Joan Baxter: How corporate tax breaks hurt humanity

How corporate tax breaks hurt humanity. Truth be told: taxation is only certain for the ordinary law-abiding citizen, the non-rich
By Joan Baxter
Rabble (Canada)



Benjamin Franklin once wrote that nothing is certain in this world except death and taxes. That was in 1789. Mr. Franklin might be surprised to learn that today his axiom no longer holds, at least not for the rich and powerful among us. Truth be told -- as it is in British investigative journalist and author Nicholas Shaxson's meticulously researched and riveting book, Treasure Islands: Tax Havens and the Men Who Stole the World -- taxation is only certain for the ordinary law-abiding citizen, the non-rich. The wealthy and the ultra-wealthy can quite easily get by paying little or even no tax, thanks to the shadowy spider webs of tax havens and secrecy jurisdictions that span the globe.

Shaxson's aims in the book, he says, are to challenge the common idea that it is acceptable for a place to get rich by undermining the laws of other places and to offer a lens through which to view the history of the modern world. "Offshore business," he writes, "is, at heart, about artificially manipulating paper trails of money across borders." It is not a "colourful outgrowth of the global economy, but instead lies right at its centre." It's not about efficiency or any genuine production or real economic growth -- it's about people and corporations making vast amounts of money through tax evasion.

Hiding the world's wealth

This book is a jaw-dropper of an exposé of how the moneyed elites use offshore to hide and grow their wealth and of how this affects the rest of humanity. Shaxson travels the world and delves into archives and financial reports to offer up some mind-boggling facts and figures. More than half of world trade passes, at least on paper, through tax havens. The balance sheets of small island finance centres alone add up to 18 trillion dollars, about a third of the world's GDP -- and that is probably an underestimate. Wealthy individuals hold over 11.5 trillion dollars offshore. That's about one quarter of the world's wealth.

It seems that just about everyone who is anybody is in on the act. Media baron Rupert Murdoch's News Corporation (which owns Fox News, HarperCollins, MySpace and Sun newspapers), for example, uses 152 offshore subsidiaries and so pays an estimated rock bottom six per cent tax rate. Even Bono, writes Shaxson, who "browbeats western taxpayers to boost aid to Africa, shifted his band's financial empire to the Netherlands [an important European tax haven] in 2006 to cut its tax bill." Eighty-three of the U.S.'s 100 biggest corporations have subsidiaries in tax havens. The Tax Justice Network, an organization that works to research and raise awareness of the secretive world of offshore finance, discovered that 99 per cent of Europe's hundred largest companies used offshore subsidiaries, and the largest users of those were banks.

Shaxson takes an extremely complex issue, how vast amounts of money are shifted into tax havens or secrecy jurisdictions where no one can tell who really owns the shell banks and corporations, and renders it all comprehensible, with lively, precise and sometimes very witty prose. It can be agitating reading about how multinationals, banks and the global oligarchy (including not just despots who have robbed their own countries but also some of the world's most respected and prominent citizens) use the offshore system to hide their wealth to avoid paying their share of taxes, which our governments, our schools, our universities, our healthcare systems, our institutions and ordinary people, so sorely need. It can be an especially disturbing read for those of us struggling right now to fill out our tax forms.

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Donna Cooper: Infographic -- Tax Breaks vs. Budget Cuts

Infographic: Tax Breaks vs. Budget Cuts
By Donna Cooper
Center for American Progress

House leaders are unfortunately restricting their proposed budget cuts for the remainder of fiscal year 2011 to nonsecurity discretionary spending in an attempt to tame a $1.3 trillion deficit. This approach is especially shortsighted since the Federal Treasury loses twice as much revenue due to tax breaks than Congress appropriates on all nonsecurity discretionary spending.

The chart below compares the 10 safety-net programs slated for deep cuts with the cost of the tax breaks that should also be considered for reduction or elimination to bring the budget into balance. The column on the left is a list of safety-net programs that have already been targets of the House leadership’s budget ax. The column on the right is the cost to specified tax breaks.



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Reuters: Government Study says most corporations pay no U.S. income taxes

Study says most corporations pay no U.S. income taxes
Reuters

Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.

