The result is, you and I report our wages -- all of it. Nothing we can do about that. But companies say, "Hey, we're not telling the IRS we made all this money, because we don't want to pay taxes on it."

Is that problem worse, say, since the mid-1990s, late 1990s?

Oh, it's been getting worse for about a decade, but it's really accelerating now. The sheltering business, the accounting firms are just marketing these to big companies, and nobody seems to have any sense of responsibility to help pay for the country anymore.

If you look at that historically, say, you go back to the World War II, Korean War period, can you see a difference between the attitude towards paying corporate taxes today from historic times in America?

Oh, yes. Back in World War II, of course, everybody had to chip in. We had rationing. We had very high tax rates. Roosevelt told the public, "Everybody's going to have to help pay for this, or they're going to be over there fighting in it." That's what we did, and we did it all together. That attitude kind of stuck around through the 1950s and mostly the 1960s.

But starting in the Nixon administration in the 1970s, things started to go in an opposite direction. Under Reagan, it got somewhat worse, and then -- boy.

This sheltering problem -- there [were] a lot of legislative proposals to deal with it from the Clinton administration saying, "Hey, we have to stop this. It's getting too bad. You give us the authority to do it." And the Republican Congress kept saying, "Oh, no. We like corporate tax sheltering." Now that they're in charge of everything, it's become like a free-for-all.

I'm interested. You said in World War II, there was kind of a sense of solidarity. Everybody kicked in. You either went to the front, or you did something on the home front. We're at war now. There's a war on terrorism. There's a war in Iraq. What's happened?

This is one of the strangest things, isn't it? Every other time we've gone to war, the government has raised taxes to help pay for it, and it has in particular asked the wealthier people and the corporations to pay more, because they're the ones that are going to make the most money off the war, in part, and because they have the most stability.

Right now, we're at war. We're not asking anything of these people. We're cutting their taxes. We're giving them new loopholes. We're saying, "Your shelters, you can just keep doing them." It's very strange. I don't know. What ever happened to "proud to be an American?"

"Proud" in the sense of kicking in, doing your share?

Right. Proud of the country, and everybody has to help. Now it's everybody for himself -- at least among the corporations and the upper-income people.

I'm going to ask you about a couple of corporations in particular. Take a bank like First Union. … How important to them is leasing and the tax benefits of leasing?

From 1997 to 1998, First Union reports in its annual report that it saved close to $1.5 billion in taxes from leasing. That was enough to cut its tax rate in 1998 to only about 6 percent.

Instead of 35 percent?

Instead of 35 percent, instead of 20 percent, instead -- it was almost down to nothing.

To do that, they must've been big in the leasing business.

According to their report, most of their tax savings, most of their loopholes involved leasing -- over the two-year period, 1997 to 1998, $1.5 billion in tax savings from leasing.

What does that mean? About $5 billion in leasing business or something like that?

Right. They would have to have write-offs of around $4 billion, $5 billion to do that. …

Was First Union particularly aggressive in its use of tax shelters, particularly leasing?

If you look at big corporations as a whole, in 1998, they paid about 20 percent of their profits in taxes. First Union is down around 6 percent. So, yes, they were pretty aggressive at sheltering.

And leasing was a key?

Leasing was central to their tax sheltering strategy as far as their annual report reveals, yes.

Now, let's look at Wachovia, which is another big bank. By 2001, it's absorbed First Union. Let's come up [to] 2000, 2001, 2002 -- more recent years. How important for a bank like Wachovia was leasing, again, in terms of tax benefits?

Wachovia, amazingly, in 2002, even though it reported $4 billion in profits, reported that it didn't pay any taxes and, in fact, got a tax rebate from the government of about $160 million.

How'd they work that out?

They worked it by sheltering all of their income, and then having excess shelters that they carried back and got a refund of what little taxes they'd paid in the past. …

What was the tax write-off? You said they got down to zero, got down to less than zero taxes. How much were they actually writing off from leases at Wachovia?

They said they saved $3 billion in taxes over the last three years from leasing, and that implies that they took tax write-offs of $9 billion or $10 billion. So, huge write-offs. … These guys are just complete freeloaders on the rest of us.

Who do we hold accountable for this? Who is responsible? Who can fix this?

Responsibility -- you can start with our legislators and our president, who haven't done anything about it. Then you can move right along very quickly to the lobbyists and the accountants -- who are the same people -- who lobby for the law changes, and then exploit every loophole they can create. That's where the blame is -- a lot of people who lost their moral compass, I'd say.

But in particular, you said there've been proposals made. The Clinton administration made some proposals to deal with tax shelters in the year 2000. Sen. Grassley, Republican of Iowa, chairman of the Senate Finance Committee, has proposals for doing tax shelter reform. So you've seen the Clinton administration, you've seen Republicans in the Senate and Democrats pushing for tax shelter reform. Where's the stumbling block?

