CEO’s And Teapartiers, Shut Up And Pay Your Taxes: Starving The Government Is Not Patriotic
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
Sign Me Up: Why I Support “The Ronald Reagan Tax Reform Act of 2011”
Ten years ago today, the wealthiest Americans caught a multi-billion dollar break from their benefactor, then-president George W. Bush. In the decade since, through two wars, natural disasters, a plummeting economy and a soaring debt, the wealthiest Americans have gotten to keep those Bush tax cuts. Happy birthday, everybody!
As the Republican Party now lines itself up behind Rep. Paul Ryan on his mission to cut the resulting deficit on the backs of working people and the elderly, I find myself surprisingly and strangely nostalgic for another GOP hero, whose legacy, at least when it comes to taxes, has become woefully misunderstood. Can it be that I find myself nostalgic for Ronald Reagan?!
Of course, I’m not alone in my nostalgia. I’m joined by the entire Republican leadership in this, but I think our reasons may be quite a bit different. In the spirit of unity, I’d like to suggest to Republicans in Congress that they look closely at the record of their favorite 20th century hero and adopt yet another policy named after the Gipper. I’m no fan of much of President Reagan’s legacy, but in a new spirit of bipartisanship, and historical accuracy, I’d like to present Republicans in Congress with an idea: the Ronald Reagan Tax Reform Act of 2011.
A key element of the Reagan lore believed by today’s GOP is that Reagan’s embrace of “trickle-down economics” is what caused any and all economic growth since the 1980s. In fact, after Reagan implemented his initial tax-slashing plan in 1981, the federal budget deficit started to rapidly balloon. Reagan and his economic advisers were forced to scramble and raised corporate taxes to calm the deficit expansion and stop the economy from spiraling downward. Between 1982 and 1984, Reagan implemented four tax hikes. In 1986, his Tax Reform Act imposed the largest corporate tax increase in U.S. history. The GDP growth and higher tax revenues enjoyed in the later years of the Reagan presidency were in part because of his willingness to compromise on his early supply-side idolatry.
The corporate tax increases that Reagan implemented — under the more palatable guise of “tax reform” — bear another lesson for Republicans. The vast majority of the current Republican Congress has signed on to a pledge peddled by anti-tax purist Grover Norquist, which beholds them to not raise any income taxes by any amount under any circumstances, or to bring in new revenue by closing loopholes. This pledge, which Rep. Ryan’s budget loyally adheres to, in effect freezes tax policy in time — preserving not only Bush’s massive and supposedly temporary tax cuts for the wealthiest Americans, but also a vast mishmash of tax breaks and loopholes for specific industries won by well-funded lobbyists.
The problem has become so great that many giant American corporations have become so adept at exploiting loopholes in the tax code that they paid no federal income taxes at all last year — if Republicans in Congress follow their pledge to Norquist, they won’t be able to close a single one of the loopholes that are allowing corporations to avoid paying their fair share.
Even Reagan recognized the difference between just plain raising taxes and simplifying the tax code to cut out loopholes that subsidize corporations. In 1984, he arranged to bring in $50 billion over three years, mainly by closing these loopholes. His 1986 reform act not only included $120 billion in tax hikes for corporations over five years, it also closed $300 billion worth of corporate loopholes.
These kinds of tax simplification solutions are available for Congress if they want them. As I wrote in April, nixing Bush’s tax cut’s for the wealthiest Americans would help the country cut roughly $65 billion off the deficit in this year alone. Closing loopholes that allow corporations to shelter their income in foreign banks would bring in $6.9 billion. Eliminating the massive tax breaks now enjoyed by oil and gas companies would yield $2.6 billion to help pay the nation’s bills.
But before Republicans in Congress change their math, they have to change their rhetoric — and embrace the reality of the economic situation they face and the one that they’d like to think they’re copying. In 1986, during the signing ceremony for the Tax Reform Act, Reagan explained that “vanishing loopholes and a minimum tax will mean that everybody and every corporation pay their fair share.”
It’s time for the GOP to take a page from their hero’s playbook. If they do so, they might be able to find some allies that they never thought possible. It’s time for “everybody and every corporation to pay their fair share.” We can all get along. Sign me up for “The Reagan Tax Reform Act of 2011.”
By: Michael B. Keegan, President: People For the American Way, Published in HuffPost, August 7, 2011
Grover Norquist’s Pledge Is A Colossal Failure
In 1986, Grover Norquist and his organization, Americans for Tax Reform, created the “Taxpayer Protection Pledge,” which he describes as “a simple, written commitment by a candidate or elected official that he or she will oppose, and vote against, tax increases.” It has recently come under repeated fire: it became a tool for ethanol subsidy apologists, for example, and most recently, it emerged as a needless obstacle in negotiations over raising the debt ceiling.
