Tax Subsidies to Corporate Giants

From the Washington Post:

The low wages paid by businesses, including some of the largest and most profitable companies in the U.S. – like McDonald’s and Wal-Mart – are costing taxpayers nearly $153 billion a year.

After decades of wage cuts and health benefit rollbacks, more than half of all state and federal spending on public assistance programs goes to working families who need food stamps, Medicaid, or other support to meet basic needs. Let that sink in — American taxpayers are subsidizing people who work — most of them full-time  (in some case more than full-time) because businesses do not pay a living wage.

[Actually, it’s worse than that.  Living wage means enough to live on now, while working. Nothing about putting aside enough, or paying back, for the years you don’t work, can’t work, aren’t allowed to work.]

$2.1 Trillion Withheld from Contributing to Nation’s Well Being

These corporate guys are like teenagers partying at what was once a nice location, tossing junk into the lakes, roaring up and down the roads, turning them into washboards and reading only beer can labels instead learning new and better ways of making the stuff of human nutrition.

Keep their profits off-shore, avoid taxes, contribute to the collapsing of the U.S. infrastructure and education of the young so that eventually the economic ecosystem that enabled their phenomenal growth collapses, and they along with it.

Eight of the biggest U.S. technology companies — including five from the Silicon Valley — added a combined $69 billion to their stockpiled offshore profits over the past year, even as some corporations in other industries felt pressure to bring cash back home.

Microsoft Corp., Apple Inc., Google Inc. and five other tech firms now account for more than a fifth of the $2.1 trillion in profits that U.S. companies are holding overseas, according to a Bloomberg News review of the securities filings of 304 corporations.

The total amount held outside the U.S. by the companies was up 8 percent from the previous year, though 58 companies reported smaller stockpiles.

There are mounting calls to bring back the military draft of young people so that “everyone has a stake” in the decisions to go to war or not.  I say, draft the corporations and the profits they make due not only to their own genius, hard work and good luck, but to the societal, legal and governmental structures that made it possible, and which all need on-going maintenance.  Take that away and the U.S. will soon look like an untended neighborhood, with abandoned houses, broken windows, listless residents and no way to find a way out.

Protesting the Corporate Tax Breaks/Evasions

Some working folks took to the street yesterday to point out the hidden obvious — the big get away with big breaks, while the little guy east dust.

City nurses, janitors and other workers marched to Twitter’s headquarters on tax day Tuesday to deliver a symbolic tax bill for tens of millions of dollars for the “corporate tax giveaway” that helped persuade the company to move to San Francisco’s Mid-Market area

SF Gate

SEIU Twitter

Protesters target Apple for offshore tax shelters

Protesters dressed up as Apple Store employees in telltale blue t-shirts marched in front of the Union Square store Tuesday morning, calling on Apple to pay taxes on the $102 billion they said the company holds overseas.

The protest called on tech’s ethos of making the world a better place. Flyers handed out at the protest to shoppers passing by the store pointed them to www.techcandobetter.org, which pushes for better wages for security guards at tech companies.

SEIU USWW, the union that organized the march, represents security guards and janitors at many companies, not just tech, in San Francisco and the East Bay.

SF Gate

Corporations And Their Responsibility

Today’s S F Chronicle featured a front page magazine piece about SalesForce.com founder, Marc Benioff and his push to enlist other Bay Area corporations to follow his in being good citizens:

Salesforce.com founder Marc Benioff is challenging fellow tech leaders to raise millions to fund a new antipoverty program – and recast the industry as a local hero.

“We don’t want to be the industry that looks like ‘The Wolf of Wall Street,’ ” he told The Chronicle. “We want to be more benevolent.”

On Friday – the software company’s 15th birthday – Salesforce and the nonprofit Tipping Point will announce the formation of SF Gives, an initiative to raise $10 million over the next 60 days for Bay Area antipoverty programs.

Persuading 20 companies to contribute $500,000 apiece is just the start. Benioff, one of the city’s leading philanthropists, said he hopes to eventually expand the program to $100 million.  SF Gate

There is, by the way, a music event at Justin Herman Plaza, near the Ferry Building, all afternoon to celebrate the 15th anniversary of Sales Force and to raise money and food for that goal.

