I want to take a day to remind people the history of the estate tax-----or what Republicans call the death tax. Right now we see in the mid-west these super-farms by BIG AG owned by corporations and they have almost eliminated the small farmers from the US economy. Here in Maryland, the Eastern Shore farmers have been forced into a kind of indentured servant structure to industrial meat---PERDUE CHICKENS. We are told we need to be subservient to PERDUE for the jobs. So, the farmers are made into contractors to this corporation for food to feed chickens, made to use chicken waste as fertilizer, move away from producing eggs and milk as many farmers always have to grow hormone-enhanced meat fed with Monsanto-grown grain. This is Maryland and this is the mid-west.
Republican voters in the south have this nostalgia for the old south and plantation life with ideas of slavery tied to people of color while poor whites are allowed more freedom as sharecroppers etc. Since I have many friends in Maryland who are Republican and conservative I want people to think about this plantation life with an American planter working slaves and then think about global corporations as the American planter AND THERE WILL BE NO PROTECTIONS FOR ANYONE PUSHED TO POVERTY.
Tea Party against estate taxes on the rich just like our founding fathers? They call it the death tax, and I've heard numerous times from a couple of them how the founding fathers fought to eliminate these taxes.
Just where do they get such nonsense when the founding fathers were totally opposed to inherited wealth?
AS ARE FREE MARKET COMPETITIVE MARKET CONSERVATIVE REPUBLICANS!
DO NOT MAKE THIS A BLACK, BROWN, WHITE ISSUE----THIS WILL BE EQUAL OPPORTUNITY ENSLAVEMENT BY GLOBAL CORPORATIONS COMING BACK TO THE US.
As I said,the Federal/Maryland's move with this $5 million window to avoid the estate tax is allowing families to invest and hold more and more land over generations and of course this will create massive land grabs of the most fertile land with water resources in each state. It won't take too long before we are back to the Medieval society with the Medici's owning all the land in a kingdom with serfs outside the city's gates. The taxman comes a-calling to take all of the wealth those serf's were able to accumulate along with much of their food grown.
THIS IS TO WHERE THIS NEO-LIBERALISM AND NEO-CONSERVATISM IS GOING. Maryland has even made JOUSTING its state sport in honor of its goal of Medieval society!
IT HAS NOTHING TO DO WITH FREE MARKETS AND COMPETITION SO REPUBLICAN VOTERS NEED TO GET ON BOARD WITH POLS SHOUTING OUT TO PROTECT THE US CONSTITUTION.
The rich always pretend the burden of this tax is on the family farmer but as I stated above----the rich do not envision family farmers existing so they are not worried about them.
Estate tax in the United States
The estate tax in the United States is a tax on the transfer of the estate of a deceased person. The tax applies to property that is transferred via a will or according to state laws of intestacy. Other transfers that are subject to the tax can include those made through an intestate estate or trust, or the payment of certain life insurance benefits or financial account sums to beneficiaries. The estate tax is one part of the Unified Gift and Estate Tax system in the United States. The other part of the system, the gift tax, applies to transfers of property during a person's life.
In addition to the federal estate tax, many states have enacted similar taxes. These taxes may be termed an "inheritance tax." The tax is often the subject of political debate, and opponents of the estate tax call it the "death tax".
If an asset is left to a spouse or a Federally recognized charity, the tax usually does not apply. In addition, up to a certain amount varying year by year, amounting to $5,250,000 for estates of persons dying in 2013, $5,340,000 for estates of persons dying in 2014 and $5,430,000 for estates of persons dying in 2015 can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes.
Remember, the Republican politicians are the party of wealth and profit and they hate the estate tax because it keeps extreme wealth at bay. Clinton neo-liberals are now joining these wealth and profit Republicans. Do not allow what is a financial problem for some Americans often not too onerous change the very fabric of American society by allowing massive accumulation of wealth tied with massive and deep poverty.
The Tea Party of real conservative Republicans had better look at this article as it speaks to this mass accumulation of wealth and free markets and competition----the same with estate tax and the anti-trust laws are all policies supported by the conservative Republicans as well as progressive labor and justice Democrats. It is only the global corporate pols---Bush neo-cons and Clinton neo-liberals moving to end the estate tax and allow this crony accumulation of wealth.
Estate tax and the founding fathers You can't take it with you
Oct 14th 2010, 21:44 by Lexington
If there was one thing the Revolutionary generation agreed on — and those guys who dress up like them at Tea Party conventions most definitely do not — it was the incompatibility of democracy and inherited wealth.
With Thomas Jefferson taking the lead in the Virginia legislature in 1777, every Revolutionary state government abolished the laws of primogeniture and entail that had served to perpetuate the concentration of inherited property. Jefferson cited Adam Smith, the hero of free market capitalists everywhere, as the source of his conviction that (as Smith wrote, and Jefferson closely echoed in his own words), "A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural." Smith said: "There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death."
The states left no doubt that in taking this step they were giving expression to a basic and widely shared philosophical belief that equality of citizenship was impossible in a nation where inequality of wealth remained the rule. North Carolina's 1784 statute explained that by keeping large estates together for succeeding generations, the old system had served "only to raise the wealth and importance of particular families and individuals, giving them an unequal and undue influence in a republic" and promoting "contention and injustice." Abolishing aristocratic forms of inheritance would by contrast "tend to promote that equality of property which is of the spirit and principle of a genuine republic."
