To Fix The Budget Deficit, Raise Corporate Taxes
Washington is a town currently gripped by deficit hysteria. Various commissions and congressional “gangs” have formed (and broken up) with the goal of crafting a plan to bring the nation’s budget into balance. Even the media has been sucked into this vortex, dedicating far more of its time to covering the deficit than other economic issues, such as unemployment.
At the same time, both parties seem to agree that the nation’s corporate tax code needs to be reformed. President Obama and House Budget Committee Chairman Paul Ryan each dedicated a portion of their respective budget plans to overhauling the federal corporate income tax, which is high on paper, but so riddled with loopholes, deductions, and outright giveaways that few corporations pay the full statutory rate (and several corporations pay no corporate income tax at all).
This, then, should be an excellent opportunity to kill the proverbial two birds with one stone: cleaning up the corporate tax code, lowering the corporate tax rate, and still raising more revenue that can be put towards deficit reduction.
But no.
Despite all the hyperventilating over the deficit, both Republicans and Democrats have said that they want corporate tax reform to be revenue neutral, meaning no more or less revenue will be raised by the new system than was raised by the old. President Obama and Treasury Secretary Tim Geithner have each extolled the virtues of deficit-neutral corporate tax reform. But if this is actually the road that’s taken, it will constitute a colossal missed opportunity.
At the moment, corporate tax revenue has plunged to historic lows. In 1960, the corporate income tax provided more than 23 percent of federal revenue; the Office of Management and Budget estimates that it will provide less than 10 percent this year.
During the 1960s, the United States consistently raised nearly 4 percent of GDP in corporate revenue. During the 1970s, the total was still above 2.5 percent of GDP. Now, the U.S. raises less than 1.5 percent of GDP from the corporate income tax. As the Congressional Research Service put it, “Despite concerns expressed about the size of the corporate tax rate, current corporate taxes are extremely low by historical standards.”
The United States effective corporate tax rate is also low by international standards (though the 35 percent statutory rate is the second highest in the world). There are plenty of reasons for this drop, but chief among them is the proliferation of loopholes and credits clogging up the corporate tax code (alongside the growing use of offshore tax havens and the ability of corporations to defer taxes on offshore profits indefinitely).
Huge corporations, such as ExxonMobil, have recently had years where they paid literally nothing to the U.S. Treasury, despite making huge profits. The New York Times made waves by finding that General Electric paid no federal income tax last year, instead pocketing hundreds of millions of dollars in tax benefits. Mega-manufacturer Boeing has done the same, paying no federal taxes in 2009 while collecting $132 million in tax benefits. Google last year had a 2.4 percent effective tax rate, while California-based Broadcom’s rate was just 1.4 percent, far below the rate that the average American pays.
The Treasury Department estimated in 2007 that corporate tax preferences cost $1.2 trillion in lost revenue over a decade. So there is ample room to remove credits and deductions (like those that benefit, amongst others, hugely profitable oil companies and agribusinesses), lower the statutory rate, while still bringing in more revenue. Some companies would see their taxes go up, but others would see their tax bills drop, and the corporate tax code would be more fair, efficient, and competitive, while ensuring that all corporations pay their fair share.
As the Center on Budget and Policy Priorities put it, “corporate tax reform is a solid candidate to make a contribution to fiscal improvement … Taking a major revenue source off the table for deficit reduction at the outset would be ill-advised.” Indeed, with corporate profits skyrocketing—up 81 percent over a year ago—and corporations sitting on trillions in cash reserves, there is no reason that corporate tax reform should be done in a way that is deficit neutral, besides the fact that raising more revenue will be politically difficult, as corporations will likely throw their considerable lobbying weight against such a move. But in the end, failing to raise additional corporate tax revenue will simply shift more of the deficit reduction burden onto a middle-class already battered by the Great Recession.
By: Pat Garofalo, U. S. News and World Report, May 25, 2011
The GOP’s Apology Primary: Love Means Always Having To Say You’re Sorry
In the 2012 Republican presidential race, love apparently means always having to say you’re sorry.
On an array of issues, the field of GOP contenders is facing enormous pressure from an ascendant conservative base to renounce earlier positions that challenged orthodoxy on the right. Their response to those demands could cast a big shadow over not only next year’s Republican primary but also the general-election contest against President Obama.
