ICYMI: At Hearing, Warren Questions Millionaire CEO Abigail Disney on Broken Tax System and Calls for Wealth and Real Corporate Profits Tax
Washington, D.C. - Today, during Senator Elizabeth Warren's (D-Mass.) first hearing as chair of the Senate Finance Committee's Subcommittee on Fiscal Responsibility and Economic Growth, Senator Warren held a debate about tax fairness. Highlights:
Millionaire CEO Abigail Disney rejected earlier comments from billionaire Leon Cooperman, who declined to attend today’s hearing. Instead of “dumping on the American dream,” as Cooperman has said, Disney said a wealth tax like Senator Warren's Ultra-Millionaire Tax Act would allow her "to step up and pay [her] fair share."
The Walt Disney Company uses certain schemes to pay less in taxes like writing off the stock options that it awards its executives at a higher value than they report on their financial statements. Dr. Disney said “Disney’s been able to save about 1 billion dollars from 2008 to 2015 just by this one bit of trickery alone.”Senator Warren also questioned Dr. Disney about how much Disney has benefited from using accounting maneuvers that shift money they've earned in the U.S. to lower-taxed countries. Dr. Disney responded, "well, I do know that in the year 2013 they were able to save about $315 million dollars, 3 1 5 million dollars on their tax bill." Senator Warren then asked small business owner Cheryl Straughter how much of her business' income was shifted to a subsidiary in a lower-tax country. Ms. Straughter said, "I did not do that at all."
Senator Warren said that three of her proposals would together raise more than $6 trillion - a wealth tax, a real corporate profits tax, and legislation to provide a mandatory funding stream for the IRS to ensure that the wealthy and big corporations are paying their fair share - enough to pay for President Biden's American Jobs Plan, the American Families Plan, and still have more than $2 trillion left over.
Senator Warren wrapped up her hearing remarks by emphasizing that “tax reform is about choices to build an America that works for everyone – not just those at the tippy-top. It’s time to make the tax system finally work for working families.”
Senator Warren asked small business owner Cheryl Straughter about the kind of difference it would make to close multimillion-dollar tax loopholes and instead invest in our communities. Ms. Straughter said, “to the late people that are out here working day by day, paying taxes, this would make a tremendous difference in our communities. Whether they are communities of color, communities that are rural that might not be of color, when you think about the division between the haves and the have-nots, it is huge. . . [W]e need this in our community. We need the taxes to be equitable and equal among everyone.”
U.S. Senate Finance Committee's Subcommittee on Fiscal Responsibility and Economic Growth - "Creating Opportunity Through a Fairer Tax System"
Tuesday, April 27, 2021
Round 1 Questions
Senator Warren: Our tax system is broken. Everywhere you look, there’s one set of rules for most Americans and a different set of rules for the richest people. One of the most glaring examples of this is how the tax code treats wealth.
The typical white family has about $188,000 in wealth. For Black and Brown Americans, that number is far lower: just $36,000 for Latino families and $24,000 for Black families.
So, let’s just focus for a minute on what wealth looks like at the top.
Senator Warren: Let me start here. Dr. Disney, if you don’t mind my asking, how much wealth do you have? And how much did it grow last year?
Dr. Disney: I have about 120 million dollars, maybe more depending on how the stock market is on any given day. It grows at about 4 to 8 percent annually.
Senator Warren: Okay, thank you. And, so let’s just say -- you said four to eight percent -- let’s just say an average growth of about 6 percent. That would mean that your wealth grew by about $7 million last year. That is almost 60 times the total wealth of the typical American family.
So, let’s just for a minute talk about that increase. Do you know how much in taxes you’ll pay on your $7 million increase in wealth this year, Dr. Disney?
Dr. Disney: Not that much. It comes not from wages but from things like dividends, and capital gains, and interest and so forth. So all of that qualifies for a lower tax rate than income.
Senator Warren: Alright, and what about your total $120 million fortune – how much do you think you’ll pay in taxes on that this year?
Dr. Disney: Nothing, there’s no wealth tax so --
Senator Warren: Why not? Yeah.
Dr. Disney: -- there won’t be any taxes.