Others wanted to go much further; Thomas Paine, like Smith and Jefferson, made much of the idea that landed property itself was an affront to the natural right of each generation to the usufruct of the earth, and proposed a "ground rent" — in fact an inheritance tax — on property at the time it is conveyed at death, with the money so collected to be distributed to all citizens at age 21, "as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property."
Even stalwart members of the latter-day Republican Party, the representatives of business and inherited wealth, often emphatically embraced these tenets of economic equality in a democracy. I've mentioned Herbert Hoover's disdain for the "idle rich" and his strong support for breaking up large fortunes. Theodore Roosevelt, who was the first president to propose a steeply graduated tax on inheritances, was another: he declared that the transmission of large wealth to young men "does not do them any real service and is of great and genuine detriment to the community at large.''
In her debate in Delaware yesterday, the Republican Senate candidate Christine O'Donnell asserted that the estate tax is a "tenet of Marxism." I'm not sure how much Marx she has read, but she might want to read the works of his fellow travelers Adam Smith, Thomas Jefferson, Thomas Paine, Herbert Hoover, and Theodore Roosevelt before her next debate".
IRS Increases Exemption From Estate Tax to $5.25 Million
...www.bloomberg.com/...11/...estate-tax-to-5-25-million.html Jan 11, 2013 ·
The estate-tax exemption for 2013 will be $5.25 million for individuals, up from $5.12 million in 2012, the IRS said in a statement today.
Rep. McDermott, Jim [D-WA-7] (Introduced 02/14/2014) Committees: House - Ways and Means Latest Action: 02/14/2014 Referred to the House Committee on Ways and Means.
Summary: H.R.4061 — 113th Congress (2013-2014)All Bill Information (Except Text) There is one summary for this bill. Bill summaries are authored by CRS.
Introduced in House (02/14/2014)
McDermott is a Clinton neo-liberal from the land of Microsoft. Below you see his attempt to move estate tax from the record low it reached in 2010 when Obama and Congressional neo-liberals allowed the Bush Tax Cuts to continue. I have not heard one mention of closing these loopholes that allow a complete escape from estate taxes. His pol Bill GAtes has made these loopholes his estate plan.
We keep hearing -----what can Democrats do? Well, with a President and control of Senate educating the American people as to consequences of policy would be the least they could do. These Clinton neo-liberals are too busy using these loopholes to hide their own wealth. Allowing estate taxes to return to pre-Reagan years is the start but will mean nothing if they are not exposing these loopholes draining Federal coffers of yet another corporate and wealth tax revenue.
Sensible Estate Tax Act of 2014 -
Amends the Internal Revenue Code to: (1) establish new estate tax rates of between 41% (for estates with a value in excess of $1,000,000) and 55% (for estates with a value in excess of $10 million), (2) allow a $1 million estate tax exclusion, and (3) provide for an inflation adjustment to such amounts for decedents dying after 2014.
Restores the estate tax credit for any estate, inheritance, legacy, or succession taxes paid to a state (expired after 2004). Repeals the deduction currently allowed for such taxes.
Sets forth estate valuation rules for certain transfers of nonbusiness assets and limits estate tax discounts for certain individuals with minority interests in a business acquired from a decedent.
Requires that the value of the basis in any property acquired from a decedent or by gift be consistent with the basis as determined for estate and gift tax purposes. Requires executors of estates and donors of gifts required to file a gift tax return to disclose to the Secretary of the Treasury, and to recipients of any interest in an estate or a gift, information identifying the value of each interest received.
Expands rules for valuing assets in grantor retained annuity trusts to require that: (1) the right to receive fixed amounts from an annuity last for a term of not less than 10 years and that such fixed amounts not decrease during the first 10 years of the annuity term, and (2) the remainder interest have a value greater than zero when transferred.
Terminates the generation-skipping transfer exemption for certain long-term trusts (perpetual dynasty trusts) 90 years after the establishment of such trusts.
While Clinton neo-liberals are pretending to be fighting to keep the estate tax---the tax Founding Fathers included in our Constitution in order to keep from having an aristocracy in the US------they are passing laws that are meant to deliberately allow these same wealthy corporations and people go around this estate tax to keep this extreme wealth for generations. Remember, Bush neo-cons and Clinton neo-liberals are trying to dismantle the US Constitution to bring a third world society of extreme wealth and extreme poverty. This is one of many laws they are passing while pretending to do the opposite. The Founding Fathers love of the estate tax is a very free market and competition economic policy that Republicans should be embracing more than progressive labor and justice----
DO YOU HEAR YOUR POLS SHOUTING THAT GLOBAL CORPORATE POLS ARE DELIBERATELY WRITING LAWS THAT ALLOW FAMILY TRUSTS TO CIRCUMVENT ESTATE TAX LAWS?