The emergence of these pressures testifies to a decisive shift in the GOP’s balance of power. The ideas now drawing the most fire from conservative activists–including support for a cap-and-trade system to limit greenhouse-gas emissions, a mandate on individuals to purchase health insurance, and a pathway to citizenship for illegal immigrants–all flowered in Republican circles during the middle years of George W. Bush’s presidency, especially among governors.
In different ways, each of these proposals embodied the common belief that Republicans had to broaden their message beyond a conventional conservative argument focused almost exclusively on reducing government spending, taxes, and regulation. Intellectually, these initiatives reflected an impulse to redefine conservatism in ways that accepted a role for government in empowering individuals or promoting market-based solutions. Politically, they reflected the belief that to build a lasting majority, Republicans needed to attract more minority voters, especially Hispanics, and to loosen the Democratic hold on blue states by reclaiming more suburban independents.
At varying points, this tendency operated under different names, including “compassionate conservatism” and “national greatness conservatism.” But the shared belief “was the sense that the Republican Party, in order to revitalize itself, needed to … show that it had modernized,” said Pete Wehner, who directed the Office of Strategic Initiatives in Bush’s White House.
Behind that conviction, Bush and the Republican-controlled Congress in 2003 created an entitlement by establishing the Medicare prescription drug benefit. In 2006, with Bush’s support, 23 GOP senators voted with 39 Democrats to provide a pathway to citizenship for illegal immigrants.
In the states, this instinct produced health care reform proposals from Govs. Mitt Romney in Massachusetts and Arnold Schwarzenegger in California that centered on an individual mandate, as well as initiatives from many GOP governors to promote alternative energy and to impose mandatory limits on the carbon emissions linked to global climate change. Republican governors played driving roles in creating regional multistate alliances to limit carbon emissions in the Midwest (Tim Pawlenty in Minnesota); the Northeast (George Pataki in New York); and the West (Jon Huntsman in Utah and Schwarzenegger). Huntsman joined then-Gov. Janet Napolitano of Arizona in 2006 to produce a bipartisan Western governors’ plan that favored legalization over deportation for illegal immigrants.
Many hard-core conservatives always bristled at these initiatives. But in those years, they lacked the leverage to entirely suppress them. Now, though, the party’s most conservative elements have clearly regained the upper hand. The tipping point was the election of Barack Obama and his pursuit of an agenda that significantly expanded Washington’s reach across many fronts. His initiatives produced a powerful back-to-basics reaction among Republicans.
The result has been to revert the party’s message toward one focused almost solely on shrinking government. “Obama, by the way he governed, shifted the debate into a much more traditional Democratic-Republican divide over the role of government,” notes Wehner, now a senior fellow at the conservative Ethics and Public Policy Center. “That’s pushed to the side or capsized these other issues.”
That dynamic has left the 2012 GOP contenders facing multiplying demands to abandon and apologize for positions they took in what now looks like a brief period of Republican glasnost.
Pawlenty has already apologized for imposing carbon limits in Minnesota but hasn’t yet renounced his parallel support for requiring utilities to generate more of their power from renewable sources, which some conservatives have also demanded. Huntsman, as he considers the race, has abandoned his previous climate policies but not yet walked back his tilt toward legalization for illegal immigrants. Romney renounced his favorable comments about legalizing undocumented immigrants (as well as his earlier backing of abortion rights) during his 2008 run, but he drew a surprisingly firm line this month by reaffirming his support for his health insurance mandate in Massachusetts. Newt Gingrich, who has faced similar complaints about his earlier support for an individual mandate and efforts to control carbon emissions, hasn’t fully tossed aside either.
These maelstroms leave the candidates without many good options. To dig in behind earlier positions promises unending collisions with conservatives (as Romney has now done on health care). But abandoning too many positions under pressure could open the eventual nominee to effective attacks from Democrats. “If these candidates are now sliding back on things they once believed, it raises questions about whether they can be a strong leader,” says Bill Burton, the former deputy White House press secretary who is heading an independent Democratic campaign effort for 2012. If voters agree, the 2012 Republicans may feel sorry later for saying sorry so often now.
