“The Real Tax Threat To American Businesses”: Big Corporations Don’t Pay Their Fair Share
American businesses face some serious challenges from taxes. But it’s not due to America’s tax rates, as many big business CEOs would have you believe. Our corporate tax problems stem from a corporate tax code with so many perks, credits and loopholes in it that many U.S. multinational corporations pay little to no taxes. This starves our national budget and imperils public education, innovative research and infrastructure, the sort of public investments that help make our businesses and economy competitive. And, maybe even worse, it’s unfair.
I’m an accountant. I know about taxes. I help my clients take advantage of the deductions and incentives to which they are entitled. But because of accounting tricks my clients cannot use, many giant U.S. corporations pay taxes at effective rates far lower than most small businesses and many middle class families. The average U.S. multinational corporation paid just 12.6 percent of its income in taxes in 2010, according to the Government Accountability Office.
Some of the most unfair corporate tax loopholes for America’s competitive position in the world are the offshore tax loopholes. These loopholes alone cost the U.S. Treasury an estimated $90 billion a year. They also create an unfair playing field between domestic businesses like I serve in my practice, and the large multinational firms, whose high priced tax attorneys and lobbyists have devised ways to shift profits earned in the United States to the world’s tax haven countries where those profits are taxed lightly, if at all.
For instance, some software companies take patents on products developed in the U.S. and register them in a foreign tax haven. When a U.S. customer purchases the product, the company sends a large chunk of the purchase price to the tax haven to pay for the use of the patent. Thus the company reduces its effective corporate tax rate – sometimes even below 10 percent.
My clients don’t have this option. Nor would they want it. They are restaurants and dry cleaners, medical practices, small manufacturers and auto repair shops. They work hard and they expect to pay their fair share of taxes. They are the engines of our local economy, just as similar small companies are the engines of local economies across the country. They provide needed goods and services. They provide needed jobs. And they pay needed taxes.
Their taxes help pay for public investment in schools, roads, courts, public transit, public safety, public health – all of the basic infrastructure that enables all businesses to function and thrive. Since they benefit – as we all do – from those tax investments, it’s only fair that they should pay their share.
But their counterparts at large US multinationals don’t have to. And it’s the tax code that lets them. It’s as if the tax code pretends that they are operating in a third world country with no infrastructure to support. That’s ridiculous, of course. I’m good at accounting and bookkeeping, but I sure wouldn’t want a client trying to operate their entire business in a rural part of a third world country.
Our tax code should be fair and should encourage investment in our shared future. When we invest together we start a virtuous cycle of growth. But when people, whether individuals or business owners, think the tax system is rigged in favor of one group or another – say U.S. multinational companies using overseas tax havens – they rightly feel that they are paying more than their fair share. They lose faith in the system.
And when tax revenues are lower than they would be without such loopholes, policymakers look for ways to cut spending. This starts a vicious cycle of ever-shrinking economic activity and ever reducing tax revenue.
Fixing the tax code is the answer, and a good place to start is with the unfair overseas loopholes that undermine our faith in the tax system and rob our communities and the nation of vital investments in the future.
It makes no sense for our tax code to be hurting domestic job creators and undermining the tax base for our schools, roads, police and other vital services and infrastructure.
The tax reform America needs is one that closes many of the unfair loopholes won by big business lobbyists over the last three decades. We need the extra revenue collected to invest in the 21st century economy that will sustain our families, our communities and our businesses.
By: Brian Setzler, U. S. News and World Report, January 17, 201
“The Undeserving Rich”: Capitalism As Currently Constituted Is Undermining The Foundations Of Middle-Class Society
The reality of rising American inequality is stark. Since the late 1970s real wages for the bottom half of the work force have stagnated or fallen, while the incomes of the top 1 percent have nearly quadrupled (and the incomes of the top 0.1 percent have risen even more). While we can and should have a serious debate about what to do about this situation, the simple fact — American capitalism as currently constituted is undermining the foundations of middle-class society — shouldn’t be up for argument.