Firms flocking to an obscure tax loophole | April 22, 2013 UPI WASHINGTON, April 22 (UPI) -- More and more U.S. companies are applying to change their status with the IRS to tax free trusts, experts said. The loophole that has been around since 1960, passed by the Eisenhower administration, allows companies to apply for the special status that has been traditionally reserved for real estate holding companies.
But now a diverse set of businesses are applying for the status, which is enjoyed by about 1,000 companies now, The New York Times reported Monday.
One method of qualifying is to create a subsidiary that rents their office space from the corporate parent. That turns the corporate parent into a real estate firm renting to its own business.
One company that run 44 prisons, the Corrections Corporation of America, has changed its status and the company said it will save $70 million in 2013 as a result of the switch.
Potentially, any company that owns an immovable asset, like land or a building, can apply for the status, the newspaper said.
Companies such as casinos, advertising firms that own billboards and communications companies that own relay towers are looking into the switch. Potentially, fast food chains, like McDonald's, could also define themselves as trusts, the Times said.
"I've been in this business for 30 years, and I've never seen the interest in real estate investment trust conversions as high as it is today, said Robert O'Brien, director of the real estate division of accounting firm Deloitte & Touche.
"It is not a far stretch to envision REITs concentrated in railroads, highways, mines, landfills, vineyards, farmland or any other 'immovable' structure that generates revenues," analysts at market research firm Jefferies said in a research note.
The law was written to exclude companies that were real estate holding companies from taxes, but unfair tax loopholes that attract media attention have found themselves repealed in the past.
"I worry that in a world where Congress is very sensitive to taxes, that a lot of these structures could end up attracting a lot of attention that might not be entirely positive," said Ross Smotrich, a market analyst at Barclays bank.
While Congress debates tax reform---- Clinton neo-liberals are pitting themselves as protecting taxes on the wealthy while protecting the middle/working class from taxation. Meanwhile, states like Biden's Delaware and Harry Reid's Nevada are ground zero for these wealth-hiding businesses using loopholes around the estate tax. As this article shows-----the amount of revenue lost at the Federal level over two decades from this estate tax avoidance is almost complete for the richest. Today-----the people paying estate tax are the upper middle class that have small farms and small estates. Seems the super-rich will fight for the right for the masses to pay estate tax-----while amassing huge real estate wealth of their own in the US.
I speak with black upper middle-class that often are working to support Clinton neo-liberals and Bush neo-cons about how dismantling all these structures built to protect against totalitarianism and autocratic societies are being broken by those very pols they are joining. Here in Baltimore, most of our pols are these very people. What happens when equal protection and extreme wealth takes hold? Those middle class blacks and/or their families will fall into the depths of poverty they helped create.
So, both working class Republican conservatives and upper middle-class people of color have incentive to stop supporting these global corporate pols that will kill any ability of people to gain wealth equity.
STOP SUPPORTING CLINTON NEO-LIBERALS AND BUSH NEO-CONS----YOU ARE NOT THINKING WHAT GLOBAL EMPIRE KIND OF WEALTH THINKS OF WORKING PEOPLE!
Estate Tax Gutted by Loopholes
Tuesday, June 17, 2014 19:41
In 2012, the nation’s estate tax collected just $8.5 billion – a fraction of one percent of the $1.2 trillion of accumulated wealth that passed to heirs. A dozen years earlier, in 2000, the estate tax recycled nearly five times more money back into society ($40 billion – after adjusting for inflation).
In 2003, 73,100 estate tax returns were filed. Of the 2.5 million Americans that died in 2012, just 9,400 estates filed estate tax returns, and of these, fewer than 4,000 paid any tax.
What’s caused these dramatic changes?
First, the Jobs and Growth Tax Relief and Reconciliation Act of 2003 established a ten-year phase out of the nation’s estate tax. Faced with the prospect that in the eleventh year, the estate tax rate and exemption would snap back to 2003 levels, Congress permanently changed the estate tax in the American Taxpayer Relief Act of 2012 (ATRA), known more popularly as “the fiscal cliff deal.” Under the terms of ATRA, the estate tax exemption was set at $5 million per person ($10 million per married couple) and indexed for inflation. Because of the inflation adjustment, married couples today can exempt $10.7 million from estate taxes. ATRA also lowered the maximum estate tax rate to 40 percent, down from 55 percent before the 2003 tax cut law was passed.
Second, aggressive use of trusts has allowed wealthy individuals to shelter their assets from estate taxes for generations and in some cases, centuries. (South Dakota has been a popular state for establishing trusts because the state allows trusts to continue in perpetuity and imposes no taxes on trust income). Trusts have an important role to play in protecting assets or ensuring that assets are used for an intended purpose, like paying the health care expenses of a special needs family member or setting aside educational funds for a child or grandchild. But increasingly, trusts are being used for the primary purpose of avoiding inheritance taxes. Except in cases where estate planning occurs too close to the date of death, virtually all estates can be fully sheltered from estate taxes with careful planning.
Clever estate planning allows wealthy people to establish trusts that are taxable to the donor for income tax purposes, but to the heirs for estate tax purposes. Hence, when a wealthy benefactor dies, his or her assets pass to the heirs without taxation until those heirs die.
