In essence, they are receiving interest-free loans from U.S. taxpayers and are contributing to the budget deficit
Ralph Nader yesterday called on the CEOs
of 19 corporations that have postponed their tax payments by more than $1
billion each by depreciating equipment and buildings faster than these
assets wear out, to reject this tax giveaway.
The companies, which generated combined profits of almost $41 billion in 1994, have accumulated more than $50 billion in deferred tax payments by using accelerated depreciation to reduce their taxable income during the early years of the lives of their assets. CEOs of seven of these companies recently signed a letter to President Clinton and Congress calling for a balanced budget, even though the seven companies have reduced their taxes by more than $27 billion by taking advantage of the accelerated depreciation tax break.
The 19 companies include: Ford Motor, Exxon, General Motors, Philip Morris, Chrysler, IBM, DuPont, Protor & Gamble, Amoco, Chevron, Mobil, Anheuser-Busch, Atlantic Richfield, Weyerhaeuser, RJR Nabisco, Phillips Petroleum, International Paper, Georgia-Pacific and Coastal.
"It is paradoxical and unconscionable that wealthy corporations are taking advantage of billions of dollars in tax breaks at the same time that CEOs are asking the President and Congress to balance the budget by cutting programs for the poor and needy," said Ralph Nader. According to the Congressional Joint Committee on Taxation's September 1995 Estimates of Federal Tax Expenditures for Fiscal Years 1996-2000, accelerated depreciation tax breaks will cost the U.S. Treasury $28.2 billion in 1996 alone and $129.2 billion over the next five years.
"When companies are permitted to reduce their tax bills by deferring payment of taxes, they are in essence receiving interest- free loans from U.S. taxpayers and are contributing to the budget deficit," said Mr. Nader. "These 19 companies alone saved more than $4.2 billion in interest expenses (at the prime rate) in 1994 by taking advantage of the accelerated depreciation tax break," he added.
"Many companies use the accelerated depreciation tax break to defer payment of taxes indefinitely," said Janice Shields, a former accounting professor and coordinator of Mr. Nader's Corporate Welfare Project. "For example, Exxon reported $8.758 billion in accumulated deferred taxes due to accelerated depreciation in 1992; that total climbed to $8.944 billion in 1994. General Motors reported $4.321 billion in accumulated deferred taxes due to accelerated depreciation in 1992 and $4.450 billion in 1994," she added.
The House of Representatives approved a change in the tax code as part of the Republicans' Contract With America which would have allowed companies to take tax deductions in excess of the amount that the company paid for depreciable assets. The Joint Committee on Taxation estimated that this provision would cost the U.S. Treasury a net $88.8 billion from 1995 to 2005. The Senate rejected the excess depreciation proposal and the conference eliminated the provision.
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