To better understand the biggest obstacle to deficit reduction and economic recovery, start watching at the 4 minute and 30 second mark:
Thursday, June 30, 2011
Saturday, June 25, 2011
Let's not open the door to corporate tax-dodging
By Renee Loth
THERE’S A LOT of genteel blackmail being practiced in Washington these days. Republicans won’t agree to raise the debt ceiling until they exact profound cuts in government programs. Opponents won’t confirm Elizabeth Warren to the new Consumer Financial Protection Bureau without major changes in the Dodd-Frank law that Congress already approved. And now, multinational corporations are demanding a colossal tax break before they’ll “repatriate’’ billions in profits they have been hoarding overseas.
A select alliance of America’s largest companies — Cisco, Pfizer, Qualcomm, and Google, to name a few — has been pressing for a bill that would temporarily slash the federal corporate income tax on offshore profits from 35 percent to 5.25 percent — a break of 85 percent. The tax holiday would ostensibly provide an incentive to return to the US Treasury between $750 billion and $1 trillion in overseas profits the companies have been sitting on.
The last time Washington passed a repatriation holiday, in 2004, it didn’t result in a surge of new jobs. In fact, according to the Congressional Research Service, many of the companies that took advantage of the tax break slashed jobs soon after. Pfizer repatriated around $37 billion in profits only to close factories and eliminate 10,000 American jobs. Hewlett-Packard announced plans to cut 14,000 jobs while it repatriated $14.5 billion.
So where did the money go? Studies by the nonpartisan National Bureau of Economic Research and others found that much of the returned cash went to increases in shareholder dividends, stock buybacks, and corporate bonuses. There’s no reason to believe the companies would behave any differently this time.
The seductively titled American Job Creation Act of 2004 simply applied the profits to projects already on the books and freed up cash to lavish on executives and shareholders.
Unfortunately, both parties in Washington are so desperate to do something that appears to goose the economy that Congress might actually approve this manifestly bad idea.
Rather than pay the ransom the corporations are demanding for the return of American tax revenues, Washington should take a cue from Massachusetts. In 2008 the Legislature passed a law that greatly limited the ability of corporations to shift income to low-tax havens, whether in other states or overseas. Companies can no longer bury profits in the tax code. And by contributing a fair share to state revenues, they get the benefits of a top education system, cutting-edge research, a functioning infrastructure, and a high quality of life. Right here at home.
Wednesday, June 22, 2011
32 Corporations Spent More On Top Executives In 2010 Than They Paid In Income Taxes
By Pat Garofalo on Jun 21, 2011
Over the last few decades, executive pay at large corporations has skyrocketed. Today, American CEOs make 263 times the average compensation for American workers, up from the 30 to 1 ratio in the 1970s. In 2010 alone, CEO pay went up 27 percent while average worker pay went up just 2 percent.
At the same time, corporate tax revenue has plunged to historic lows. During the 1960s, for instance, 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. But the U.S. now raises less than 1.5 percent of GDP from the corporate income tax.
According to a new report called “S.& P. 500 Executive Pay: Bigger Than …Whatever You Think It Is,” put together by the independent research firm R. G. Associates, there are currently 32 companies that actually spent more on compensation for their top executives in 2010 than they paid in corporate income taxes:
This isn’t really surprising when you consider that several of the largest U.S. corporations simply paid no taxes at all last year. General Electric, for instance, made more than $5 billion last year, but had a tax rate of -64 percent, meaning it received billions in tax benefits. Boeing hasn’t paid any federal income tax in three years, while CEO Jim McNerny made $19 million last year.
Monday, June 20, 2011
Corporations seek tax break to bring profits home
By David Kocieniewski
June 20, 2011
NEW YORK — Some of the nation’s largest corporations have amassed vast profits outside the country and are pressing Congress and the Obama administration for a tax break to bring the money home.
Apple has $12 billion waiting offshore, Google has $17 billion, and Microsoft is holding $29 billion.
Under a proposed repatriation holiday, the federal income tax owed would fall to 5.25 percent for one year, from 35 percent. Short term, the measure could generate tens of billions in tax revenue.
Corporations and their lobbyists say a tax break could inject $1 trillion or more into the economy, and they promoted the proposal as “the next stimulus’’ at a conference Wednesday in Washington.
But that’s not how it worked last time.
Congress and the Bush administration gave companies a similar tax incentive, in 2005, and 800 took advantage. Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to the nonpartisan National Bureau of Economic Research. Its study concluded the program “did not increase domestic investment, employment or research and development.’’