But it is, of course. Partly this reflects Upton Sinclair’s famous dictum: It is difficult to get a man to understand something when his salary depends on his not understanding it. But it also, I think, reflects distaste for the implications of the numbers, which seem almost like an open invitation to class warfare — or, if you prefer, a demonstration that class warfare is already underway, with the plutocrats on offense.
The result has been a determined campaign of statistical obfuscation. At its cruder end this campaign comes close to outright falsification; at its more sophisticated end it involves using fancy footwork to propagate what I think of as the myth of the deserving rich.
For an example of de facto falsification, one need look no further than a recent column by Bret Stephens of The Wall Street Journal, which first accused President Obama (wrongly) of making a factual error, then proceeded to assert that rising inequality was no big deal, because everyone has been making big gains. Why, incomes for the bottom fifth of the U.S. population have risen 186 percent since 1979!
If this sounds wrong to you, it should: that’s a nominal number, not corrected for inflation. You can find the inflation-corrected number in the same Census Bureau table; it shows incomes for the bottom fifth actually falling. Oh, and for the record, at the time of writing this elementary error had not been corrected on The Journal’s website.
O.K., that’s what crude obfuscation looks like. What about the fancier version?
I’ve noted before that conservatives seem fixated on the notion that poverty is basically the result of character problems among the poor. This may once have had a grain of truth to it, but for the past three decades and more the main obstacle facing the poor has been the lack of jobs paying decent wages. But the myth of the undeserving poor persists, and so does a counterpart myth, that of the deserving rich.
The story goes like this: America’s affluent are affluent because they made the right lifestyle choices. They got themselves good educations, they got and stayed married, and so on. Basically, affluence is a reward for adhering to the Victorian virtues.
What’s wrong with this story? Even on its own terms, it postulates opportunities that don’t exist. For example, how are children of the poor, or even the working class, supposed to get a good education in an era of declining support for and sharply rising tuition at public universities? Even social indicators like family stability are, to an important extent, economic phenomena: nothing takes a toll on family values like lack of employment opportunities.
But the main thing about this myth is that it misidentifies the winners from growing inequality. White-collar professionals, even if married to each other, are only doing O.K. The big winners are a much smaller group. The Occupy movement popularized the concept of the “1 percent,” which is a good shorthand for the rising elite, but if anything includes too many people: most of the gains of the top 1 percent have in fact gone to an even tinier elite, the top 0.1 percent.
And who are these lucky few? Mainly they’re executives of some kind, especially, although not only, in finance. You can argue about whether these people deserve to be paid so well, but one thing is clear: They didn’t get where they are simply by being prudent, clean and sober.
So how can the myth of the deserving rich be sustained? Mainly through a strategy of distortion by dilution. You almost never see apologists for inequality willing to talk about the 1 percent, let alone the really big winners. Instead, they talk about the top 20 percent, or at best the top 5 percent. These may sound like innocent choices, but they’re not, because they involve lumping in married lawyers with the wolves of Wall Street. The DiCaprio movie of that name, by the way, is wildly popular with finance types, who cheer on the title character — another clue to the realities of our new Gilded Age.
Again, I know that these realities make some people, not all of them hired guns for the plutocracy, uncomfortable, and they’d prefer to paint a different picture. But even if the facts have a well-known populist bias, they’re still the facts — and they must be faced.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 19, 2014
“A Diabolical Chicken-And-Egg Conundrum”: Fear Is Why Workers In Red States Vote Against Their Economic Self-Interest
Last week’s massive spill of the toxic chemical MCHM into West Virginia’s Elk River illustrates another benefit to the business class of high unemployment, economic insecurity, and a safety-net shot through with holes. Not only are employees eager to accept whatever job they can get. They are also also unwilling to demand healthy and safe environments.
The spill was the region’s third major chemical accident in five years, coming after two investigations by the federal Chemical Safety Board in the Kanawha Valley, also known as “Chemical Valley,” and repeated recommendations from federal regulators and environmental advocates that the state embrace tougher rules to better safeguard chemicals.