Now such corporate largesse would seem to be a welcome thing.  Who could complain about $10 million to help the impoverished?  The problem is two fold as I see it.  One, each corporation is necessarily guided by its Board of Directors along the value lines they set up.  Therefore, the decisions as to Who is supported, under What criteria for How long and When the help begins and ends are all privatized.  As we have seen recently, several corporations are suing the government for mandating medical care payments for services they don’t like.  It follows that a corporation or consortium of corporations will, predictably, have opinions about who the Deserving Poor are and distribute their support accordingly.

Secondly, the corporate anti-poverty push is so far, and likely to remain so, a local affair.  The Bay Area is home to Sales Force and many other mega billion dollar companies; Gallup, New Mexico is not.  The result of such local action will follow in the tracks of the public school system in which wealthy districts hold million dollar fund raisers every year; their districts far outstrip their poor brethren in the breadth of school offerings, size of classes, excellence of facilities, availability and quality of extra-curricular activities.  The notion of equal education and opportunity is lost but denied, since all are still in ‘public schools.’

Thirdly, how much is $10 million anyway?  According to a Forbes article, the US spends $550 billion yearly to alleviate poverty.  My calculator won’t show in decimal format how small a percentage that $10 million is.

Fourthly, why is such giving necessary in the first place?  Why are there so many poor?  Why, for example, is San Francisco the city in the nation where the disparity between its rich and its poor has grown the fastest?

What are the structural economic reasons for this?  Have salaries for Sales Force janitors, electricians and grounds keepers kept pace with those of the Benioffs and top managers?  Have the associated companies taken advantage of city and county tax breaks, thereby diminishing taxes available for infrastructure jobs?  Perhaps the smart guys in these corporations could help us all figure this out.  What are the algorithms of production, distribution and consumption most likely to get us to a stable, growth economy, where all who wish to work can, and those who are unable to work are provided for?  Where are the super-computer models that could help us move forward?

Finally, such corporate largesse if it does not now, will surely, be weighed against their corporate tax obligations.  Perhaps such gifts are already tax deductible, depriving the governments (state and national) from making decisions and allocations of tax moneys — based on input from affected communities and debates which, in theory at least,   are public.  Corporate Board decisions are not public.  Who are their constituents?  If the donations are not now deductible you can be sure that the argument will be advanced, strongly, that they should be, or should be more deductible if such corporate giving shows a decent track record in the next years.

And how have corporations done with their responsibilities to the national community through fair and equal taxation?  The corporate record can barely even be called spotty. According to a new report from Citizens for Tax Justice:

“A comprehensive, five-year study of 288 profitable Fortune 500 companies finds that twenty-six paid no federal corporate income tax over the five-year period; 111 paid no federal corporate income tax in at least one of the last five years, and one-third paid a U.S. tax rate less than 10 percent over the same period,” says a recent study by Citizens for Tax Justice, a Washington, D.C.-based group.

Among the companies that paid not a single penny over five years, despite making huge profits, are household names such as Boeing, General Electric, Priceline.com, and Verizon.

[Just scanning the report will set your hair on fire…]

Corporate Tax Dodgers

Further, the hue and cry from the GOP to roll back corporate taxes and compensate for lost revenue by stitching up loop-holes in the law is about to go silent completely, after a report by one of its own shows how many toes would have to be stepped on to come close to maintaining revenues while rolling back top tax rates.

… the Tax Reform Act of 2014 proposed last week by the chairman of the House Ways and Means Committee, Representative Dave Camp, a Michigan Republican …  seems unlikely to go anywhere, in no small part because the House Republican leadership has gone out of its way to distance itself from the proposal, praising Mr. Camp for his diligence and calling it worthy of consideration but not getting close to an endorsement.

In the talk about tax reform, there has been a general agreement that top rates should be reduced and loopholes closed, something Mr. Ryan has loudly endorsed. But there has been a great reluctance to get specific. This proposal does get specific, and in doing so it makes clear that much more needs to be done to reduce tax preferences and loopholes if we want both to finance the government and to lower tax rates.

To make the limited progress he does, Mr. Camp has to attack many tax preferences. Some are easy (did you know that for some reason the National Football League is tax-exempt?), but many are not. Americans who work overseas lose a tax break. The tax credit for buying electric cars goes away. So does the credit for adopting a child. A lot of tax provisions to provide aid for higher education costs are consolidated.

And so it goes.

It seems to me Benioff and friends would do all of us a big favor to put significant dollars into a tax reform campaign, into national discussion, payment for expert opinion, studies of other comparable countries, into its drafting and into lobbying to pass it — taxes which are recognized as corporate responsibilities.  After the payment of that obligated to the common good, and payment to workers of sufficient wages, if there is a strong benevolent ethos or particularly profitable years, additional gifting, corporately determined, would be a very nice thing, indeed.

