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Why The GOP’s ‘Job Creators’ Are Hard to Find

If you’re a “job creator,” raise your hand. It would be nice to know who you are, exactly.

Republicans negotiating with President Obama over a fix for the nation’s debt problems have been rolling out the heavy buzzwords lately, and there must have been a fresh memo about the sonorous ring of “job creators.” House Speaker John Boehner repeatedly decries tax hikes on job creators, with congressional colleagues such as Paul Ryan and Jeb Hensarling forming a job-creators chorus behind him. House Republicans recently published a “Plan for America’s Job Creators” (but not for everybody else, presumably) and if you’re an aggrieved job creator, you can let House Majority Leader Eric Cantor know what’s bugging you by filling out a brief form at http://jobs.majorityleader.gov/.

The trouble is, job creators are an endangered species these days. The biggest problem in the U.S. economy, in fact, is a shortage of job creators to reward and protect. Companies are barely hiring, and there are about 7 million fewer jobs now than there were at the end of 2007, when the Great Recession began. Part of the Republicans’ plan is to lower taxes, streamline regulation, open more trade and take other steps that will stimulate job creation. But we’ve already tried some of that, including several rounds of tax cuts since 2008. Most job creators are still hiding.

Big companies employ a lot of Americans, but over the last few years they’ve been better at job destruction than job creation. Between 2007 and 2010, companies with more than 1,000 employees shed about 2.6 million jobs, according to the latest data from the Labor Department. Many big companies have rebounded sharply from the recession, with impressive profits and a lot of cash on hand. But even some of the most successful big companies aren’t doing much job creation–not in the United States, anyway. Here are a few examples:

General Electric, which is run by the same Jeffrey Immelt who chairs President Obama’s Council on Jobs and Competitiveness, axed 32,000 jobs worldwide between 2007 and 2010, according to information from GE’s annual reports. About 22,000 of those lost jobs were in the United States. No job creation there, even though GE earned about $12 billion in profits in 2010.

Exxon Mobil has added about 2,800 jobs worldwide since 2007, but the giant oil firm doesn’t break out how many of those new hires work in the United States. Since Exxon earns nearly 70 percent of its revenue from overseas, it’s a good bet that’s where most of the new jobs are, too.

Wal-Mart has added about 40,000 jobs in the United States since 2007, largely because the discount retailer has been a beneficiary of pinched consumers desperate to save money. But it has added about 150,000 jobs overseas during the same time–nearly four times the U.S. tally. Still, Wal-Mart seems to be one company that can legitimately call itself a job creator.

IBM has added about 40,000 employees since 2007, but like Exxon, it doesn’t say where. About 65 percent of IBM’s revenue comes from abroad, and that’s where almost all of its revenue growth has come from since 2007. IBM’s U.S. business is actually down from 2007 levels, so it’s possible that most or all of IBM’s new hires have been overseas.

Big companies, in fact, aren’t considered a big source of new jobs. While they generate a lot of profits, they also tend to be mature enterprises more likely to swallow other companies and consolidate market share, which tends to eliminate jobs, not create them. “It’s the job of big firms to shed jobs,” says Carl Schramm, CEO of the Kauffmann Foundation, which promotes entrepreneurship. “Big firms want to lower costs, which means lowering labor costs.”

Young firms, Schramm says, account for virtually all net job creation in the U.S. economy over the last 30 years. That’s because startups that survive their first couple of years tend to be vibrant, fast-growing companies that create new industries and hire a lot of new workers. Think Microsoft and Oracle in the 1980s, and Amazon, eBay, and Google in the 1990s. Today, new technology-based firms like Facebook, Twitter, Groupon, Zynga, and LinkedIn represent one of the fastest-growing sectors of the U.S. economy. However, they’re the last companies that need any kind of tax relief–and they’re not about to ask for special treatment from Washington, either. They became transformative companies without Washington’s help, and they’d like to keep it that way.

Politicians routinely extol the virtues of “small business,” but that’s not really where the job creators are, either. Conventional small businesses–dry cleaners, nail salons, delicatessens, independent professionals like lawyers and doctors–tend to be important pillars of their communities, but they also come and go without generating a lot of new jobs, on balance. During the third quarter of 2010 (the most recent quarter for which there’s data), firms with fewer than 20 employees eliminated 34,000 jobs, according to the Labor Department. The biggest gains were among firms with 500 to 999 employees, which created 37,000 jobs.

So if Republicans want to modify the tax code to reward and encourage job creators, they need to come up with a scheme that offers the lowest tax rates to fast-growing startups, some medium-sized firms, and a few select multinationals. Of course, they might prefer to lower taxes on everybody who could be a job creator–because that includes almost everybody. If you ever spend money, that makes you a job creator, in the most expansive sense of the phrase, since somebody gets paid to provide whatever you buy. But then we’d have to figure out whether to reward American consumers for helping create jobs in China, Japan, Sri Lanka, or wherever the imported goods they purchase come from, or to reward  people who spend money that helps create American jobs. So if you buy a Lexus made in Japan or Gucci loafers made in Italy, you’re not really a creator of American jobs and you shouldn’t be eligible for favorable tax treatement. But if you have your kitchen remodeled by a local contractor or go to a chiropractor for back pain, you qualify. It’s not so easy being a job creator. Or locating one.

By: Rick Newman, U. S. News and World Report, July 13, 2011

July 14, 2011 Posted by | Big Business, Congress, Conservatives, Consumers, Corporations, Economic Recovery, Economy, GOP, Ideology, Jobs, Politics, President Obama, Republicans, Small Businesses, Taxes, Unemployment | , , , , , , , , , , , , , , , , | Leave a comment

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

May 25, 2011 Posted by | Big Business, Budget, Class Warfare, Congress, Conservatives, Corporations, Deficits, Democrats, Economy, GOP, Government, Ideologues, Ideology, Income Gap, Lawmakers, Media, Middle Class, Politics, Press, Pundits, Regulations, Republicans, Tax Credits, Tax Evasion, Tax Loopholes, Taxes, Unemployed, Unemployment, Wealthy | , , , , , , , , , , , , , , , , , | Leave a comment

   

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