The most problematic trust is the Grantor Retained Annuity Trust, or GRAT. Ironically, Congress passed the GRAT law in 1990 to close another loophole in the estate tax code exploited by tax attorney Richard Covey. But it wasn’t long before Covey found an even bigger loophole in GRAT. This single loophole has cost the U.S. Treasury more than $100 billion since 2000, about a third as much as the total estate taxes collected during the period, according to Covey. Casino mogul and top Republican campaign contributor Sheldon Adelson has used 30 GRAT trusts to give nearly $8 billion to his heirs, saving $2.8 billion in gift taxes since 2010, according to SEC filings analyzed by Bloomberg News.
The estate tax was adopted in 1916 as a tool in the fight against the widening economic inequality of that age. At the present time, as inequality reaches levels not seen for a century, it is time for Congress to close estate tax loopholes and restore trusts to their proper roles by ending trust fund abuse.
Chuck Collins and Bill Gates, Sr. (father of the founder of Microsoft), co-authors of Wealth and Our Commonwealth, had it right when they called the estate tax the “economic opportunity recycling tax.” Great pools of wealth would not be created without tremendous public investment and support in successful enterprises, and at the end of life, some of that wealth should flow back into the pot that is used to create similar opportunities for generations to come.
As we know the Gates Foundation is one of the largest such Trusts into which Buffet add his fortune and I showed a few weeks ago how those trusts are now simply used for corporate R and D in the PHARMA and EDUCATION businesses these two are creating from the attack on public health and education.
As the rich and corporations flock to these estate tax loopholes all we hear is a debate on how much the estate tax will cover. We need to keep fighting the dismantling of this tax, but we need the spotlight on the policies making these laws moot.
It's like the Anti-Trust laws that are meant to keep US corporations from becoming too big now being made moot by court interpretation of what constitutes anti-trust. Interpreting estate tax law in ways that allow such loopholes is only done by Wall Street Clinton and Bush global corporate pols!
If you noticed, the Buffets, Gates, Soros, and as this article shows, the Clintons and Bushes have pretended to support keeping the Estate Tax the Founding Fathers declared necessary to keep extreme wealth from creating an aristocracy from which the Revolutionary War was fought to escape. The media labelled these wealthy Americans----'THE GOOD BILLIONAIRES'. Meanwhile, all of the above pushed and passed tax laws that allow these same people to hide their wealth through generations in FAMILY TRUSTS. As this article shows----you won't find any Clinton/Bush wealth that is not hidden in these Trusts. So, they have killed the ESTATE TAX while pretending to protect it.
Below this article is the same billionaires pretending to be champions of the people and democracy----using FAMILY TRUST LAWS TO HIDE HUNDREDS OF BILLIONS OF DOLLARS IN REAL ESTATE AND INVESTMENTS.
It appears the super-rich will fight to keep the estate tax to control what others can accumulate while using tax loopholes to amass generational wealth themselves. We need both estate taxes kept high and loopholes closed!
Clintons use loophole to avoid estate tax they helped create
By Leonard Greene
June 17, 2014 | 2:27pm
Hillary and Bill Clinton have used a tactic popular among the 1 percent to avoid paying millions in an estate tax they supported before striking it rich. Not bad for a couple of “dead broke” people.
Penny-pinching probable presidential candidate Hillary Clinton and her former leader-of-the-free-world husband, Bill Clinton, have apparently grown quite attached to their money.
Despite being self-described paupers on their way out of the White House, the Clintons managed to sock away so much that they now want to shield their wealth from the dreaded estate tax they enthusiastically supported before striking it rich.
“The estate tax has been historically part of our very fundamental belief that we should have a meritocracy,” Hillary Clinton said at a December 2007 appearance with billionaire investor Warren Buffett.
But according to Bloomberg News, the Clintons have employed a variety of financial strategies designed to help shield multimillionaires from the estate tax, a levy paid by a person who inherits money or property.
The tax can top out at 40 percent of assets.
Bill and Hillary Clinton have long supported an estate tax to prevent the US from being dominated by inherited wealth.
As long as the tax is for other people, it appears.
According to federal financial disclosures and local property records, the Clintons created residence trusts in 2010 and shifted ownership of their Westchester house into them in 2011, a strategy popular among the nation’s 1 percent.
Federal financial disclosures show the Clintons have shielded their wealth by shifting ownership of their Westchester house into a residence trust
The move could save the Clintons hundreds of thousands of dollars in estate taxes, financial experts say.
News of the money move comes as Hillary Clinton promotes her new book, “Hard Choices.”
Last week, in an interview with ABC, she told anchor Diane Sawyer that she and Bill were “dead broke” and in debt when they left the White House after 2000.
She backtracked a day later on “Good Morning America,” saying she understood the struggles of Americans.
At the end of 2012, the Clintons were worth from $5.2 million to $25.5 million, according to financial disclosures that Hillary Clinton filed in 2013 as she was leaving her position as secretary of state.
So, if the rich are using these new loopholes to protect their estates under the guise of FAMILY TRUSTS----why are they pushing for higher estate taxes? They look to be trying to keep families of the lesser rich from keeping wealth they want to win. Super-rich avoiding estate taxes while promoting them looks to be just what the Founding Fathers were trying to avoid.