The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.

More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.

During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.

The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.

With the U.S. budget deficit this year running close to the record $413 billion that was set in 2004 and projected to hit a record $486 billion next year, lawmakers are looking to plug holes in the U.S. tax code and generate more revenues.

Dorgan in a statement called the report "a shocking indictment of the current tax system." Levin said it made clear that "too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States."

The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said.

Link

Yves Smith: Wisconsin Union Battle -- A Convenient Distraction From the Real Culprit in State Budget Woes

Wisconsin Union Battle: A Convenient Distraction From the Real Culprit in State Budget Woes
by Yves Smith
Naked Capitalism

The first is that the collapse in tax receipts was the result of the global financial crisis. That’s the 800 pound gorilla in the room that everyone seems to ignore. But second, as a very good article by Richard Wolff in the Guardian stresses, is that corporations no longer pay their fair share of total taxes:

During the Great Depression, federal income tax receipts from individuals and corporations were roughly equal. During the second world war, income tax receipts from corporations were 50% greater than from individuals. The national crises of depression and war produced successful popular demands for corporations to contribute significant portions of federal tax revenues.

US corporations resented that arrangement, and after the war, they changed it. Corporate profits financed politicians’ campaigns and lobbies to make sure that income tax receipts from individuals rose faster than those from corporations and that tax cuts were larger for corporations than for individuals. By the 1980s, individual income taxes regularly yielded four times more than taxes on corporations’ profits…

Corporations repeated at the state and local levels what they accomplished federally. According to the US Census Bureau, corporations paid taxes on their profits to states and localities totalling $24.7bn in 1988, while individuals then paid income taxes of $90bn. However, by 2009, while corporate tax payments had roughly doubled (to $49.1bn), individual income taxes had more than tripled (to $290bn).

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A Reply to a Mass Email That All We Need to Do Is Remove the Current Elected Officials and Our Political System Will Be Fixed

[My response to a mass email sent by a relative trying to convince people that what need to do is to get rid of the current elected representatives and that will solve our current social/economic problems]

I would like to encourage you all to reconsider what the problem is here. You can do whatever you want to your elected officials, but they are not really the true problem. I would encourage you to look into the recent Supreme Court decision on "Citizen United vs the US" and consider the implications of unregulated corporate cash influx into our so-called democratic elections. The problem is the unchecked flow of corporate money in our democracy and the dependence of our elected officials on that money to get elected (and re-elected). Get rid of many as you want, the new ones will still be dependent on the same masters.....

Take, for instance, the Tea Party, which is corporate funded and is not about dismantling the current system. What they are about is deregulating the social system in order to continue to benefit our country's elites (this is not to discount the legitimate worries of the Tea Party masses, this is to say they are being misled by their corporate funded leadership). The first thing newly elected Tea Party Senator Rand Paul did here in KY was to seek to continue the tax cuts Bush had temporarily instituted for those that make over 250,000 dollars.

A current report from Democracy Now lets us know how bad it is for working people who have lost their jobs and/or have seen their wages frozen/cut these past few years:

Food banks across the country are serving a record number of people and many agencies are struggling to meet the demand ahead of Thanksgiving. In Texas, the Montgomery County Food Bank served a record 31,000 people last month. The Washington Post reports the demand for meals at the Arlington Food Assistance Center in Virginia
has jumped 50 percent in the past two years. In the Washington DC area, the Capital Area Food Bank is on pace to distribute a record 30 million pounds of food this year, an increase of more than 10 percent since 2009. According to the U.S. Department of Agriculture, the number of families seeking assistance from food pantries jumped from 3.9 million in 2007 to 5.6 million last year. The number of U.S.
households deemed "food insecure" also exceeded 50 million last year, amounting to a record 14.7 percent.

... and then this report comes out in the NY Times about all-time record corporate profits last quarter:

Corporate Profits Were the Highest on Record Last Quarter

Record "profits" for the few through the exploitation of workers. Record "growth" for corporations through systemic economic disparity and extreme poverty for the majority of workers. Currently 1 in 7 families in America are at or below the poverty line ($22,000 for a family of four), in KY it is 1 in 4. This is disturbing to me.

