job creation and investment in America and end these tax incentives for exporting jobs and dodging responsibility for the cost of securing our country.”

As the Obama administration and leaders in Congress consider proposals to revamp the corporate tax code, G.E. is well prepared to defend its interests. The company spent $4.1 million on outside lobbyists last year, including four boutique firms that specialize in tax policy.

We'll dig a littler deeper in Part II, which will be the next post up.