CAT should be praised, not criticized
We are a tax avoidance nation.
Almost everyone employs some strategies to avoid paying more taxes than they should.
So it’s hardly news to anyone, except Sen. Carl Levin, D-Michigan, that Caterpillar Inc. may have employed some strategies to reduce the amount of federal taxes it pays.
Levin, chairman of the U.S. Senate Permanent Subcommittee on Investigations, held a five-hour hearing this week to allege that the Peoria-based company was avoiding about $300 million in federal taxes a year by using a Swiss affiliate to sell replacement parts. Levin admitted that Caterpillar didn’t break any laws, but that didn’t stop him from what some described as an “inquisition.”
Caterpillar sells many of its American-made products to foreign countries. It makes sense to have an overseas affiliate that sells replacement parts. There are about 400 employees in the Swiss affiliate.
And Caterpillar pays plenty of taxes. In her testimony before Levin’s committee, Julie Lagacy, Caterpillar’s vice president in charge of its financial services division, said the company pays an effective income tax rate of 29 percent, the top bracket paid by multinational corporations. In the last three years, she said, the company has paid federal taxes of $1.8 billion and $645 million in state and local income, property and sales and use taxes over the same period.
She also noted that the company has 52,000 employees in the United States and facilities like the Decatur plant, which is the only place in the world where Caterpillar makes huge mining trucks that are used all over the world. Selling American-made equipment to other countries is good for the economy.
Lagacy also told Levin’s committee that at Caterpillar “We pay the taxes we owe, not more.”
Levin said still criticized Caterpillar for what he called “tax avoidance.”
“Tax avoidance through the use of dubious tax loopholes costs the U.S. Treasury tens of billions each year,” Levin said.
There isn’t an issue here. Caterpillar may have used the federal tax code – approved by Congress, just in case Sen. Levin forgets who is responsible – to reduce its tax burden. Is there anything wrong with that? Isn’t it the job of a corporation to maximize profits for its shareholders and to employ as many people as possible? How many jobs would Caterpillar have to eliminate to pay another $300 million a year in taxes?
If Sen. Levin wants to change the tax code, then he should propose legislation to do just that.
Caterpillar pays a lot of federal taxes, exports American-made goods, employs a lot of American workers and is a good corporate citizen. It seems that Sen. Levin should be praising Caterpillar instead of criticizing.
