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CTJ Says Businessman on Fiscal Commission Runs Business Avoiding Taxes

APR. 12, 2011

CTJ Says Businessman on Fiscal Commission Runs Business Avoiding Taxes

DATED APR. 12, 2011
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Dave Cote, Member of President's Deficit Commission, CEO of Corporate Tax Dodger Honeywell

 

Citizens for Tax Justice

 

 

April 12, 2011

 

 

A key business leader who was appointed to the President's fiscal commission and who is scheduled to appear this morning with several U.S. Senators to address the budget deficit, manages a corporation that has largely avoided paying U.S. taxes, according to public records.

Honeywell International, whose CEO Dave Cote was a member of the National Commission on Fiscal Responsibility and Reform, paid no U.S. corporate income taxes in either 2010 or 2009, despite having U.S. profits exceeding one billion dollars in each year. For example, according to Honeywell's recent filings with the SEC, in 2010, the company reported U.S. profits of $1.2 billion and rather than paying U.S. taxes, it recorded a tax benefit of $471 million, meaning Honeywell expects to receive that amount from the IRS.

While the company did report a loss in the U.S. in 2008, this loss does not explain its ability to aggressively drive down its tax rate over several years. Over the previous five years, 2006 through 2010, Honeywell reported net U.S. profits of $5 billion but paid a net of just $205 million in U.S. corporate income taxes. That's an effective U.S. tax rate of just 4.1 percent over the five-year period.

As a member of the fiscal commission, Dave Cote voted in favor of a broad plan that would rely on spending cuts to achieve two thirds of its deficit reduction goals and revenue increases to achieve just one third of that goal.1

While the details on the tax components of the plan were not entirely clear, sources inside the commission's process have suggested that corporations overall would not pay more in U.S. taxes than they do now.

In his State of the Union address, President Obama called on Congress to reform the corporate income tax "without adding to our deficit."

It is unclear why President Obama has not called on Congress to use corporate tax reform to raise revenue and reduce the deficit. A report issued by the Treasury in 2007, under the Bush administration, concluded that the share of profits paid in taxes is actually lower for U.S. corporations than it is on average for corporations of other OECD member nations.2

Many analysts have pointed to this finding as evidence that the U.S. should collect more tax revenue from its corporations.3

Cote's most recent public comments on the deficit crisis will come just weeks after observers called into question the influence of another corporate CEO, Jeffrey Immelt, after the New York Times reported on the tax avoidance of his company, General Electric.4 Immelt is the chair of the President's Council on Jobs and Competitiveness, which is to advise the White House on economic policy.

 

FOOTNOTES

 

 

1 Citizens for Tax Justice, "Statement on the President's Fiscal Commission Plan," December 2, 2010. http://www.ctj.org/pdf/deficitcommissionplan.pdf

2 U.S. Department of the Treasury, "Treasury Conference on Business Taxation and Global Competitiveness: Background Paper," July 23, 2007, page 41. http://www.treasury.gov/press-center/press-releases/Pages/hp500.aspx

3 For example, see Chuck Marr and Brian Highsmith, "Six Tests for Corporate Tax Reform: Reform Should Help Shrink Long-Term Deficits, Reduce Biases and Preferences in the Tax Code, and Discourage Tax Sheltering," Center on Budget and Policy Priorities, February 28, 2011. http://www.cbpp.org/cms/index.cfm?fa=view&id=3411 See also, Citizens for Tax Justice, "Revenue-Positive Reform of the Corporate Income Tax," January 25, 2011. http://www.ctj.org/pdf/corporatetaxreform.pdf

4 The organizations Progressives United and MoveOn have circulated an online petition calling for Jeffrey Immelt to step down from his position as chair of the President's Council on Jobs and Competitiveness. http://www.immeltmustgo.com/action/immelt-must-go?sc=immelt_gg1

 

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