Senator Warren: So, thank you. As I’m sure you know, your situation is not unique. In fact, 99 % of Americans pay about 7.2% of their wealth in total taxes every year. But the top 0.1%, they only pay 3.2%.
The unfairness runs deep. Homeownership is the number one way that most middle class Americans build wealth, and those Americans pay property taxes every single year on that wealth. But if you are an ultra-millionaire or a billionaire, you have a million different kinds of assets -- stock, paintings, diamonds, gold, cash -- and you get to hang on to all of those assets as they appreciate without paying taxes and, if you decide to sell, you’ll have an army of lawyers and an endless supply of carefully-crafted tax loopholes to help you avoid paying taxes.
Now, I’ve proposed a tax on the wealth of the very richest Americans. This is a 2-cent tax on every dollar of wealth above $50 million, and a few cents more on every dollar above $1 billion. It would raise $3T in revenue that we could use to build economic opportunity for every person in America – from universal child care, to investments in education, to fixing our roads and bridges.
The tax would be paid by the wealthiest 100,000 families – including yours, Dr. Disney.
Poll after poll shows that Republicans, Democrats, and independents support this idea. Now, not everybody loves it.
Leon Cooperman, a hedge fund billionaire who was hauled up before the SEC for boosting his fortune by using illegal insider trading, is one critic. He has described my two-cent wealth tax as “dumping on the American Dream.” I invited him here to make his case to Congress today, but I guess he prefers to stay in the safe space of financial news networks where he can say whatever he wants and nobody pushes back.
Senator Warren: Dr. Disney, you agreed to appear today. So let me ask you: if my wealth tax was the law, you’d owe nearly one-and-a-half million dollars on your fortune. Of course, you’d still be fabulously wealthy and your wealth, which you said grew by about $7M last year, would still have grown, but only by about $5 and a half million. So let me ask, do you agree with Mr. Cooperman that this increase in your taxes would be, and I’m paraphrasing the word he used, dumping on the American Dream?
Dr. Disney: Well, my American Dream would be alive and well because the only effect a wealth tax would have on me would be to slow the growth of my wealth. It won’t be taking anything that I need. And my American Dream also includes a lot of people who aren’t currently having the benefit of things like roads and schools and parks and good healthcare, and so forth. So to me, my part of the American Dream is to step up and pay my fair share.
Senator Warren: Thank you. And, Ms. Straughter, if I can, let me ask you, a wealth tax would allow us to invest in the health and wellbeing of your workers. It would help us repair our roads so it’s easier to get to work. It would help level the playing field for small businesses like yours. How would that affect your ability to pursue the American Dream?
Dr. Straughter: Yeah, using the voice of small business, it would allow me to increase my staff, it would allow me to grow from a small size business to a medium size business. It would allow me to pivot. So right now, I’m in the headquarters of the Boston School Department and right now many of the employees are working from home, so I’m trying to increase my capacity as a caterer. So what would help is the ability to have my business positioned to go after more contract work.
Senator Warren: Thank you, that’s very helpful. President Biden has called for raising taxes on the wealthy and on giant corporations to fund his Build Back Better agenda. And I agree. A wealth tax raises more revenue from those most able to afford it than just about any other plan on the table. It would allow us to build back better and to make the American Dream a reality for millions of families.
Round 2 Questions
Senator Warren: So, our rigged tax code allows big corporations to report enormous profits to their shareholders, and, at the same moment, report little or no profits to the IRS. Of course, when giant corporations don’t pay taxes on their profits, somebody has to pay, and the tax burden falls mostly on working families.
That’s why I’ve proposed a Real Corporate Profits Tax to force the biggest and the most profitable corporations to pay their taxes. For every dollar in profits over $100 million that a corporation reports to their investors, they have to pay seven cents to the IRS. No tricks, no deductions, no loopholes – nothing fancy. President Biden has proposed something similar.
One of our witnesses today is Abigail Disney, a shareholder in the Disney Company. So let’s talk about how companies like Disney use the current tax system.
Dr. Disney, one scheme Disney uses to pay less in taxes is to write off stock options that it awards its executives at a higher value than they report on their financial statements. So, how much has Disney benefitted from deducting stock options?
Dr. Disney: Disney’s been able to save about 1 billion dollars from 2008 to 2015 just by this one bit of trickery alone.