By: Ronald Brownstein, Political Director, Atlantic Media, The Atlantic, May 20, 2011
Dear Conservatives: Drop The Charade On Israel
As a liberal American Jew, I get treated to the predictable mock-outrage from conservatives every time a Democrat says something about Israel. In this case, it was President Obama’s remarks on Israel in his speech today. Sure, there was the usual routine of conservatives ignoring the basic facts of the matter (saying Obama called for Israel to accept the unacceptable pre-1967 border, when he actually said that the border should be BASED on the pre-1967 line), but I can’t even get mad at that anymore.
What’s got me upset, and has made me upset for a while, is American conservatives acting as though they (and only they) are capable of speaking for Israel. Michelle Bachmann already called Obama’s words “a betrayal” and Mitt Romney said that Obama “threw Israel under the bus”. Who made these schmucks experts on Israeli policy? What gives them the right to treat our spiritual homeland like it’s something only they can understand?
They DON’T understand Israel. Israel, the Middle East, and the world at large won’t be served by a refusal to negotiate and a refusal to make mutual concessions. All that does is create more resentment, more frustration, more anger…that’s not what we need. In the past twenty years, all they’ve done is give Israel money and weapons. They haven’t made any genuine effort to bring about peace. If you’re going to criticize one approach to the peace process, you have to present an alternative. Otherwise, it just seems disingenuous.
I have a friend, a guy I’ve known almost since birth, who put off law school for a few years to join the Israeli military. This hard-line approach advocated by conservatives just puts him, his fellow soldiers, and civilians in increased danger. It doesn’t solve problems, just amplifies them, and people who truly cared about Israel would realize this. Instead of only paying lip service to Israel, why doesn’t Bachmann, Romney, and the rest of their ilk actually do something constructive?
It’s also very hard to take all the pro-Israel talk seriously when Glenn Beck spews forth nonsense about George Soros and the Holocaust, Palin calls herself the victim of a “blood libel”, Republicans in Texas oppose a Jewish speaker of the state House, Limbaugh equates “banker” with “Jew”, and so on. Given that Israel is a Jewish state, it’s hard to imagine how one can truly support it while harboring a less-than-welcome attitude toward Jews. And while I’m on the subject, stop with the whole idea of promoting “Judeo-Christian values”. It seems that the only Jewish values they like are the very specific values of one Jew from Nazareth…
I’m not sure why American conservatives insist upon playing this game because it’s not going to get Jews to vote for them (Jews have been pretty solidly Democratic since the early 1900s). But that’s besides the point. It doesn’t matter why they do it.
It’s fake.
It’s insulting.
And it needs to stop.
By: Pandaman, Daily Kos, May 19, 2011
“Stalwart” Ronald Reagan: Why Raising The Debt Ceiling Is Necessary
Let’s get real. What person in their right mind would really want the United States to default? Of course, nobody, yet over the years many members of Congress have voted against raising the debt ceiling.
Barack Obama did it and now rejects his own action. It is always a symbolic gesture that both Democrats and Republicans use, and use irresponsibly.
Yet now we seem to have the Tea Party, and a larger group of Republicans, clamoring for some kind of show down at the OK Corral. Not a symbolic gesture to some but a real threat. Not smart.
For those who like to cite Ronald Reagan in his 100th year as a stalwart, antidebt, no-tax-hike, no nonsense conservative, they have the wrong guy. Aside from his major tax increases as governor of California and as president here is a little history on the debt ceiling.
In a letter to then-Majority Leader Howard Baker on November 16, 1983, President Reagan asked “for your help and support, and that of your colleagues, in the passage of an increase in the limit on the public debt.”
Reagan went on:
…the United states could be forced to default on its obligations for the first time in its history.
This country now possesses the strongest credit in the world. The full consequence of a default–or even the serious prospect of default–by the United States are impossible to predict and awesome to contemplate….The risks, the costs, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns.
The point is that Republicans should shelve using the debt ceiling vote as a means of negotiation. This is not a negotiable item. Should they take this right up until the 11th hour and refuse to fund the government, not only will Reagan’s admonitions come true but the Republicans will seal their fate as an irresponsible, minority party–a pariah for years to come.
Bad policy, bad politics.
By: Peter Fenn, U. S. News and World Report, May 19, 2011
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