According to Jesse Drucker of Bloomberg today:
Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.
Google’s income shifting — involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” — helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.
Of course, Google executives were among Barack Obama largest campaign contributors. CEO Eric Schmidt stumped for candidate Obama, and he and other senior executives contributed $150,000 to help pay for the inaugural celebration.
Obama rails against “loopholes” that allow corporations to escape taxes on foreign earnings. He demonizes bankers and he wants to raise taxes on “the rich.” In reality, Obama is the best friend the wealthy have ever had. His tax hikes will not impact the very rich very much because they can arrange Google-style tax avoidance strategies. Obama has bailed out Wall Street where buyout artists like KKR (formerly Kohlberg Kravis Roberts) exploit something called a 754 election, which produces ultra-low tax rates.
Instead of soaking the rich, Obama is draining the upper middle class. Most of the entrpreneurial, professional and managerial class of this country will never be rich but will soon see at least half of their income taxed away. Obama has offered an implicit, Putin-like deal with the rich: you will be left alone if you do not stand in the way of my plans for socialism for everyone else.
Google is no stranger to hypocrisy. Its data centers consume huge amounts of electricity, but it is at the forefront of “green” initiatives that will constrict supply and raise electricity rates for ordinary consumers. When the company was encouraging its employees to drive fuel-efficient cars, Google founders Sergey Brin and Larry Page bought a Boeing 767-200 “party jet,” which burns about 1,550 gallons per hour.
I am all for lower corporate tax rates, as long as they are the same for everyone. Too bad Google hasn’t embraced that.
Byron York reports today in theWashington Examiner:
On the day it was reported that Google uses income shifting techniques known by such arcane names as the “Double Irish” and the “Dutch Sandwich” to avoid paying taxes on its foreign profits, President Obama attended an intimate, high-dollar fundraiser at the Palo Alto, California home of a top Google executive. He didn’t mention Google’s tax tricks, according to a White House transcript of his remarks.
The Democratic fundraiser, which guests each paid $30,400 to attend, was at the home of Marissa Mayer, one of Google’s best-known executives. At the lavish home, which was “decked out in Halloween decorations on steroids,” according to a White House pool report, Obama spoke briefly and had nothing but praise for Google. He spoke fondly of his first visit to the company when he was an Illinois state senator. And of his work as president dealing with the recession, he said, “My task over the last two years hasn’t just been to stop the bleeding. My task has also been to try to figure out how do we address some of the structural problems in the economy that have prevented more Googles from being created…” (Although founded in the 1990s, Google went public and prospered enormously in the years that Obama and his fellow Democrats characterize as an economic disaster.)