No action was ever taken. State and local officials turned a deaf ear. The storage tank that leaked, owned by Freedom Industries, hadn’t been inspected for decades.
But nobody complained.
Not even now, with the toxins moving down river toward Cincinnati, can the residents of Charleston and the surrounding area be sure their drinking water is safe — partly because the government’s calculation for safe levels is based on a single study by the manufacturer of the toxic chemical, which was never published, and partly because the West Virginia American Water Company, which supplies the drinking water, is a for-profit corporation that may not want to highlight any lingering danger.
So why wasn’t more done to prevent this, and why isn’t there more of any outcry even now?
The answer isn’t hard to find. As Maya Nye, president of People Concerned About Chemical Safety, a citizen’s group formed after a 2008 explosion and fire killed workers at West Virginia’s Bayer CropScience plant in the state, explained to the New York Times: “We are so desperate for jobs in West Virginia we don’t want to do anything that pushes industry out.”
Exactly.
I often heard the same refrain when I headed the U.S. Department of Labor. When we sought to impose a large fine on the Bridgestone-Firestone Tire Company for flagrantly disregarding workplace safety rules and causing workers at one of its plants in Oklahoma to be maimed and killed, for example, the community was solidly behind us — that is, until Bridgestone-Firestone threatened to close the plant if we didn’t back down.
The threat was enough to ignite a storm of opposition to the proposed penalty from the very workers and families we were trying to protect. (We didn’t back down and Bridgestone-Firestone didn’t carry out its threat, but the political fallout was intense.)
For years political scientists have wondered why so many working class and poor citizens of so-called “red” states vote against their economic self-interest. The usual explanation is that, for these voters, economic issues are trumped by social and cultural issues like guns, abortion, and race.
I’m not so sure. The wages of production workers have been dropping for thirty years, adjusted for inflation, and their economic security has disappeared. Companies can and do shut down, sometimes literally overnight. A smaller share of working-age Americans hold jobs today than at any time in more than three decades.
People are so desperate for jobs they don’t want to rock the boat. They don’t want rules and regulations enforced that might cost them their livelihoods. For them, a job is precious — sometimes even more precious than a safe workplace or safe drinking water.
This is especially true in poorer regions of the country like West Virginia and through much of the South and rural America — so-called “red” states where the old working class has been voting Republican. Guns, abortion, and race are part of the explanation. But don’t overlook economic anxieties that translate into a willingness to vote for whatever it is that industry wants.
This may explain why Republican officials who have been casting their votes against unions, against expanding Medicaid, against raising the minimum wage, against extended unemployment insurance, and against jobs bills that would put people to work, continue to be elected and re-elected. They obviously have the support of corporate patrons who want to keep unemployment high and workers insecure because a pliant working class helps their bottom lines. But they also, paradoxically, get the votes of many workers who are clinging so desperately to their jobs that they’re afraid of change and too cowed to make a ruckus.
The best bulwark against corporate irresponsibility is a strong and growing middle class. But in order to summon the political will to achieve it, we have to overcome the timidity that flows from economic desperation. It’s a diabolical chicken-and-egg conundrum at a the core of American politics today.
By: Robert Reich, The Robert Reich Blog, January 15, 2014
“The Only Card They Have To Play”: What Can Republicans Do If Obamacare Isn’t A Disaster?
As the 2014 midterms draw nearer, the Republican Party has developed a simple, Costanza-esque plan for the election season: Nothing.
The theory, which is reportedly being pushed by House Speaker John Boehner (R-OH) over the objections of some House members, goes as follows: As the rollout of the Affordable Care Act continues, Republicans should fade to the background and watch it “collapse under its own weight,” as Rep. Paul Ryan (R-WI) is prone to saying. That will allow Republicans to eliminate any distractions as they relentlessly hammer Democrats over the law’s failures, on the way to maintaining their House majority and winning the net six seats needed to take control of the Senate.
