Corporate Hubris

Interesting article over at Think Progress. Industrial giant Corning goes to Capitol Hill crying that it is overpaying taxes and pleads for a lower corporate rate. The real record shows that they paid no taxes at all from 2008 to 2011, in fact they received a $4 million dollar refund from Uncle Sam.

"Over a four years period from 2008 to 2011, Corning Inc. was one of 26 companies that managed to avoid paying any American income taxes, even though it earned nearly $3 billion during that time. In fact, according to Citizens For Tax Justice, the company received a $4 million refund from 2008 to 2010. That didn’t stop Susan Ford, a senior executive at the company, from telling the House Ways and Means Committee this week that America’s high corporate tax rate was putting her company at a disadvantage."

Ford told the committee that Corning paid an effective tax rate of 36 percent in 2011, but as CTJ notes, she is counting taxes on profits earned overseas that haven’t yet been paid and won’t be unless the company decides to bring the money back to the United States. Corning’s actual tax rate in 2011, according to CTJ’s analysis, was actually negative 0.2 percent.


The territorial system Ford testified in favor of would actually encourage the offshoring of profits earned by American companies, thereby reducing the amount they pay in taxes even more. And rather than helping remove a disadvantage that prevents companies from creating jobs, an economic analysis of such a tax system found that it could actually cost the United States as many as 800,000 jobs.

Cornings response : "Corning management has said that our tax rate continues to go up. Why is this happening?


Corning does business all over the world and different tax rates apply in each country where we earn income. Our overall tax rate increases if we earn a larger portion of our income in higher tax jurisdictions. For example, if we earn $150, in which $50 is earned at a 40 percent tax rate and $100 is earned at a 10 percent tax rate, our overall tax rate is 20 percent. If our markets switch and instead we earn $50 at a 10 percent tax rate and $100 at a 40 percent tax rate, then our overall tax rate increases to 30 percent. Based on this example, even though our total income of $150 did not change, our overall tax rate went up. This means we ultimately received less profit from the same amount of sales. This is an example of what happened to Corning in 2011. We call this distribution of income in different countries the “mix.” Depending on the mix, our tax rate can increase or decrease despite having earned the same amount of total income. As our income grows in the U.S. and China, where tax rates are higher, our overall tax rate increases.


Was our tax rate inordinately low in the past? Did we pay all the taxes we should have, given tax laws over recent years?


Corning always complies with all tax laws in countries where we do business. Our tax rate was low in the past for various reasons. One is the “mix” reason I just described. During the telecom crash in the early and mid-2000s, we suffered significant losses in the U.S., which has a relatively high tax rate of 38 percent. Income in high jurisdictions drives the overall tax rate higher, but losses in high jurisdictions drive the overall rate lower. So our losses in the U.S., due to the telecom crash, drove our historical rate lower. Additionally, many countries –particularly in Asia – offer tax incentives to encourage foreign investment. This has been true for us in China, Taiwan, and Korea. This is another reason why our overall tax rate has been low but is increasing: the tax incentives we have previously enjoyed in these countries are expiring."

Hard to shed a tear for these people. The people with all the gold always figure out a way to game the system. But to cry about taxes that you may never pay takes chutzpah to a new level.