The Artful Dodgers: Transportation
Moving things has long been a lucrative business, but ever since the nation’s first canals and railroads were built, it’s been known to be even more profitable when companies have access to subsidies and special treatment by the government. Whether it’s using a lobbying network to get the Defense Department to overturn the award of a contract to a rival or structuring corporate operations to avoid paying taxes, Boeing, Carnival, and Federal Express are leaders in using government to maximize profits.
Boeing is one of the nation’s most connected firms in Washington, D.C., so much so that from the 1950s to the 1980s, Sen. Henry Jackson (D-Wash.) was nicknamed the “senator from Boeing” for his efforts in moving government contracts to the Seattle-based company. Decades later, the company still has considerable pull on Capitol Hill, which it exercised in 2008 when it successfully appealed the loss of a $35 billion Air Force refueling tanker contract to Northrop Grumman. After an extensive lobbying effort, government auditors voided the contract, rebid it, and eventually awarded it to Boeing.18 These same lobbying efforts have paid off when it comes to Boeing’s tax bill. It received a $124 million tax refund from the IRS last year.19
Boeing’s success is tied to its high level of political involvement at the federal level. Between 2000 and 2010, the company’s PAC and its employees contributed more than $10 million to political candidates and committees, with almost ten percent of that ($923 thousand) going to members of the House Ways and Means and Senate Finance Committees. Boeing also spent $115 million during that same time period on lobbying the federal government.
Federal Express, whose presence in Washington is as ubiquitous as its delivery trucks, is experienced at exploiting loopholes to evade tax liability. Unlike its main rival UPS, FedEx classifies the men and women who drive its trucks as independent contractors, thereby obviating the company of the obligation to pay employment taxes. (In 2007, the IRS decided that the company could owe as much as $319 million for 2002 alone, but the decision was later withdrawn.) The company is also an expert at avoiding income taxes. When it recently reported $1.9 billion in profits, it used 21 different tax havens to trim its tax liability to less than .0005 percent of its income. 20
FedEx’s success in getting favorable tax treatment is due in part to its successful efforts to influence lawmakers on Capitol Hill. The company’s PAC and employees have given $8.7 million in federal campaign contributions over the past ten years, with $797,000 of it going to members of the tax committees in the House and Senate. The company also spent $71 million in lobbying expenditures during that same ten-year period.
Carnival Cruise Lines relies heavily on federal and local governments to keeps its ships safe from pirates and to build the port complexes required for its massive ships, yet the company also pays among the lowest total tax rates of any American corporation. According to the New York Times, “Over the last five years, [Carnival] has paid total corporate taxes—federal, state, local, and foreign—equal to only 1.1 percent of its cumulative $11.3 billion in profits.” The company is able to do this because its ships are legally registered in Panama, allowing the firm to shelter its profits there, though it also pays very little in Panamanian taxes.21
Carnival spends a tremendous amount of money trying to influence policymakers in order to protect its lucrative tax position. Over the last ten years the company’s PAC and employees have given $1.7 million in federal campaign contributions, with $131,099 of that going to members of the House Ways and Means Committee and another $100,300 to members of the Senate Finance Committee. The company also spent $1.6 million on lobbying expenditures during that period.
18. “EADS Won’t Protest Loss of Tanker Contract to Boeing,” New York Times (March 4, 2011). Available online: http://www.nytimes.com/2011/03/05/business/global/05tanker.html.
20. U.S. Uncut (accessed April 12, 2011). Available online: http://www.usuncut.org/targets/fedex.
21. “The Paradox of Corporate Taxes in America,” New York Times (February 1, 2011). Available online: http://www.nytimes.com/2011/02/02/business/economy/02leonhardt.html.