They say death and taxes are inevitable. Apparently not however, if you have a team of high-paid lawyers, accountants and bankers scheming to engineer a sophisticated tax shelter designed to hoodwink the IRS and pad your profits. In fact, the IRS estimates such plans allow some corporations to avoid up to $50 billion a year in federal taxes.
That’s a slap in the face to every small business owner, worker, shareholder and retiree in America who plays by the rules and pays their fair share of the tax burden. Corporate tax dodgers give American business a black eye. And perhaps the mother of all bruises goes to the now bankrupt Enron Corp. Their story of trickery and deception reads like a conspiracy novel.
When the Houston-based energy giant collapsed into financial ruin more than a year ago, thousands of workers and retirees saw their life savings vanish. Loyal employees who believed in and trusted their company with their retirement security now face financial devastation due to cavalier corporate executives who enriched themselves at the expense of the rank-and-file.
When the company filed for bankruptcy protection, Enron had 200 executives – each of whom was being paid over a million dollars. When the company stock tanked from more than $90 a share in 2000 to 34 cents a share in January 2002, the company’s current and former employees were left holding nearly worthless shares.
If only the Enron situation were an isolated case of greed, dishonesty and moral corruption. Since its house of cards collapsed, more cases of corporate wrongdoing has been exposed to the light of day. Unfortunately, it seems a cancerous breach of business ethics has tainted the highest tier of business, accounting, banking and legal professionals in the country.
As chairman of the Senate Finance Committee, which has jurisdiction over U.S. tax policy, I have a news flash for corporate America. You can kiss your tax tricks good-bye. As of Feb. 13, 2003, your days of scheming and dodging are over. That’s the date I called a congressional hearing to expose the abusive tax shelters created for Enron. And that will be the effective date for any legislation I advance through my committee that’s written to shut down abusive tax shelters.
A year-long congressional investigation into Enron’s ploy to skirt their tax liability revealed a cozy relationship between corporate big wigs and those who peddle get-out-of-taxes-free cards. The 2,700 page report by the non-partisan Joint Committee on Taxation detailed highly complicated arrangements that involved transferring income, expenses, assets and liabilities from one Enron unit to another with three goals in mind: ditch taxes, confuse the IRS and artificially inflate profits. The Joint Tax investigation revealed for example, that Enron paid no taxes in 1996, 1997, 1998 and 1999. Meanwhile, the complicated business structure showed Enron earning $2.1 billion in profits.
The report left a sour taste in my mouth. An internal Enron document exposes the confounding stratagem for what it is. Greed. It uses the phrase: 'Show me the money!' to refer to one of its tax shelters. Money trumped common sense. Greed duped corporate executives into substandard levels of professional and business decency.
A few years ago I led a crusade to change a culture of abuse within the Internal Revenue Service. I’m prepared to do the same with the corporate elite of America. Consider the case of two executives with a Kansas-based telecom giant. In an arrangement devised by the company’s auditors, they entered into an arrangement that would have sheltered $288 million in profits gleaned from stock options. It’s mind-boggling to me that these business professionals considered it ethically appropriate to avoid paying one penny of taxes on hundreds of millions of dollars. All Americans have the opportunity to reap the economic benefits and personal prosperity afforded by free enterprise. At the same time, all Americans have the obligation to pay their share of taxes for the services, security and way of life our system of government provides.
It would be impossible to legislate against greed. However, I am working to thwart white-collar mills from peddling abusive tax shelters. My proposal would bring greater financial transparency and disclosure to business tax arrangements. Let the light of day sanitize some of these dubious tax arrangements. My other priorities include strengthening employee pension protections, curbing abusive executive compensation deals, and clamping down on off-shore tax-free havens.
As a long-time advocate for tax relief, I’ve often said that hard-working taxpayers ought to pay their share in taxes and not a penny more. But to those corporations (and to the people who run them) which are spending millions on fees to keep from paying one red cent in taxes on their profits, I say it’s a shameful way to do business.
As long as I’m in the U.S. Senate, I’ll stand watch to help ensure corporate citizens come clean and work to close the loopholes that effectively shifts a greater share of the tax burden to ordinary citizens.