Congress Vested in Avoidance

It is estimated that U.S. Corporations have parked $2 Trillion in untaxed profits off-shore; this is all quite legal and made possible by Internal Revenue Code (IRC) and with the full knowledge and backing of the White House and Congress. Many would have you believe that the U.S. Corporate Tax Rate is greater than most and this is patently untrue; the effective U.S. Corporate Tax rate is, globally, among the lowest.
When we consider our horrific trade agreements, which provide that no Corporation can be disadvantaged by domestic tax structures, and the various tax credit/subsidies it should be absolutely clear to any casual observer that the IRC is merely a monument to the corporate welfare state. Examples follow.
Example 1: (Apple-like) US Companies that are tech/intellectual property (IP) rich have a rather unique facility at their disposal; they sell their IP to an Off-Shore Shell (OSS) company they’ve domiciled in a tax-friendly locale and then license the distribution/use of the Technology back to the domestic entity for a hefty-fee. The OSS contracts for manufacturing at third-world wages then ships the completed product at retail-pricing (now under license for distribution) back to the domestic distributer who facilitates the sale. As the profit is recognized by the OSS, the legal owner of the tech/IP, the income escapes the IRS.
Example 2: (GM/Caterpillar/GE-like) Transfer pricing is a concept that was always used by related companies and has become a mainstay of the matured domestic corporations (now Multi-National). In many ways it is similar to that described in the above however it is a bit more complex and thus far more difficult to trace due to the number of entities involved; the principle is still the same though and it applies universally to many industries including manufacturing and financial services.
The key point to understand is that the entire system revolves around the concept of “income recognition” (the location where it is taxed) and the very simple mechanisms used to minimize that amount. GM, for example, has multiple product lines the parts for which are sourced from various suppliers around the world. GM also owns (or has interest in) many of these related entities outside of the U.S. who either manufacture or source the products it requires to assemble its various vehicles here in the U.S.
What is not considered is what GM (U.S.) pays its subsidiaries or affiliates for those parts. Here too GM, like every other company that sources products off-shore, simply inflates the price of the products it purchases from its controlled-entities which are located in various tax-friendly locations. The effect of this process is quite simple; domestically they report the cost of a vehicle at a much higher price which in turn reduces the profit reported domestically and thus it pays a much lower tax. For companies that import (to the U.S.) completed products the process is no different than in the manner described in the previous example.
The following are a select group of responses to questions/comments received after the original article was published. We believe you will find them of interest.
#1: Clearly the IRS lacks the capacity for tracking these types of events and, in fact, it is much easier to target the lowly individual taxpayer and for this reason we can understand why the tax burden has so strongly shifted away from the sacred corporate structure and directly on to the individual. So long as the Federal Government (and most of the States) continues to cater to the corporate structure the individual tax burden can and will only increase. The goal should be to reverse the trend and move back to the foundational rule that (1) All economies are local.  (2) A vibrant economy occurs when an individuals wealth creating capacity is funded by their exchange of personal talent/resource. And, (3) That individual wealth creating capacity is the single source for driving the occurrence of supply.  Presently, the public is being force-fed an abhorrent belief-system that is the complete opposite of the appropriate matrix and as such has become the slave of the corporate state. Some will and often do argue that “…they’ll just raise prices to offset the increase tax burden” to which I respond that  if one holds to this thought then they are clearly ignoring the economic costs of the current arrangement and you’ve accepted the supremacy of the corporate state and their false argument.  
Curtis C. Greco, Founder
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