Michael

Terrance Heath: Revisiting the Reagan Nightmare

Revisiting the Reagan Nightmare
by Terrance Heath
Campaign for America's Future

...

And it started with Reagan. Anyone who's wringing their hands about America's debt and China's ownership of it has Reagan to thank, as Reagan's former budget director David Stockman recently explained to David Corn.

Here's how Stockman tells the tale. In the '80s, Reagan and his White House crew were eager to cut income taxes across the board. The aim, he asserts, was to fix the slumping economy, not to starve the beast of big government. Republican leaders on the Hill were initially skeptical—they insisted that the White House pass spending cuts before Congress tackled the tax side. "The honest-to-goodness fact," Stockman says, "is that in February 1981, there wasn't close to a Republican majority for tax cuts without any accompanying or coupled spending cuts. The idea of supply-side in its purest form"—that tax cuts fuel economic growth that yields increased tax revenues—"was only embraced by a handful of junior Republicans, plus Jack Kemp."

The Reagan administration hardly minded proposing massive cuts to both taxes and spending. But then things went haywire, Stockman notes. The tax cut ballooned from $500 billion over five years to $1 trillion after lobbyists added special-interest tax breaks for various industries. And on the spending side, the Reagan administration went hog-wild throwing money at the Pentagon. The inevitable happened: The deficit ballooned.

...The new doctrine got a boost when it turned out you didn't have to match tax cuts with spending cuts: The Federal Reserve was able to sell the nation's growing debt to China and others. "It totally anesthetized the political system to the costs of deficit spending," Stockman says. "Therefore the simplistic and reckless idea that the way to stimulate the economy is to cut taxes anytime, anywhere, for any reason, became embedded [in the GOP]. It has become a religion, it has become a catechism. It's become a mindless incantation."

As Paul Krugman wrote 2009, we weren't always a nation of big debts. He went on to explain how it started with Reagan.

“This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. ... All in all, I think we hit the jackpot.” So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.

He was, as it happened, wrong about solving the problems of the thrifts. On the contrary, the bill turned the modest-sized troubles of savings-and-loan institutions into an utter catastrophe. But he was right about the legislation’s significance. And as for that jackpot — well, it finally came more than 25 years later, in the form of the worst economic crisis since the Great Depression.

...The S.& L. crisis has been written out of the Reagan hagiography, but the fact is that deregulation in effect gave the industry — whose deposits were federally insured — a license to gamble with taxpayers’ money, at best, or simply to loot it, at worst. By the time the government closed the books on the affair, taxpayers had lost $130 billion, back when that was a lot of money.

But there was also a longer-term effect. Reagan-era legislative changes essentially ended New Deal restrictions on mortgage lending — restrictions that, in particular, limited the ability of families to buy homes without putting a significant amount of money down.

These restrictions were put in place in the 1930s by political leaders who had just experienced a terrible financial crisis, and were trying to prevent another. But by 1980 the memory of the Depression had faded. Government, declared Reagan, is the problem, not the solution; the magic of the marketplace must be set free. And so the precautionary rules were scrapped.

Together with looser lending standards for other kinds of consumer credit, this led to a radical change in American behavior.

Revisiting the Reagan ruins earlier this week, Robert Borosage explained that Reagan's de-regulatory fervor essentially gutted consumer protections.

Deregulation gutted consumer protection, environmental protection, workplace safety and the right to organize under Reagan. It led to many scandals that made his administration one of the most corrupt in history, with a record 138 officials investigated, indicted or convicted. But the biggest change was deregulation of banking, which led to successive financial wildings and crashes that have cost taxpayers literally trillions. The first was the Savings and Loan debacle that followed on Reagan's reforms that empowered banksters to gamble with other people's money, with their losses guaranteed by the federal government.

Working people's share of the benefits from increased productivity took a sudden turn down.

In the column quoted above Krugman also wrote that the increase in public debt was dwarfed by the increase in private debt, made possible by Reagan's deregulation. "It's the gift that keeps on taking," Krugman wrote. Taking, that is, from working people.

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