The big stumbling blocks are in two places -- the chairman of the Ways and Means Committee, Bill Thomas, and President Bush. Both of those have just pushed very hard to maintain the shelters the way they are. Every time there's a reform proposal, both of them nix it. So that's where I'd put the blame -- House Republicans, led by the chairman of the Ways and Means Committee, and the White House, led by President Bush.

They're stonewalling reform?

Absolutely. … The accounting firms are huge donors, and they get what they want.

Who are the big winners in the corporate tax shelter game?

The winners, I guess, are the companies who get away without paying taxes. The losers, obviously, are the rest of us, who have to pay the taxes for them, or don't get the government services, or run gigantic budget deficits that we have to pay for in the future. Big costs for the rest of us; you know, $180 billion a year is a big number.

If it's $180 billion a year that corporations are not paying, that they would be paying if they'd been doing what they've done historically, that's a big amount of money. Why isn't the public upset about this? Why isn't this more of an issue? When I listen to you, it sounds so clear. Why doesn't the public understand this?

Once in a while, the press will cover it, and the public will get excited about it. When we found out companies were renouncing their citizenship and moving to Bermuda, that got a lot of people upset. So there were bills proposed in Congress and ready to go, and then they were stonewalled and blocked by President Bush and House Republicans. You can't keep the public's interest forever. They probably think something was done. But it wasn't.

I'm just wondering whether or not there is something [in] the complexity of the tax code. I mean these transactions themselves, the sheltering -- they're buried in mounds of paperwork. It's not like it's not like petty graft. It's not like we can actually see somebody's hand in the cookie jar. You have to be pretty smart, and you have to pay a lot of attention to a lot of tiny little details in paperwork that buries and hides things. I just wonder how difficult it is to get this issue surfaced and understood by the public.

It's always hard to get an issue in front of the public. But in this case, all the paperwork isn't the issue. The issue is the companies aren't paying the taxes they ought to pay on their profits, and the public can understand that. They just need to be reminded every once in a while that, "Hey, that big brand-name company that you think so highly of turns out to be a freeloader and [is] making you pay its taxes for them."

The public doesn't like that. When you're being ripped off, it doesn't make you feel good, and that's where the public stands right now with corporate taxes.

The public's being ripped off?

Absolutely.

What should ordinary taxpayers do? You're head of an organization called Citizens for Tax Justice. If you believe in tax justice, what should you do, if you're an ordinary citizen?

Well, it used to be -- whether it was Republicans or Democrats in office -- that if we could expose this kind of a scandal or something similar, and get it out in the press, the public would get angry; and the politicians would do something about it.

But the current people in power are not embarrassable. You tell them that, "Hey, all these big companies are paying nothing." They say, "Good. That's what we are here for." So I would say, "What can the public do? Regime change [is] probably all we can do. There are some Republicans in the Senate, like Chuck Grassley, who want to do the right thing, so keep him there. But people that say, "I'm going to move all the taxes under middle-income wage earners and take them off the corporations?" Let's get some new people. …

The corporations argue that they've got to have lower tax rates in order to be globally competitive; that we're a high-tax country, and we're hurting ourselves globally if we don't cut the taxes and allow them to have these various loopholes and shelters and tax breaks.

We used to be among the highest in the world in our corporate taxes -- back in the 1960s, for instance. We were higher than most countries in Europe, most other developed countries.

But these days, we're the lowest in the industrialized world, except for Mexico. France, Sweden, England, Japan, Australia -- all the industrialized countries are much higher than we are. We have the lowest corporate taxes in our history and in the world.. …

So what you're saying is it's just a bunch of garbage what we're being told?

Absolutely. You can find a way to twist any statistic, I suppose, if you're the Heritage Foundation, or the Cato Institute, or a lobbyist for Ernst & Young. But the truth of the matter is that our taxes -- our corporate taxes -- are second-lowest in the industrialized world. … I don't know how they make this argument.

That triggers another thought. You've presented a picture of [corporate] taxes being anywhere between 25 percent and 40 percent in the era of World War II, in the 1950s and the 1960s. Now we're talking about it being down to 7 percent, something like that. Do you see, over time, a deliberate campaign to lower the corporate tax rate gradually and gradually have it wither away?

Certainly, the lobbyists for the tax-avoiding companies would like to see the corporate tax wither away. Certainly, some ideological economists and members of Congress would like to see it wither away.