The Republican strategy makes some sense on its face — after all, no issue fires up Republican loyalists quite like the Affordable Care Act, and there’s no question that the law’s troubled rollout has been a massive political headache for Democrats.
But there’s a question that should keep every Republican strategist up at night: What happens if health care reform isn’t the electoral albatross that Republicans assume?
It’s not an unrealistic proposition. After all, despite the massively publicized problems with the launch of the law, the percentage of Americans who want it scaled back or repealed has hardly changed over the past two years. There are more reasons to be optimistic that the law will work as intended than there have been at any point since its rollout. Americans still have no faith in the Republican Party to create a constructive alternative. And, crucially, at least one poll suggests that the public is more concerned with job creation, gun reform, and immigration reform — bread-and-butter issues for Democrats — than with reducing the deficit or repealing Obamacare (the central tenets of the GOP platform, such as it exists).
In fact, according to the final Democracy Corps battleground survey of 2013, Republicans may actually pay a political price for their unyielding attacks on the health care reform law. As pollster Erica Seifert put it, “battling on Obamacare is [Republicans’] weakest case for re-election. In fact, it undermines it.”
So if the Affordable Care Act doesn’t crash and burn, destroying the Democratic Party with it, what is the Republican Party’s plan B?
It appears that their guess is as good as yours.
Speaker Boehner has reportedly been trumpeting the results of a recent survey finding that the public now primarily blames President Obama for the nation’s economic problems, rather than the policies of his predecessor.
“Since he can’t blame George W. Bush anymore, the president has chosen to talk about rising income inequality, unemployment, and the need to extend emergency unemployment benefits,” Boehner told House Republicans, according to The Hill. “After five years in office, Barack Obama still doesn’t have an answer to the question: Where are the jobs?”
The problem for Boehner is twofold: First, Americans very clearly want to have the conversation that President Obama has begun. Second, if Republicans have an answer to the “where are the jobs?” question, they are keeping it awfully close to the vest.
The Republican Party’s official “Plan for Economic Growth & Jobs” is incredibly thin on details. In fact, with the exception of repealing Obamacare — and replacing it with yet-undefined “patient-centered reforms” — it does not offer a single specific policy prescription. (By contrast, the White House jobs page leads directly to a description of the American Jobs Act, which, regardless of what one thinks of its merits, is undisputably an actual plan.)
The GOP has similar problems discussing other top issues of the day. Tacit in Boehner’s barb about President Obama “distracting” Americans with a discussion of inequality is the fact that Republicans have few productive ideas to add to the conversation. Immigration reform is similarly treacherous territory for the party. As is any conversation on “reforming” Social Security or Medicare.
It’s not as though Republicans aren’t aware of the issue; after the 2012 presidential election, the Republican National Committee made a concerted effort to change its image from that of a party that’s only “talking to itself” (it has not been going well, by the way).
Perhaps in an attempt to fill out its pitch to voters, on Thursday the Republican National Committee tweeted a link to a “campaign strategy survey,” urging its followers to “tell us your top issues” so the party can “win big in 2014.”
In a reflection of the party’s priorities, however, question one — “Which of the following should be the top priority for the Republican Party in the next 18 months?” — offers a choice between “Elect principled conservatives to the U.S. House and U.S. Senate,” “Rally a grassroots movement,” “Stop the liberal agenda by defeating Democrats,” and “Unite the party.” In other words, the “strategy” isn’t exactly technocratic.
It’s entirely possible that Republican predictions are right, and merely opposing Democrats — with a specific focus on their health care reforms — will be enough to carry them through the midterm elections. After all, the map and the electorate (which history suggests will be smaller, older, and whiter than 2012) favor the GOP. But if they’re wrong, and Obamacare does not ruin the Democrats, then Republicans could be in serious trouble. Because unless they have a major surprise up their sleeves, this is the only card they have to play.
By: Henry Decker, The National Memo, January 17, 2014
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