Buffett Joins Soros in Effort to Raise Taxes on Estates
By Richard Rubin Dec 11, 2012 3:35 PM ET
Billionaire investors Warren Buffett and George Soros are calling on Congress to increase the estate tax as lawmakers near a decision on tax policies that expire Dec. 31.
In a joint statement today, Buffett, Soros and more than 20 other wealthy individuals asked Congress to lower the estate tax’s per-person exemption to $2 million from $5.12 million and raise the top rate to more than 45 percent from 35 percent.
An estate tax structured this way will “raise significant revenue to reduce the deficit and fund vital services, will only be paid by the top one percent of estates, will raise more from the wealthiest estates” and will simplify compliance, said the statement. It also was signed by John Bogle, founder of mutual fund company Vanguard Group Inc., and former President Jimmy Carter.
The renewed push for increasing the estate tax faces significant opposition in Congress, where Senate Democrats including Max Baucus of Montana and Mark Pryor of Arkansas have joined Republicans to support the current estate tax parameters. That intra-party dispute caused Democrats to leave estate tax changes out of legislation they passed July 25 extending income tax cuts.
There’s probably enough support among Democrats to maintain the existing estate tax parameters, said Carolyn Lee, senior director of tax policy at the National Association of Manufacturers in Washington, which supports existing levels.
‘Multigenerational Businesses’ “We think that family-held and multigenerational businesses are important,” she said. “It’s part of the American way of life.”
Changes to the estate tax are among the more than $600 billion in automatic spending cuts and tax increases scheduled to start in January.
If Congress does nothing, the amount one could exempt from the estate tax would drop to $1 million and the rate would increase to 55 percent. Obama wants to reinstate the 2009 levels, which include a $3.5 million exemption and a 45 percent top rate. Compared with continuing current policies, Obama’s plan would raise $119 billion over the next decade, according to his budget proposal.
Cutting estate taxes just means that someone else will have to pay for government, Bogle said.
“I’m more than happy for my own estate to pay my fair share,” he said today on a conference call with reporters.
In 2013, under the plan favored by Republicans, there would be an estimated 3,600 taxable estates in the U.S., according to the nonpartisan congressional Joint Committee on Taxation. Obama’s plan would double that number to 7,200. If Congress does nothing, 55,200 estates, or 2 percent of estimated 2013 decedents, would owe taxes.
Buffett, 82, is the chairman, chief executive officer and largest shareholder of Berkshire Hathaway Inc. (BRK/A), and his $46.7 billion fortune as of yesterday places him fourth on the Bloomberg Billionaires Index.
Buffett has long been a supporter of estate taxes. He testified before the Senate Finance Committee in 2007 and said the tax was necessary to “prevent our democracy from becoming a dynastic plutocracy.”
Buffett has committed most of his wealth to charities, including the Bill & Melinda Gates Foundation and organizations started by his three children. He has urged billionaires to agree to donate at least half their wealth in a campaign he co- founded with Microsoft Corp. (MSFT) Chairman Bill Gates, the world’s second-richest person, who’s worth $62.7 billion according to the Bloomberg Billionaires Index.
Contributions to charitable groups can be deducted from annual income and, at death, from the taxable value of an estate.
Obama has used Buffett’s call for higher taxes on capital gains to promote the “Buffett rule,” which would require a minimum tax rate for top earners.
Soros, 82, is chairman and founder of Soros Fund Management LLC. He is worth $21.6 billion, placing him at 24th on the Bloomberg Billionaires Index. He has donated more than $3 million to Democrats and has financed groups such as the American Civil Liberties Union.
Other signers of the statement include Bill Gates Sr., father the Microsoft chairman; Richard Rockefeller, chairman of Rockefeller Brothers Fund Inc.; and Leo Hindery, managing partner of InterMedia Partners LP.
Rockefeller said on the conference call today that a higher estate tax rate encourages philanthropy, because it gives wealthy people an incentive to direct their money to causes.
The $4 million exemption per couple, indexed for inflation, is adequate, he said.
“Passing along $4 million is not trivial,” Rockefeller said.
The statement was organized by the Responsible Wealth project of United for a Fair Economy, a Boston-based group that opposes concentrations of wealth.
Biden was allowed to run for President and serve as VP because of the commitment he and his state has to protecting wealth and profit as Clinton Wall Street global corporate neo-liberals. Delaware is the biggest haven in the world for shell companies and wealth stealth-----Harry Reid's Nevada is next. See how Clinton neo-liberal candidates are chosen? This is why neo-liberals from Hillary, Biden, O'Malley, and Cuomo are the lineup from which 80% of the Democratic base will want to run! Talk with the citizens of Delaware and they will tell you the citizens pay plenty of taxes where corporations do not.
PLEASE STOP ALLOWING A WALL STREET GLOBAL CORPORATE DNC CHOOSE CANDIDATES IN PRIMARIES---RUN AND VOTE FOR LABOR AND JUSTICE IN ALL PRIMARY ELECTIONS!
Below you see a Clinton neo-liberal outpost----Delaware and Biden---and they are also top in the nation for estate tax evasion businesses as well.
