As I sit here in Germany’s financial capital, a few hours by train from where my forbearers set out for the United States a century ago, I’m remembering what antitax Americans are forgetting: Living in a stable and free society that supports economic initiative isn’t a given.
Those who think that U.S. corporations and wealthy individuals already pay too much in taxes and get too little in return are taking for granted social order and economic opportunity. Keeping the peace costs money, and paying police, fire and other emergency personnel requires tax revenue. Just ask U.K. Prime Minister David Cameron, whose plan to make substantial cuts in London’s Metropolitan Police budget now looks ill-timed, amid pictures of looters making off with stolen goods.
U.S. corporations benefit every day from operating in an environment where bricks aren’t flying through windows and gunshots aren’t going off in parking lots. Civil unrest can be expensive, as executives at Sony Corp learned this week after its London warehouse went up in flames.
It also costs money to educate a workforce, something that also seems glossed over by those who want to slash money for federal education grants.
When I first arrived in Germany, people asked me whether the news they saw on TV is true, that “everyone in the United States is lining up for food stamps,” as one Frankfurter put it. Their questions were a reminder that even though Germany’s tax burden is higher than that in the United States, its economy weathered the global recession of 2008-09 better than America’s did, and its unemployment rate today, at 7%, is significantly lower than ours at 9.1%.
People like Grover Norquist, who claim that high taxes are the root of all our economic problems, have no answer for facts like these.
Those who want to lower business taxes often say that the U.S. corporate tax rate of 35% is higher than the 25% average of the world’s developing economies. But that argument ignores the long list of tax loopholes that allow U.S. companies to pay much lower rates in actuality.
Go down the list of second-quarter earnings reports for companies in the S&P 500 Index and stop when you get to one that paid 35% of earnings. That might take a while.
What the United States needs isn’t more tax cuts, but tax reform to eliminate the many loopholes that create an uneven playing field.
Tax corporate cash
Given the sluggish pace of U.S. economic growth, perhaps such reform could include a tax on the enormous amounts of cash that American companies now have sitting on their balance sheets.
Non-financial companies in the S&P 500 are sitting on more than $1 trillion in cash right now — an absurd amount given that many of those same companies are laying off workers. Some estimates put the total closer to $2 trillion.
Forcing corporations to spend that money, either by hiring workers or paying investor dividends, would go a long way toward spurring growth.
When I hear Norquist — along with the candidates active in the tea-party movement that are too weak to resist signing his so-called loyalty oath — complain about actually having to pay for government services, I think we’ve come to take those services for granted.
I also think such whining is the exact opposite of the can-do attitude of the waves of immigrants who helped build the U.S. economy and continue to do so today. I’d like to introduce them to some of the start-up CEOs that I interview every week in Silicon Valley.
During the past few months, I’ve been writing a series of profiles on tech entrepreneurs for the site Entrepreneur.com. Neither I nor my editors planned it this way, but given that recent immigrants tend to be among the hardest-working Americans, perhaps it’s no surprise that none of the first four that I’ve written about are native to the United States.
These executives are people who, like generations of immigrants before them, came to the States and put their energy into building companies, rather than sitting around complaining how terrible a place this is to do business. They also, by the way, create jobs.
They come from across the globe: Victoria Ransom and Alain Chuard of Wildfire Interactive grew up in New Zealand and Switzerland, respectively; Mikkel Svane and his Zendesk co-founders hail from Denmark; Rahim Fazal of Involver is from Vancouver, B.C.
Yet all of them came to the United States to build their businesses. Why would they do that if it’s so hostile to their efforts, as the antitax extremists claim the country to be?
The answer is it’s not. On the contrary, America’s still the most attractive country for entrepreneurs. Keeping it that way costs money — something that tax haters seem to forget.
By: John Shinal, MarketWatch, August 12, 2011
August 13, 2011 Posted by raemd95 | Businesses, Capitalism, Class Warfare, Conservatives, Consumers, Corporations, Democracy, Economic Recovery, Economy, Education, Freedom, GOP, Government, Ideologues, Ideology, Immigrants, Liberty, Middle Class, Politics, Republicans, Right Wing, Small Businesses, Tax Evasion, Tax Loopholes, Taxes, Teaparty, Unemployed, Wall Street, Wealthy | Anti-Tax, Civil Unrest, Corporate Earnings, David Cameron, Free Societies, Government Services, Grover Norquist, London, Patriotism, S&P 500, Social Order, The Pledge, Unemployment Rates, United Kingdom, Workers | Leave a Comment
The United States is simply not at risk of default. Default is impossible for a sovereign currency issuer.
The Standard & Poor’s rating firm should be embarrassed. If there is any political judgment at work here, it is S&P. falling for politically motivated scare mongering. But given its track record with mortgage securities and collateralized debt obligations, why should we be surprised to see a rating agency relying on conventional wisdom rather than analysis?
The whole premise of the rating is incorrect. The U.S. may eventually experience unacceptable levels of inflation, but the experience of Japan shows that stop-and-start fiscal stimulus is more likely to result in protracted near-term deflation.
Every time Japan tried to lower its public-debt-to-gross-domestic-product ratio by cutting spending, the resulting drop in economic activity actually made that ratio worse. We are seeing the same results in Ireland and Latvia. The United Kingdom tried the same experiment 10 times in the last 100 years, and every time it got the same results: cutting spending to reduce budget deficits results in a fall in G.D.P. that makes the debt burden worse, not better.
The remedy should be to get private sector debt loads down via encouraging debt restructuring and write-offs, and using well targeted fiscal stimulus to offset the impact of those efforts. But S&P instead would have us do the economic equivalent of trying to cure an infection by using leeches.
Misguided cures killed a lot of patients and are killing a lot of economies.
By: Yves Smith, Writer for Naked Capitalism. Original article appeared in The New York Times, April 18, 2011
April 19, 2011 Posted by raemd95 | Capitalism, Congress, Conservatives, Corporations, Debt Ceiling, Debt Crisis, Economic Recovery, Economy, Federal Budget, Financial Institutions, Financial Reform, Government, Government Shut Down, Ideology, Lawmakers, Lobbyists, Media, Mortgages, Politics, Pundits, Standard and Poor's | Debt, Debt Default, Financial Institutions, Financial Ratings, GDP, Inflation, Japan, Markets, Private Sector Debt, Securities, United Kingdom | Leave a Comment
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