Large Corps No Pay the U.K. — Promises Fly

UK lawmakers seek end to corporate tax avoidance

British lawmakers slam Amazon, Google, Starbucks for ‘immoral’ tax avoidance schemes

– British lawmakers on Monday accused major multinational companies including Starbucks, Google and Amazon of immoral tax avoidance, while Starbucks announced it is reviewing its British tax practices in a bid to restore public trust.

Parliament’s public accounts committee said the government should “get a grip” and clamp down on multinationals that exploit tax laws to move profits generated in Britain to offshore domains.

“Global companies with huge operations in the U.K., generating significant amounts of income, are getting away with paying little or no corporation tax here,” said Labour legislator Margaret Hodge, who chairs the all-party committee. “This is outrageous and an insult to British businesses and individuals who pay their fair share.”

…  executives from the three companies had been “unconvincing and, in some cases, evasive” when they appeared before the committee last month to explain their tax regimes. And she accused Britain’s tax agency of being “way too lenient” in dealing with multinationals.

“All three companies accepted that profits should be taxed in the countries where the economic activity that drives those profits takes place,” the lawmakers’ report said.

“However, we were not convinced that their actions, in using the letter of tax laws both nationally and internationally to immorally minimize their tax obligations, are defensible.”

The New York Times Reporters Do Not Understand How Marginal Tax Rates Work

For whatever reason, an article titled “Investors Rush to Beat Threat of Higher Taxes” was published by The New York Times despite the fact that it contains a galling bit of stupidity, which could spread like a supervirus to the general public.

It is these three paragraphs in particular:

Kristina Collins, a chiropractor in McLean, Va., said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000 for individuals and $250,000 for couples.Ms. Collins said she felt torn by being near the cutoff line and disappointed that federal tax policy was providing a disincentive to keep expanding a business she founded in 1998.

“If we’re really close and it’s near the end-year, maybe we’ll just close down for a while and go on vacation,” she said.

This is a stupidity as persistent as it is avoidable. Ms. Collins, chiropractor from Virginia, is among the many people of affluence who have somehow survived without understanding how marginal tax rates work. As always, I am obligated to provide the following paragraph from Dean Baker’s post, “Marginal Tax Rates: How To Explain Them To A Five-Year-Old Child” (not it’s actual title, but still):

The tax system brackets give marginal rates. This means that if the raise bumps you into a higher bracket then you pay more taxes only on the income in the higher bracket. Suppose that the tax bracket for income under $200k is 25 percent, and for income over $200k is 33 percent. If you get a raise that pushes your income from $195,000 to $205,000 then you only pay the higher 33 percent tax rate on the $5,000 that is above the $200k threshold not your whole income. Therefore, there is no (as in none, nada, not any) way that getting more money, and being pushed into a higher tax bracket will leave you with less money after taxes.

Read all by Jason Linkins at HuffPo

Senate Republicans Don’t Like Facts, Bury Them

A couple of news reports dug up the late September live-body-burial by Senate Republicans of a Congressional Research Service report that found no correlation between tax rates for the wealthy and economic growth.

A foundational axiom (no proof needed) of Republican beliefs is that by lowering tax rates for the super wealthy, that money, now not going to the common wealth, will be invested in enterprises which will generate more wealth and jobs.  If on the other hand, the tax rates rise, that money will go to government boondoggles,  the economy will not grow and unemployment will rise.

Not so, says the study.  No correlation.

Senator Charles Schumer raised the issue in a speech at the National Press Club,

“This has hues of a banana republic,” Mr. Schumer said. “They didn’t like a report, and instead of rebutting it, they had them take it down.”

Well, of course Mitch McConnell says they didn’t “order” it taken down.  They only raised issues and “it was withdrawn voluntarily” (over the objections of its author.)  What didn’t they like?

Senate Republican aides said they had protested both the tone of the report and its findings. Aides to Mr. McConnell presented a bill of particulars to the research service that included objections to the use of the term “Bush tax cuts” and the report’s reference to “tax cuts for the rich,” which Republicans contended was politically freighted.

So now those who regularly excoriate politically correct speech would like to use it on their own behalf?  Instead of Bush Tax Cuts we could say the 2001, 2003 tax cuts.  Insted of tax cuts for the rich we could say tax cuts for the top.1% of income earners.  Happy now?  Of course not.