Responding to his critics, Norquist has taken to the op-ed page of the New York Timesthis morning to defend his legacy:
Contrary to the hopes of some that I am somehow softening the pledge, it is stronger and more important than ever: it has made it easier for members of Congress to credibly commit to voters that they will refuse to increase taxes and instead focus on reducing the cost of government.
In fact, it is more important than ever to be rid of The Pledge, because it has been a colossal failure. Does anyone think that fiscal conservatives should be happier with the state of our nation’s finances now than they were when the pledge began 25 years ago? Does anyone still harbor the illusion that “starve the beast” is an effective method of shrinking the federal government?
Here is why The Pledge has failed. Time and again, it has contributed to the GOP tendency to make taxes their top priority, deficits be damned. As Kevin Williamson puts it at National Review, “Republicans led by naïve supply-siders are preparing, for the third time in my life, to sell their souls on spending cuts in exchange for tax-rate reductions that are small, ineffective, and sure to be temporary. Ronald Reagan got his tax cuts, but he went to his grave waiting for those spending cuts. George W. Bush got his tax cuts, and ended his presidency with spending soaring and his entitlement-reform program in the garbage. And now certain Republicans are starting to slobber over the Gang of Six plan.”
What Norquist doesn’t understand or won’t admit is that deficit spending is worse than a tax increase, because you’ve got to pay for it eventually anyway, with interest. Meanwhile, you’ve created in the public mind the illusion that the level of government services they’re consuming is cheaper and less burdensome than is in fact the case. If you hold the line on taxes but not the deficit, you’re making big government more palatable.
Back in 1986, if taxes had been raised every time federal spending had increased, and voters knew that taxes would go up again every time new federal programs or spending was passed, the backlash against big government that we’re seeing now would’ve started a lot sooner, and been much more broad-based. Had that been the policy, it’s doubtful that George W. Bush would’ve passed Medicare Part D. Instead, the Baby Boomers have borrowed a bunch of money that my generation and my children’s generation is going to have to pay back. But their taxes didn’t go up. Thanks for that, Mr. Norquist. I’m not sure what to call it, but fiscal conservatism isn’t it.
As the conservative movement laments our fiscal straits, and the dire situation the nation finds itself in, perhaps it is too much to ask that they assign Norquist a little bit of the blame. But surely they can at least recognize that the solution he’s been pushing since the Reagan Administration hasn’t worked.
By: Conor Friedersdorf, Associate Editor, The Atlantic, July 22, 2011
Cut Cap & Balance And The New Frontiers of Kookery
A scant few months after the Paul Ryan budget redefined the boundaries of conservative fanaticism, the Republican Party’s new “Cut, Cap, and Balance” Constitutional Amendment makes that document seem quaintly reasonable. Ezra Klein sums up the policy:
Ronald Reagan’s entire presidency would’ve been unconstitutional under CC&B. Same for George W. Bush’s. Paul Ryan’s budget wouldn’t pass muster. The only budget that might work for this policy — if you could implement it — would be the proposal produced by the ultra-conservative Republican Study Committee. But that proposal was so extreme and unworkable that a majority of Republicans voted it down.
37 House Republicans and 12 Senate Republicans have pledged not to support a debt ceiling increase unless the CC&B Constitutional Amendment passes. Mitt Romney has signed this insane pledge. Ramesh Ponnuru has some gentle questions:
Representative Mick Mulvaney, a freshman Republican from South Carolina who is a leading supporter of the amendment, said in an interview that if “the president wants this debt-ceiling increase, he’s going to help us get the votes.” He argued that Obama should deliver 50 Democratic votes in the House and 20 to 30 in the Senate. “That’s a good compromise for both sides.”
Does the congressman think that 50 Republicans would vote for a constitutional amendment that contradicts everything they stand for if President Romney asked them to?
What a congressman who pledges to increase the debt limit only if a spending-limit amendment passes is really saying is that he opposes increasing the debt limit. Because there is no way that two-thirds of Congress is going to pass this amendment now, or ever.
Perhaps the most remarkable thing about the CC&B amendment is the casual way in which it attempts to enshrine specific spending levels and to freeze current taxes into the Constitution. I would like to see its advocates explain why it is necessary for the Constitution to require their agenda. What is keeping the public from electing officials who will enact this agenda? If people want to enact policies like this, why not just let them do it? And if they don’t, why force these policies upon them?
By: Jonathan Chait, The New Republic, July 19, 2011
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