How Delaware Thrives as a Corporate Tax Haven
By LESLIE WAYNE Published: June 30, 2012
NOTHING about 1209 North Orange Street hints at the secrets inside. It’s a humdrum office building, a low-slung affair with a faded awning and a view of a parking garage. Hardly worth a second glance. If a first one.
But behind its doors is one of the most remarkable corporate collections in the world: 1209 North Orange, you see, is the legal address of no fewer than 285,000 separate businesses.
Its occupants, on paper, include giants like American Airlines, Apple, Bank of America, Berkshire Hathaway, Cargill, Coca-Cola, Ford, General Electric, Google, JPMorgan Chase, and Wal-Mart. These companies do business across the nation and around the world. Here at 1209 North Orange, they simply have a dropbox.
What attracts these marquee names to 1209 North Orange and to other Delaware addresses also attracts less-upstanding corporate citizens. For instance, 1209 North Orange was, until recently, a business address of Timothy S. Durham, known as “the Midwest Madoff.” On June 20, Mr. Durham was found guilty of bilking 5,000 mostly middle-class and elderly investors out of $207 million. It was also an address of Stanko Subotic, a Serbian businessman and convicted smuggler — just one of many Eastern Europeans drawn to the state.
Big corporations, small-time businesses, rogues, scoundrels and worse — all have turned up at Delaware addresses in hopes of minimizing taxes, skirting regulations, plying friendly courts or, when needed, covering their tracks. Federal authorities worry that, in addition to the legitimate businesses flocking here, drug traffickers, embezzlers and money launderers are increasingly heading to Delaware, too. It’s easy to set up shell companies here, no questions asked.
“Shells are the No. 1 vehicle for laundering illicit money and criminal proceeds,” said Lanny A. Breuer, assistant attorney general for the criminal division of the Justice Department. “It’s an enormous criminal justice problem. It’s ridiculously easy for a criminal to set up a shell corporation and use the banking system, and we have to stop it.”
In these troubled economic times, when many states are desperate for tax dollars, Delaware stands out in sharp relief. The First State, land of DuPont, broiler chickens and, as it happens, Vice President Joseph R. Biden Jr., increasingly resembles a freewheeling offshore haven, right on America’s shores. Officials in other states complain that Delaware’s cozy corporate setup robs their states of billions of tax dollars. Officials in the Cayman Islands, a favorite Caribbean haunt of secretive hedge funds, say Delaware is today playing faster and looser than the offshore jurisdictions that raise hackles in Washington.
And international bodies, most recently the World Bank, are increasingly pointing fingers at the state.
Of course, business — the legal kind — has been the business of Delaware since 1792, when the state established its Court of Chancery to handle business affairs. By the early 20th century, the state was writing friendly corporate and tax laws to lure companies from New York, New Jersey and elsewhere. Most of the businesses incorporated here are legitimate and many are using all legal means to reduce their tax bills — something that most stockholders applaud.
President Obama has criticized outposts like the Caymans, complaining that they harbor giant tax schemes. But here in Wilmington, just over 100 miles from Washington, is in some ways the biggest corporate haven of all. It takes less than an hour to incorporate a company in Delaware, and the state is so eager to attract businesses that the office of its secretary of state stays open until midnight Monday through Thursday — and until 10:30 p.m. on Friday.
Nearly half of all public corporations in the United States are incorporated in Delaware. Last year, 133,297 businesses set up here. And, at last count, Delaware had more corporate entities, public and private, than people — 945,326 to 897,934.
One Delaware company was used last year to make an anonymous $1 million donation to Restore Our Future, a super PAC that favors Mitt Romney for president. Restore Our Future ultimately disclosed that the money came from a former Bain Capital executive. The Romney campaign declined comment, and Restore Our Future did not return calls.
Delaware’s tax laws are a bonanza for the state. At a time when many states are being squeezed by a difficult economy, Delaware collected roughly $860 million in taxes and fees from its absentee corporate residents in 2011. That money accounted for a quarter of the state’s total budget.
“Companies choose our state and we are proud of it,” said Richard J. Geisenberger, Delaware’s chief deputy secretary of state and its leading ambassador to business. “We spend a lot of time in the United States and traveling internationally to let people know that Delaware is a great place to do business.”
It is also a great place to reduce a tax bill. Delaware today regularly tops lists of domestic and foreign tax havens because it allows companies to lower their taxes in another state — for instance, the state in which they actually do business or have their headquarters — by shifting royalties and similar revenues to holding companies in Delaware, where they are not taxed. In tax circles, the arrangement is known as “the Delaware loophole.” Over the last decade, the Delaware loophole has enabled corporations to reduce the taxes paid to other states by an estimated $9.5 billion.
State lawmakers in Pennsylvania are now trying to close the loophole, arguing that their state is being robbed of its tax dollars. Of particular concern is that many companies involved in drilling for natural gas in the Marcellus Shale region of Pennsylvania are, in fact, incorporating in Delaware instead.
“Delaware is an outlier in the way it does business,” said David E. Brunori, a professor at George Washington Law School and an expert on taxation. “What it offers is an opportunity to game the system and do it legally.”
