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Taxes you pay go to PG&E & not Headstart

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POSTED May 6, 2013 12:22 a.m.

Pundits - and editorial cartoonists - are having a field day over Congress’ decision to restore funding for air traffic controllers while letting programs such as Headstart for low-income kids and Meals on Wheels for shut-in senior citizens take federal budget hits.

There is plenty of money out there to have full funding for air traffic controllers, Headstart, and Meals on Wheels. If you doubt this consider just two of tens of thousands of examples of big drains on your tax dollars - subsidies for the American music industry to market music labels overseas and Warren Buffet.

Uncle Sam apparently alarmed that music retail sales have dropped from $12 billion to $7.1 million between 2003 and 2012, recently allocated $300,000 in federal tax dollars through the International Trade Association to pay for a dozen independent music labels to get a marketing foothold in places such as Latin America and Asia.

The dozen firms accounted for about $2.3 billion in sales in 2012. Surely they could afford $300,000 to underwrite efforts to tap foreign markets without getting federal help. This is nothing new. Uncle Sam regularly - and quietly - doles out your tax dollars to help wealthy corporations to market products overseas. The list is long and is dotted with Fortune 500 companies firms as well as very successful corporations such as McDonald’s, Kraft Foods, Jim  Beam Brands, Campbell Soup, and Ralston Purina to name a few. The money earmarked for overseas advertising is coming right out of your pockets. It could very easily go to Meals on Wheels, Headstart or any of a thousand other federal programs but Congress instead set up a system to use as much as $100 million a year to pay for American corporate advertising in foreign lands.

By framing budget cuts as a choice between air traffic controllers and feeding seniors on limited income it glosses over the real reasons Uncle Sam spends way beyond his means.

Then there is the Oracle of Omaha who keeps lecturing us that we need to pay more taxes.

How about Buffet - and owners of other utilities such as PG&E - giving state and federal treasurers taxes utilities used government mandates to collect from us as utility customers and then pocketed?

Here’s how utilities such as PG&E get to keep taxes you cover that are clearly marked on your monthly bill as part of what you are paying. The California State Public Utilities Commission embedded the taxes that utility firms such as PG&E are projected to owe within their rates. They do that to assure PG&E collects all of their costs so they can have an 11.45 percent guaranteed return.

But thanks to federal laws that allow utilities’ corporate parents to pay the taxes instead, what typically happens is through the employment of tax shelters, tax credits, and other slights of hand the corporate parent pays little or no taxes.

PG&E, for example, was able to sell itself to its own holding company after deregulation. That has allowed the holding company to figure a way year after year to pay significantly less taxes than PG&E as a standalone company would under state law. In some years that has meant absolutely no federal income taxes were paid by PG&E.

So who pockets the money? The PG&E holding company does. That is one reason why PG&E profits often exceed 11.45 percent.

 The biggest abuser of the raid of dollars collected specifically from consumers for the expressed purpose of paying taxes was Enron. When they owned Portland General Electric, Enron pocketed $92 million a year in taxes collected from Portland GE customers that never went to the government. By the time Enron no longer owned the Oregon utility, they had taken almost $1 billion in money consumers paid as part of their rates for the explicit purpose of covering taxes that instead fattened their bottom line.

When Oregon pushed a law to change the siphoning of tax dollars into cooperate profit columns, Enron fought it as did Warren Buffet.

Yes, the same guy who lectures us about not paying enough in taxes.

Buffet owns Mid American Energy Corporation that also happens to own Oregon-based power provider PacifiCorp.

Buffet is an expert at making sure the companies he owns and profits from don’t pay their fair share of taxes. Mid American as an example deferred $666 million in taxes in 2007. By 2035, it will have paid only half of the taxes it owed for the year 2007.

To put this in perspective, it would be akin to you getting a 28-year interest free loan to buy a home for $200,000 today. And then - 28 years down the road when inflation has eroded the value of the dollar by 40 percent - you only have to pay the price you originally agreed to which would be the equivalent of $120,000 in constant dollars.

Anyone want to venture a guess why the Oracle of Omaha is rich? It certainly isn’t because he pays his fair share of taxes. In fact, he finds ways to pocket the taxes you are forced to pay by government edict on behalf of some of his companies

Eliminate subsidies for corporations making record profits and prevent some of those same corporations from pocketing money taken from us in the form of taxes and maybe the federal spending sequester for “vital” government services can go away.



This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA.  He can be contacted at dwyatt@mantecabulletin.com or 209-249-3519.

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