Representation without Taxation

OSPIRG Foundation

Two years ago, the Supreme Court’s Citizens United vs. Federal Election Commission decision opened the floodgates to corporate influence in our political system by allowing corporations to pour money from their treasuries into the campaign coffers of political candidates. This report examines one area of policymaking where corporate money already had an enormous impact even before that decision: tax law. 

This report compares corporations’ lobbying expenditures with the tax breaks they receive. In addition, this report examines one particular way in which corporations’ ability to successfully lobby for tax breaks is even greater than this data can demonstrate by exploring corporate tax avoidance using offshore tax havens. One can only conclude that corporations’ influence over tax policy will become even greater than what is described here if the Citizens United decision is allowed to stand.

For too long, large corporations have wielded far too much unchecked political power in our country. While they provide valuable public services and goods, too often powerful corporations use their influence to gain special favors in the law and fend off basic public interest protections that might threaten their profit margins. This influence rarely takes the form of simple payment for favors. It rather works more indirectly—through lobbying and campaign contributions—and is amplified by the resources and economic power of corporations.

This report covers 280 corporations that make up most of the Fortune 500 companies that were consistently profitable in each of the last three years. These 280 companies spent a combined total of $2 billion over the 2008-2010 period on federal lobbying and received a total of $223 billion in tax breaks during those years, making a mockery of our tax code, which has long been written in their favor.

The most egregious examples are 29 companies that avoided federal corporate income taxes entirely during this period, plus an additional company that paid less in federal corporate income taxes than it did for lobbying Congress. These 30 companies collected $67.9 billion in tax subsidies while spending nearly half a billion dollars on federal lobbying.

While lobbying is only one avenue of corporate influence, we highlight it because it is one of the more thoroughly documented. Federal laws require that any entity that lobbies report quarterly on its overall lobbying expenses and give a brief summary of who lobbied which branch on what issue. Although this reporting is hardly a complete picture of corporate influence, we chose not to examine campaign contributions, another common form of influence, because current reporting standards for contributions are entirely insufficient.

Tax legislation is particularly vulnerable to the influence of powerful corporations because the countervailing forces of democratic accountability are particularly weak in this area. Most Americans pay little attention to the arcane rules of corporate taxation. Although special tax giveaways have the same bottom- line effect on the budget as direct spending, they are subject to far less democratic oversight. Proposals for special tax favors are usually not considered against competing spending proposals or with consideration of how other ordinary taxpayers must pick up the tab. And unlike a spending item, once tax giveaways are on the books, they usually don’t need to be approved each year. Instead they typically remain in effect indefinitely, sucking away at government revenue like a tape worm that remains unseen.