WHAT does it take to incorporate a company in Delaware? Not a lot, tax experts say. Shell companies — those with no employees, no assets and, in fact, no real business to speak of — are remarkably easy to establish here, and it doesn’t always matter who you are or what business you are in. Viktor Bout, the Russian arms dealer known as “the merchant of death,” used two Delaware addresses. In April he was sentenced to 25 years in prison on terrorism charges resulting from an American sting operation.
Jack Abramoff, the former Washington lobbyist jailed on corruption charges, set up a sham Delaware corporation to hide millions in payments and circumvent federal laws. Mr. Subotic, the Serbian businessman who was tried in absentia last October for his role in a cigarette smuggling scheme and sentenced to six years, used three airplanes that were registered in Delaware, including two at 1209 North Orange. Mr. Subotic lives in Geneva and denies the charges.
The Organized Crime and Corruption Reporting Project, an international group based in Sarajevo, has identified other Eastern Europeans with Delaware links. Among them is Laszlo Kiss, an Romanian accountant and author of “United States, Tax Heaven — Uncle Sam Will Fight Your Taxes!” that praised the state’s lax rules. He is now awaiting trial in Bucharest on charges of helping embezzle and launder $10 million through Delaware shells.
“Delaware is the state that requires the least amount of information,” says David Finzer, the chief executive of Capital Conservator, a registration agent that sets up accounts in Delaware and elsewhere for non-United States citizens. “Basically, it requires none. Delaware has the most secret companies in the world and the easiest to form.”
Mr. Finzer, an American based in Novi Sad, Serbia, advertises his services online. “Tax-Free Havens for Non-U.S. Citizens,” his Web site, says. It goes on: “More than 50 percent of the major corporations in the world are incorporated in Delaware. Why? Because in provides the anonymity that most offshore jurisdictions do not offer.”
That is exactly what troubles law enforcement agencies and some in Congress who are trying to rein in Delaware. The state is seen as an onshore alternative with regulations more lax than such well-known offshore tax havens as the Isle of Man, Jersey and the Caymans, which require greater disclosure. Even more, a Delaware registration allows a business, legitimate or not, to open a bank account anywhere in the world with the patina of an American address.
“You can have companies in Delaware that have no U.S. bank accounts, no requirements for documentation and no one knows who owns them,” says Anthony B. Travers, chairman of the Cayman Islands Stock Exchange and former chairman of that country’s Financial Services Association. “There should be a level playing field and Delaware should have to comply with the same standards as the Caymans.”
Delaware isn’t the only state that has gone this route. Three others — Nevada, Wyoming and Oregon — have also been cited by the Financial Crimes Enforcement Network, a division of the United States Treasury Department, as “particularly appealing” for the formation of shell companies. Of those four states, Delaware stands out as the one offering the least transparency and the most secrecy, this group says.
“What is so galling about secrecy in the United States is that there is no attempt to document who owns a corporation,” said Richard Murphy, a senior adviser at the Tax Justice Network, an independent organization based in London that researches tax havens. “Two million corporations are formed each year in the United States, more than anywhere else in the world. Delaware, in turn, is the biggest single source of anonymous corporations in the world.”
Mr. Murphy adds: “Why go to the Caymans when you can just go down the street?”
In 2009, the Tax Justice Network named the United States as No. 1 on its Financial Secrecy Index, ahead of Luxembourg and Switzerland. It cited Delaware as one of the reasons.
That, Mr. Murphy says, elicited howls in Wilmington. “The reaction was: ‘This cannot be true.’ Not only can it be true, it is true.” (The United States has since fallen to fifth place, behind Switzerland, the Caymans, Luxembourg and Hong Kong, after the group changed its method.)
For years, Senator Carl Levin, a Michigan Democrat, has been leading a quixotic effort to adopt legislation that would require states to collect information on the “beneficial ownership” of companies incorporated within their borders.
That would require states to add the name of the person standing behind the corporation — its beneficial owner — on incorporation papers. To sweeten the pot, the legislation would exempt public companies, hedge funds and other large corporations, along with mom-and-pop businesses where ownership is clear. In addition, the federal government would pick up the tab for putting the law into effect.
Senator Levin has long complained that it takes more information to get a driver’s license than to set up a corporation in America. Three times since 2000, he has introduced his legislation — once co-sponsored by Barack Obama when he was a senator from Illinois — and each time the effort has been rebuffed. He has never even been able to get the measure out of committee.
Law enforcement agencies, human rights groups and the administration are on his side. Last month, a letter supporting Mr. Levin’s measure and signed by 41 different groups was sent to every member of Congress.
But that has been no match for the opposition. Most vocal is the National Association of Secretaries of State, a politically powerful group. It is backed up by the Chamber of Commerce, the American Bar Association and the state of Delaware, which is the lone state to have hired a lobbyist to work on the matter.
Senator Thomas R. Carper, a Delaware Democrat, is in line to be the next chairman of the Senate Homeland Security and Government Affairs Committee, which has jurisdiction over the measure. Mr. Carper has expressed concerns about the measure but has taken no formal position on it.
“Levin is hitting a brick wall,” said Heather Lowe, director of government affairs for Global Financial Integrity, an anticorruption research group. “It’s frustrating. Delaware is playing a significant role in the committee. Senator Carper is well liked and well respected and he’s not moving on this issue.”