On the other hand, most Americans think that corporations ought to pay taxes just like the rest of us. Most politicians have to respond to what the public wants, or hide it - which is what they do now. So you don't see them saying, "We're going to cut the corporate rate from 35 down to 7 percent." Instead, you see them saying, "We're going to give companies incentives to do very good things," that will have the same effect. …

Is this sort of a "five easy pieces" sort of approach -- that you gradually get rid of the taxes on corporations by allowing rapid depreciation, write-offs, exempting overseas earnings, allowing loopholes, protecting shelters and that kind of stuff? You never say directly what you're engaged in. Do you think this is a deliberate campaign to hide the objective, which is to get rid of corporate taxes by doing it piecemeal? Do you think there's something there going on that's purposeful?

There's no doubt that the people know what they're doing. So when President Bush proposes to wipe out a third of the corporate income tax through new write-offs, he knows that that's going to be a big tax cut for corporations that will do what it does. Same with Bill Thomas, the chairman of the Ways and Means Committee in the House of Representatives. They know what they're doing, and they have an agenda to get rid of taxes on big companies. I think some of them do, yes.

Without telling us directly.

Right. …

You talk about corporations losing their moral compass. What do you mean?

In the olden days, we had a kind of a sense of solidarity among each in the country, where we all understood that, "We're fighting World War II. We all got to chip in to help pay for us. Those of us who have the most have to chip in the most." That attitude was one that carried over into the 1950s and the 1960s.

We really felt that way, and you could see the corporations and their leaders feeling that way. You know, President Kennedy proposed a tax break for corporations in the 1960s, and the corporations testified against it. They said, "A), first, we think this is stupid, but B), we ought to pay our fair share."

Boy, you don't hear that now. Something's changed. That's what I mean when I say that this idea that "We're in it together" doesn't seem to apply to people who design tax shelters, or corporate executives who buy them, and that's too bad.

And we're at war again.

Yes, we're in a war, and a lot of these big companies don't want to help support it. They don't think that they should be on the hook for anything -- whether it's the war, whether it's education, whether it's roads. All the things they benefit from, they don't want to help pay for.

Some people argue that there just ought not to be the tax on capital. They just ought to tax income. What's your take on that?

There are those who believe that all the taxes should be on wages and wage earners, and that people that make their money from dividends, interest and capital gains and corporate profits shouldn't have to pay taxes. There are people who think that.

That was the prevailing view in the country in the 1980s. But we got over it. We figured out that if you don't have the wealthy people chipping in something reasonable in taxes, that we can't have the country we need. You know?

If you look, the top fifth of the population makes most of the money. If you exempt most of their income from tax, you're just not going to be able to afford to run the kind of country we need. We won't have the defense we need. We won't have the education or the roads. So you can't do it in a way that doesn't end up making America a much worse place than it is now.

We've talked about leasing -- Wachovia, in recent years, literally having zero taxes, getting a rebate from the federal government, because it's found tax shelters. We have talked about, a few years ago, First Union having [a] 6 percent tax rate. How typical is that? Are those aggressive? Are they just at the forefront of where a lot of other corporations want to go? How much is the competitive pressure on corporations -- the tax directors, the financial officers, chief financial officers, the CEOs -- to get their effective tax rate down to match the competition? … What's the environment that's developed, in terms of reducing your corporate tax rate on each company?

You know the old saw that one bad apple spoils the whole lot. There's no doubt that when you get some rotten companies and rotten tax advisors getting them to cheat on their taxes -- or at least avoid their taxes -- that other companies are going to look into it. That's one reason we need to go after this now, because the more it spreads, the harder it will be to fix.

There are some companies still paying reasonable amounts -- 30 percent, 33 percent in taxes. But they're looking around and over their shoulder and saying, "Hey, this company in the same industry as I am is paying way less than me. What's wrong with our tax department?" So it's one reason we ought to close the shelters.

Does it look as though, if you're a company who's paying 30 percent, 35 percent of your taxes, are you a sucker? Do people start figuring, "Hey, our competitors are paying 5 percent, 10 percent, 15 percent, or getting a rebate? We're suckers to pay the full rate?"

I like to think of the companies that are paying a reasonable rate in taxes as patriotic American companies, and the ones that aren't as freeloaders who shouldn't be doing what they're doing. But as long as you have people and companies that are going to do the wrong thing if allowed, you have to have laws against it. That's what we need right now -- laws that get the tax code back in order. …

Let me just ask you the question simply. In terms of corporate taxes and the way people pay them, is there a level playing field today?

If you look at companies, within the same industries, [you'll see] some of them paying fairly high rates and others paying virtually nothing. So it's not very level, no. It's as un-level as you could imagine.

Sometimes you wonder. You get these "free marketeers," as they call themselves in Congress, who want everything to be level and fair and even. Then they pass laws that say, almost randomly, [that] some companies don't pay taxes and others do.

So there's not a level playing field? Not even close.

There isn't. No. There's not a level playing field. A level playing field is a good thing, because it means that market forces and consumer demand decide what the products are that are made. [If] you start subsidizing one thing over another, hey, pretty soon we're just going to be the Soviet Union.