Senator Warren: Wow. A billion dollar loophole that doesn’t require the company to do anything differently – just file some paperwork.
So, thank you. Ms. Straughter, you own a business – what about you? How much in stock options have you deducted on your tax return in recent years?
Cheryl Straughter: [laughs] Pardon the smile, zero. Now, we talked about a few words here today and I have not been able to do that.
Senator Warren: Okay, so let’s do another example.
Multinational corporations are able to use accounting maneuvers that shift money they’ve earned in the United States to lower-taxed countries, which artificially lowers their U.S. profits.
Dr. Disney, how much has Disney benefitted from these profit shifting schemes?
Dr. Disney: Well, I do know that in the year 2013 they were able to save about $315 million dollars, 3 1 5 million dollars on their tax bill.
Senator Warren: Okay, and Ms. Straighter, how much of your business’ income did you shift to a subsidiary in a lower-tax country?
Cheryl Straughter: I did not do that at all.
Senator Warren: Yeah. Now, many companies also lobby Congress for specific tax breaks. In other words, these companies write the tax rules that apply to them.
Dr. Disney, has Disney been lobbying members of Congress for any special tax credits?
Dr. Disney: Disney spends a lot of time lobbying Congress as well as local governments and anyone else who has a say in what they pay in taxes.
Senator Warren: Okay, and Ms. Straughter, how many high-paid lobbyists are walking the halls of Congress to find tax breaks that will benefit you personally?
Cheryl Straughter: I have not met one yet.
Senator Warren: You know, this is the problem. Our tax code is rigged in favor of giant corporations like Disney – and everyone else, people like Ms. Straughter, are paying for it. Disney isn’t alone. In recent years, dozens of profitable companies have gotten away without paying one cent in federal income taxes for the entire tax year — companies like: Amazon, Nike, FedEx, Chevron, Netflix, Eli Lilly, Starbucks, IBM, HP, Halliburton.
So, Professor Gamage, we’ve gone through a couple ways -- just a couple -- that big corporations use their massive resources to rig the tax system. Would a tax on book income, like my Real Corporate Profits Tax, ensure that these giant companies can’t get away with paying nothing in taxes?
Professor Gamage: Yes, absolutely, Chair Warren. Because corporations can keep two books, they can currently report high earnings to investors and to increase stock options for management, while reporting low earnings or no earnings to the IRS through tax shenanigans. The Real Corporate Profits tax would limit both of these sets of accounting games. To briefly give one more example, as I believe all three of the Republican invited witnesses noted, the tax books allow accelerated appreciation in full expensing, which could in theory be part of a good corporate tax system. The problem is it only works if you combine it with very strict limits on interest expense deductions, which we currently don’t have. When you have generous interest expense deduction limits and these other provisions as we currently do it’s not all that difficult for high paid corporate tax lawyers like my friends and former students in practice to design wasteful, complicated transactions, earning enormous fees to reduce tax payments on the corporate side without affecting corporate earnings. The Real Corporate Profits Tax would deter all of these financial tax accounting shenanigans to the benefit of the real economy and creating a level playing field.
Senator Warren: Well, thank you Professor Gamage. This is why the president’s Made in America Plan is so important. It includes no-brainer policies like raising the corporate tax rate and cracking down on overseas profit shifting.
But it also contains a backstop similar to my Real Corporate Profits Tax.
As President Biden has said, we have firemen and teachers paying 22% while these giant companies pay nothing – “that is wrong.”
Yes, that is wrong. And Congress can change it.
Senator Warren: So, let me ask you. Ms. Straughter, what kind of difference would it make to close these multi-million dollar tax loopholes, and instead invest that money in communities like yours?
Ms. Straughter: I think if more members of Congress walk the streets as I do as ordinary. And not to say that Congress is not ordinary, but to the late people that are out here working day by day, paying taxes, this would make a tremendous difference in our communities. Whether they are communities of color, communities that are rural that might not be of color, when you think about the division between the haves and the have-nots, it is huge. To not pay taxes is something that should not occur. To hide your tax money should not occur. To have multiple levels of ways of paying and not paying taxes should not occur. So we need this in our community. We need the taxes to be equitable and equal among everyone.
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