Here is the meat of the report summary, and a link to the whole item,

Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.

Nick Kristoff’s Friend Gone

Nick Kristoff wrote a lengthy piece a week ago about a friend of his who had made choices as to his health insurance when he was young and healthy and broke, that had come back to bite him bad.  He had stage 4 prostrate cancer.

It was an essay about bad choices and the sorrows of one man but also a warning story:  about societies which construct the need for such choices, and about — since that is a given in the US– the need to take those choices seriously.

Kristoff was appalled by the level of vile and contempt heaped on a man who was dying and had said publicly that  it was due in large measure to his own fault.

“Not sure why I’m to feel guilty about your friend’s problem,” Terry from Oregon wrote on my blog. “I take care of myself and mine, and I am not responsible for anyone else.”

Well, I’ll bet you a days worth of medical bills Terry does not take care of “myself and mine,” at least not as many would count “mine.” Second cousins?  Step-parent after he had left home?  Back in an ideal Rousseauean universe we all knew who were ours and who were not.  Today we’re unlikely to know more than the narrow cone of our own mother-father tree; maybe parents’ siblings and their off-spring, but hardly likely at all to know the “mine” of nieces and nephews.  I have several nieces with several children each, whose names I know but not much more — are they “mine” in Terry’s sense?  And as always, the bottom line is 1) who decides and 2) who enforces?  What if Terry says ‘hell no, that drunkard son of my no good sister is not mine?”  Who, in Terry’s opinion picks up the load?

There is always the option of leaving the bodies in the gutters where they fall.  Even then, sadly for the go-it-alone types, someone has to cart off the cadavers.  If there is no market for cadavers and thus no income to haulers, some kind of tax is imposed, even by the hard heats, because suddenly, a public health problem presents itself to “mine.”

I wouldn’t know, not knowing what Terry does everyday, how correct he is that he even takes care of ‘me.”  Is he trekking in on trails he tramped out himself.?  Is the gasoline he uses completely paid for by himself, and not supported by government grants, or pulled from public land (our land, Terry, not Yours) without havingpaid market rate land-use payments?

Then there is Terry’s — and many like him– heartlessness, hidden behind a brusque masculinity.  Kristoff takes it up:

 Living in a community means being interconnected in myriad ways — including by empathy. To feel undiminished by the deaths of those around us isn’t heroic Ayn Rand individualism. It’s sociopathic. Compassion isn’t a sign of weakness, but of civilization.

My second argument is that if you object to Obamacare because you don’t want to pay Scott’s medical bills, you’re a sucker. You’re already paying those bills. Because Scott wasn’t insured and didn’t get basic preventive care, he accumulated $550,000 in bills at Seattle’s Swedish Medical Center, which treated him as a charity case. We’re all paying for that.

Kristoff then reveals that his friend, Scott, has died.

His death was also unnecessary and might not have occurred if he had lived in Britain or Canada or any other modern country where universal health care is standard and life expectancy is longer.

So Scott, old pal, rest in peace. Let’s pray that this presidential election will be a milestone in bringing to an end this squandering of American lives, including your own.

Read All

 

Debt Payments are Deductable for Businesses and so Debt Grows

ProPublica is one of the great resources in the struggle to see through the muddy, under-oxygenated waters in which the big corporations swim.  Here is a piece, published in the NY Times, as well as elsewhere, that will shine a bright light through the dirt.

Thanks to a leaked video, we know that Mitt Romney divides the country into those who pay taxes and those who don’t, the makers and the moochers.

There is one perhaps surprising group you can put in the latter category: the nation’s banks. Sure, banks pay taxes, but they pay a lot less thanks to a giant and underappreciated distortion in our nation’s tax code. Moreover, this tax code distortion makes the financial system and the economy more fragile, prone to bankruptcies and runs. Banks profit, and the economy teeters. Great bargain, huh?

It’s the tax code’s favoring of debt over equity.

For businesses, debt interest payments are tax deductible; equity payments, like when a company pays out a dividend, are not. At the margin, this encourages entities to take on more debt than they otherwise would, as Steven M. Davidoffnoted in a Deal Professor column earlier this year. More debt not only makes companies more vulnerable to bankruptcy but also makes investors more susceptible to panics, when they withdraw their capital en masse. More equity would make the world more stable.

Jesse Eisinger: NY Times / ProPublica