The secretaries of state, along with Delaware, argue that the Levin measure would be costly and burdensome, and would discourage business incorporation and capital formation. They add that their offices are generally ill-equipped to process the additional data that would be required. Even more, determining beneficial ownership may not be a simple matter.
“This would be a sea change in how things are done,” said Ross Miller, Nevada’s secretary of state and president-elect of the National Association of Secretaries of State. “It would add red tape and increasing processing time. And if you had a money launderer and asked for his name, he probably wouldn’t be truthful.”
Mr. Geisenberger, the chief deputy secretary of state of Delaware, said of the Levin measure: “This would be a massive inhibitor to starting a business. It would end up taking weeks or months to get a business started. And I think a lot of them would move underground and into the black market and just not form a legal entity.”
COMPANIES that are incorporated in Delaware need someone on the ground here — an agent or go-between to act on their behalf. That is where the CT Corporation comes in.
CT, a subsidiary of the Dutch information services company Wolters Kluwer, is the largest registered agent in Delaware and, it turns out, the registered agent for 1209 North Orange Street. CT is authorized to transact business at that address, and its main duty is to accept legal notices on behalf of the businesses incorporated here and to pass them along.
CT represents nearly a third of all companies registered in Delaware and 60 percent of Fortune 500 companies. It says that before accepting clients, it screens them against the government’s “Specially Designated Nationals,” a list of people barred from doing business in the United States.
Mainly, however, CT says it acts as a middleman. “We check names and addresses against various federal agency lists,” says Timothy Hall, a spokesman for the company, which has no position on the Levin measure. “We will comply with whatever law is passed,” he added.
(The New York Times Company has seven corporate subsidiaries registered at 2711 Centerville Road in Wilmington. The registered agent for that address is the Corporation Service Company, which is the second-largest agent in the state.)
For corporate tax planners, Delaware is a dream. The state helps companies legitimately reduce their United States taxes and, sometimes, obscure profits in other countries.
“Companies are able to turn taxable income into tax-exempt income in Delaware and then use it to reduce their tax bills in other states,” said Bradley P. Lindsey, an accounting professor at North Carolina State University and one of three authors of a 2011 study titled “Exploring the Role Delaware Plays as a Domestic Tax Haven.” Delaware does not tax certain profit-making intangible items — like trademarks, royalties, leases and copyrights. Yet those same intangibles can be part of a tax strategy that allows them to be classified as deductions in other states, reducing a company’s tax bill there.
“Delaware serves as a domestic tax haven, much like the Cayman Islands serves as an offshore foreign tax haven, and offers a similar level of tax avoidance,” the report states.
American corporations find the Caymans alluring for many reasons. There, they can operate in relative secrecy, attract more foreign customers, avoid regulation and enjoy a low tax rate. In one respect, however, Delaware is even better than the Caymans. At some point, American companies have to bring back their foreign profits from the Caymans and pay federal taxes. But in Delaware, the state tax savings through the Delaware loophole are permanent.
And on the reputational front, “Delaware doesn’t carry the same stigma as the Caymans or Bermuda,” Mr. Lindsay said, adding, “Why not attract business to my little state and get something at the expense of the other states?”
WorldCom, the telecom giant that collapsed into bankruptcy after an accounting scandal, could be a symbol for the Delaware loophole. Bankruptcy court filings showed that the company had cut $20 billion from state taxes thanks to an intangible asset it called “management foresight.”
Delaware subsidiaries are especially popular with global energy and mining companies like Exxon, Chevron and Rio Tinto. Among the top 10, some 915 subsidiaries have been set up in Delaware, compared with 51 in Switzerland and 49 in the Caymans, according to a report last September by the Norway chapter of Publish What You Pay, a London-based group that studies natural resources. The study said that this allows these resource extraction companies to put up a “wall of silence” about their far-flung operations and profits, especially from poor countries that may want a greater slice of the revenue. Exxon, Chevron and Rio Tinto declined to comment.
STATES like Pennsylvania are increasingly fed up. More than 400 corporate subsidiaries linked to Marcellus Shale gas exploration have been registered in Delaware, most within the last four years, according to the Pennsylvania Budget and Policy Center, a nonprofit group based in Harrisburg that studies the state’s tax policy.
In 2004, the center estimated that the Delaware loophole had cost the state $400 million annually in lost revenue — and that was before the energy boom.
More than two-thirds of the companies in the Marcellus Shale Coalition, an industry alliance based in Pittsburgh, are registered to a single address: 1209 North Orange Street, according to the center.
“So many of these Marcellus Shale companies have figured out that it is fairly easy to siphon profits from Pennsylvania, so that they don’t pay taxes here,” said Michael Wood, research director at the Harrisburg center.
The center is urging Pennsylvania to try to close the Delaware loophole. But it is running into opposition from Pennsylvania companies that want to retain the break. And, in Delaware, state officials say that their approach to business is good for America.
“We have a system that is the greatest creator of wealth in the history of the world,” said Mr. Geisenberger, the Delaware official. “We will not support any changes that change the friendliness of American business and close our doors to capital formation and the ease of doing business.”