The Obama administration has been uncharacteristically harsh in its criticism of the idea. The president and Treasury Secretary Timothy F. Geithner have said they will support it only if it is part of a corporate tax overhaul that results in no decline in federal revenues.
Monday, June 13, 2011
First Republican presidential debate: Slash medicare and social security and cut taxes for the rich. Huh?
Since 1976, the rich got WAY richer:
Cutting taxes for the rich and deregulating corporations produced massive deficits, drove our economy to the brink of collapse, and wiped out 7 million jobs.
Monday, June 6, 2011
Vouchercare Is Not Medicare
By PAUL KRUGMAN
June 5, 2011
Republicans are seeking to dismantle Medicare as we know it, replacing it with a much worse program. For some reason, many commentators seem to believe that accurately describing what the G.O.P. is actually proposing amounts to demagoguery.
There’s nothing demagogic about telling the truth.
Start with the claim that the G.O.P. plan simply reforms Medicare rather than ending it. You can name the new program Medicare, but it’s an entirely different program — call it Vouchercare — that would offer nothing like the coverage that the elderly now receive. (Republicans get huffy when you call their plan a voucher scheme, but that’s exactly what it is.)
Medicare is a government-run insurance system that directly pays health-care providers. Vouchercare would cut checks to insurance companies instead. Specifically, the program would pay a fixed amount toward private health insurance — higher for the poor, lower for the rich, but not varying at all with the actual level of premiums.
If you couldn’t afford a policy adequate for your needs, even with the voucher, that would be your problem.
And most seniors wouldn’t be able to afford adequate coverage. A Congressional Budget Office analysis found that to get coverage equivalent to what they have now, older Americans would have to pay vastly more out of pocket under the Paul Ryan plan than they would if Medicare as we know it was preserved. Based on the budget office estimates, the typical senior would end up paying around $6,000 more out of pocket in the plan’s first year of operation.
Most of the health reformers I know would have greatly preferred simply expanding Medicare to cover all Americans. Vouchercare would simply hand out vouchers of a fixed size, regardless of the actual cost of insurance. And these vouchers would be grossly inadequate.
But what about the claim that Medicare as we know it is unsustainable?
Yes, Medicare has to get serious about cost control; it has to start saying no to expensive procedures with little or no medical benefits, it has to change the way it pays doctors and hospitals, and so on. And a number of reforms of that kind are, in fact, included in the Affordable Care Act. But with these changes it should be entirely possible to maintain a system that provides all older Americans with guaranteed essential health care.
Republicans don’t want to make Medicare sustainable, they want to destroy it under the guise of saving it. So in voting for the House budget plan, Republicans voted to end Medicare.
Saying that isn’t demagoguery, it’s just pointing out the truth.
Thursday, June 2, 2011
STUDY: U.S. Corporations Paid Far Less
First Posted: 06/ 1/11 03:54 PM ET
WASHINGTON (Kevin Drawbaugh) - Twelve big U.S. companies paid far less than the statutory corporate tax rate from 2008 to 2010, despite making substantial profits in that period, said a report released on Wednesday.
With the Obama administration drafting a corporate tax reform plan, the report found General Electric Co, American Electric Power Co Inc, DuPont Co and nine other companies had a negative 1.5 percent tax rate on $171 billion in profits over the three years studied.
"Not a single one of these companies paid anything close to the 35 percent statutory tax rate," said the report from Citizens for Tax Justice, a left-leaning group based in Washington that promised more details later this year.
The White House and Congress are considering an overhaul of the corporate tax system as a partial solution to the federal deficit, projected to hit $1.4 trillion this year.
Citizens for Tax Justice produced a report in the 1980s that helped lead to President Ronald Reagan's landmark 1986 tax reforms. Since then, the tax code has become riddled with exemptions, deferrals and other special breaks.
Companies singled out in Citizens for Tax Justice's newest report also included Verizon Communications, Boeing Co, Wells Fargo & Co, FedEx Corp and Exxon Mobil Corp.
"These 12 companies are just the tip of the iceberg of widespread corporate tax avoidance," said Bob McIntyre, director of Citizens for Tax Justice, which is working on a broader report covering the Fortune 500 companies.
Elected officials should make "reducing or eliminating the vast array of corporate tax subsidies the centerpiece of any deficit-reduction strategy," he said.
Citizens for Tax Justice said that in the 2008-2010 period, 10 of the dozen companies studied enjoyed at least one year in which they were profitable, but paid no taxes.
(Additional reporting by Matthew Daily and Ernest Scheyder in New York, Anna Driver in Houston, Scott Malone in Boston; Editing by Richard Chang) Copyright 2011 Thomson Reuters.