The Hightower Report

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Corporate Tax Cheats

Would you pay $720 for a jar of salad dressing? It's from Brazil, but still .... How about buying tweezers from Japan at $4,896 each?

These are not more of the infamous Pentagon purchases that occasionally make the news, but purchases that U.S.-based corporations routinely make from their own foreign subsidiaries. What we have here is a tax scam. It amounts to a massive money-laundering scheme in which corporations "buy" supplies and services from their overseas selves, grossly inflating the price they pay. These phony purchases move huge sums of corporate profits out of our country and into the accounts of their foreign affiliates, thus escaping U.S. taxation on those profits.

Scamming Uncle Sam has become very big business, according to two highly respected finance professors who've been tracking this annual rip-off for a decade. Simon Pak and John Zdanowicz calculate that this "transfer pricing," as they term it, cost our public treasury $53 billion last year alone, and it's on the rise. Wow -- $53 billion would pay for a lot of health care, bridge and road repairs, alternative energy research, and other crying needs that the politicians keep telling us there's no money to finance!

Instead, this $53 billion was pocketed by the tax thieves. The transfers go two ways. In addition to buying from foreign subsidiaries, U.S. corporations also sell products to their overseas affiliates at ridiculously low prices, such as selling missile launchers to an Israeli subsidiary for $52 each.

This corporate fraud is another of the joys of globalization. Multinational firms play these global shell games to rip-off We the People -- yet the treasury department doesn't even track their international tax-evading transactions.

Senator Byron Dorgan is on the warpath against these corporate cheats. To back his effort, call 202/224-2551.

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What Would Willie Do?

Is it possible that Tom Ridge doesn't actually exist, that he's really just an actor from Saturday Night Live doing a parody of himself, or that maybe he's even a computerized animatron created by Disney?

Real or not, Ridge is our current Homeland Security czar, and it's a hoot to watch him furrow his brow, purse his lips and, in a deep and solemn voice, make absolutely silly pronouncements about how his agency is Johnny-on-the-spot to alert us to any terrorist threat and to make us safe from al Qaeda evildoers. Who does he think he's kidding?

Maybe Congress, which is putting up a $37 billion a year façade called the Department of Homeland Security. The main security that it provides is for politicians so they can pretend that they've done something to protect us. The core of DHS's terrorism warning system, however, is nothing more than a kindergarten-level, color-coded threat barometer. At present, says Ridge with a straight face, we're at yellow. But, he explains, still deadpan, there are yellows and there are yellows: "We are at the upper end of that [yellow] range. Depending on the information we have available we could, down the road, raise it to orange."

There. Feel safe? What the hell is he talking about? Do we hide under the bed, get in the closet, flee to the woods ... what? We're the richest, most powerful, most technologically advanced nation on earth, and all we get is this dour-faced caricature of a Homeland czar occasionally popping out like some bird from a cuckoo clock, saying: Warning citizens, it's a mauve Monday.

How about something a bit more descriptive? Willie Nelson says he once went to a doctor to get his thumb treated, and as the procedure began, the doc warned that there'd be some pain. Wait, said Willie, is this going to be "grit-your-teeth" pain, or "wet-your-pants" pain?

Let's boot Ridge and hire Willie! I believe he'd take the job for less than $37 billion ... and he might even sing the warnings to us.