The Defense Department has known since at least 2004 that KBR was avoiding taxes by declaring its American workers as employees of Cayman Islands shell companies, and officials said the move allowed KBR to perform the work more cheaply, saving Defense dollars.
But the use of the loophole results in a significantly greater loss of revenue to the government as a whole, particularly to the Social Security and Medicare trust funds. And the creation of shell companies in places such as the Cayman Islands to avoid taxes has long been attacked by members of Congress."
After WWII, individuals in the US paid about 53% of all taxes in the nation while businesses of all sorts and sizes paid the remaining 47%. Tax laws have been altered ever since with businesses getting more and more tax breaks while the individual taxpayer picks up more and more of the tax load each year until now the burden has shifted so that the 53-47 split is fast approaching 90-10. Of course, with individual taxpayers picking up more and more of the burden they have less to spend in the economy, which means less income for business and that prompts politicians to offer a new tax break for businesses.
And tax scams that have been made possible by the nation's tax codes open the doors for other scams; the most notable being the Enron collapse.
The giant Texas energy trading company had many important connections to lawmakers, being the closest with George W. Bush before and during his reign as governor of Texas and as president. Enron, like many other influential corporations, managed to use those connections to free itself of tax obligations at all levels of government.
Many apologists for Enron CEO Kenneth Lay ~ known as "Kenny Boy" to Bush ~ excused Lay's crimes on which he was later convicted by claiming him to be an ignorant dupe who knew nothing of the company's illegalities. The fact that he drew more than $300 million from the company in wages and bonuses because of his exalted status as the "smartest man in the room" and competent leader who couldn't be lost to the company because of his value was of no consequences to the "dupe" argument. The apologists cited Lay's purchase of Enron stock late in the company's life as proof to support their claim of his innocence.
They are fools. Lay was in on the scam and played it well. Here is how it works:
Lay would name his cronies to the board of directors. As payback for their lavish unearned income, the board members would give Lay stock options that he could activate if the stock price increased or ignore if the stock declined. Listing money from stock and bond sales and money borrowed from financial institutions as income and profit caused the stock price to soar.
Lay would then exercise his option and buy a million shares at $10 a share ~ the price when the option was extended ~ when the phony stock price hit $50 a share. (figures are used to demonstrate the scam, not to represent reality.) He would immediately borrow $50 million in cash from the company and put up as collateral his million Enron shares, which could be used for stock options in the future. There was never an intention of repaying the loan leaving Lay with a $40 million profit and the company with a million shares of stock that would eventually become worthless when the company died; killed in part by the very scams that enriched company leaders. It was advantageous for executives to exercise all options on the falling stock before it become less "valuable" and to borrow on the stock at virtually the same moment as purchasing it.
The nation's brokerage houses continued to tout Enron as a $100 stock going through a "correction" following the 9/11 terrorist attacks, the same story executives told their employees who had their retirement hopes tied up in Enron stock that they were forbidden to sell. It took several months for the Enron stocks to become worthless, providing executives plenty of time to clean out all options at huge profit.
Had Lay sold those shares on the New York Stock Exchange, he would have paid several million dollars in a short-term capital-gains tax, but since this cash went to Lay as a loan, he paid no taxes whatsoever.
Thousands of others lost their jobs, careers and retirements. Shareholders lost their investments. Former Republican Texas Senator Phil Gramm went public to claim he and his wife, who served on the Enron board of directors and helped facilitate the collapse by ignoring the ongoing scams, lost hundreds of thousands of dollars because of the collapse. But what he downplayed was the Gramm loss involved the compensation his wife would have received to continue serving on the board had the company not collapsed. How much, if any, personal Gramm money was invested was unmentioned.
That is one of the ways the nation is being scammed by tax manipulation and few people are capable of seeing this grand theft being perpetrated so they continuously vote into office the politicians who make these scams possible and inevitable. And the zeal to reform the corporate community to combat corruption following the Enron collapse has dissipated.
But we see that in the present presidential campaign no one is offering a solution to this national injustice that could, and possible does, easily occur in any corporation. Neither Democratic candidate mentions it and the Republican candidate offers to make permanent the tax laws that make it possible and proposes more tax cuts to make the scam easier and more abundant.
We are being taxed to death, but not with tax collections; with scams labeled as "tax reform."
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