June 2011 Archives

Hatch, liberal group respond to Pawlenty tax plan

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Original Post

June 7, 2011

By Bernie Becker

Sen. Orrin Hatch (R-Utah) seems pretty amenable to the tax plan proposed by Tim Pawlenty, the former Minnesota governor and Republican candidate for president.

The left-leaning Center for Tax Justice? Not so much.

Pawlenty, in a Tuesday speech at the University of Chicago, called for slashing the top corporate and individual tax rate, both of which currently stand at 35 percent, to 15 percent and 25 percent, respectively.

The former two-term governor also called for eliminating tax credits and deductions, as well as taxes on dividends, interest income, capital gains and the estate tax – all part of his plan to ramp up economic growth. (The Hill’s Jordan Fabian has more on the speech here.)

Hatch told reporters Tuesday that he thought it was “feasible” to reduce the top corporate rate to 15 percent, while also sounding enthusiastic about rolling back taxes on capital gains.

“I’d love to see it at 15,” said Hatch, who added that he thought a drastically lower rate could entice more multinationals to establish their headquarters here.

But Hatch, the ranking member on the Senate Finance Committee, also noted that more policymakers pushing for tax reform had been eyeing a top rate more like 25 percent. (That includes Reps. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, and Paul Ryan (R-Wis.), the chairman of the House Budget Committee.)

For its part, Citizens for Tax Justice, a group with significant ties to organized labor, released a study declaring that Pawlenty’s plan would amount to a 41 percent average tax cut for millionaires.

On the individual side, Pawlenty proposes to install a 10 percent rate for income up to $50,000 for individuals or $100,000 for married couples. All income above that would be taxed at the 25 percent rate.

CTJ – which assumed in its analysis that the Pawlenty proposal would be paired with the elimination of all itemized deductions and tax credits – said that would mean that a taxpayer with annual income of $10 million or more a year would see a 46 percent tax cut.

Huffington Post: Corporate Tax Holiday Could Create Infrastructure Bank - But Devil Is In The Details

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Original Post

June 22, 2011

by Matt Sledge

Rahm Emanuel has a proposition. A grand one, for big business, big unions, and Congress: let a corporate income tax holiday pay for a national infrastructure bank.

Let multinationals bring their money home -- the money that's parked overseas, dodging Uncle Sam's corporate income taxes -- and the federal government can use some of it to pay for the infrastructure bank, the newly minted mayor of Chicago says.

Unions, big corporations, and potentially members of both parties: a virtual rainbow coalition may be assembling in favor of the infrastructure bank. But corporate watchdogs charge there's no difference between a tax holiday with a bank and a tax holiday without one.

Under Emanuel's plan, which he is developing with Rep. Rosa DeLauro (D-Conn.), the bank would build the bridges, roads and mass transit that America has been neglecting for decades. As these structures rust and fall apart, oftentimes nothing new is being built in their place. Yet money to improve infrastructure money will not be easy to come by in the midst of a protracted deficit debate; by including the tax holiday, Emanuel's proposition aims to win over Republicans leery of adding to the deficit.

The idea for the bank is not new -- former Service Employees International Union President Andy Stern mooted it in an op-ed piece months ago -- but it seems to be gaining renewed attention. Reed Hundt and Thomas Mann wrote about it in the Washington Post last week, Emanuel treated it as his own in a speech to the U.S. Conference of Mayors on Saturday, and now Sen. Chuck Schumer (D-N.Y.) is feeling out the Senate.

For proponents, the hope is that the proposition could unite Democrats in the Senate and Republicans in the House. Emanuel said he thinks his grand compromise "brings the parties together."

The specific terms of the tax holiday, however, would be critical. Some Democrats don't want to give multinationals a free pass, and Republicans don't want to be too hard on corporate America.

Without some sort of deal, it's possible that money could continue to linger offshore -- parked in anticipation of a better deal from a different Congress. That has been the situation since 2005, when another tax holiday was declared, premised on the idea that it would create jobs; it didn't.

Critics of any sort of tax holiday say that the infrastructure bank is just the latest twist on corporate blackmail.

"Every one of these amnesties encourage greater holding offshore and Congress is being irresponsible even to say they are thinking about it," said Calvin Johnson, a professor at the University of Texas School of Law who specializes in tax law.

Former SEIU chief Andy Stern disagreed. "The problem is the money hasn't come back, there's no reason to believe it will ever come back," said Stern, now a senior fellow at Georgetown University Public Policy Institute.

"Details are appropriate and important -- you know, what's the tax rate? -- but we're now in the right framework," he argued.

In his speech to the mayors, Emanuel said he would like to see the tax rate lowered to 10 or 15 percent, down from its current 35 percent, for the tax holiday. The money the government raises from those taxes would then be directed only to the infrastructure bank, ensuring, in his view, that it would actually be used to create jobs.

Such a cut on the corporate income tax rate, however, might not sit well with small businesses, who can't use creative accounting to hide their profits overseas like the multinational corporations. And a cut to 10% might not be steep enough to win over Republicans in the House, who have been talking about taxing repatriated income at a rate in the low single digits. In the Senate, Schumer has reportedly suggested a 5% rate.

Rep. DeLauro told HuffPost that she's working with Emanuel to find a balance, and she is hopeful that Republicans can be convinced to sign on to their plan. DeLauro said she has been working on plans for an infrastructure bank for 14 years, and found the recent discussion of the idea "very encouraging."

"The concept of an infrastructure bank has wide support -- from the U.S. Chamber, from labor unions, from a whole bunch of people in between," she said.

Robert McIntyre, director of Citizens for Tax Justice, isn't one of those people. He said there was "no substantive difference" between a straight tax holiday and one that was combined with an infrastructure bank. "It's just somebody's wacky idea that the problem the world faces today is a lack of capital. Our problem is there's not enough consumer demand. The government should be out there shoving money out the door and stimulating the economy."

"This bank is going to be just another bank -- they could have given the money to SunTrust, you know?" he said.

DeLauro said capitalizing the bank via a tax holiday was not her first choice, but she thought that it would be a good approach in the GOP-controlled House.

"If we are going to have another repatriation holiday, the federal government should use the incoming revenue to capitalize a national infrastructure bank, and we do know that such an entity creates jobs, long-term economic growth," DeLauro said.

Tying the repatriation to a larger reform of corporate income taxes is also critical in her mind. "Any repatriation effort has got to be a bridge to broader corporate tax reform. We have to close tax loopholes," she said.

Her infrastructure bank plan would leverage money from corporations and the federal government to create projects that include public-private partnerships. Because of the federal backing, loans for the projects could be issued at low rates.

Such arrangements are common overseas; some have pointed to the European Investment Bank as a model for what could be created here.

The United States has relatively fewer infrastructure projects that are operated as public-private partnerships, and any ventures that smacked of privatization might prove controversial. A privately owned toll road created with lending from the infrastructure bank, for instance, might charge a high rate to pay off its government loan. Criticism might also arise if the arrangement's big winners are the same multinationals benefiting from the tax holiday, as opposed to small businesses.

New York Times: No Food Safety in These Numbers

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Original Post

June 21, 201


I’m eager to cover some curious and less depressing topics here — did you know Asian multi-millionaires are cornering the market on first-growth Bordeaux? — and equally eager to stop throwing mind-numbing numbers around. But as long as those pesky Republicans keep attacking the food supply for low-income people and food safety for all of us, and as long as most Democrats put up toothless defenses instead of actually trying to make things better, I gotta pay attention. If we needed further evidence that the party of “family values” only values wealthy families, we have it now; when these guys say “women and children first,” they mean “first to throw overboard.”

The House’s reactionary majority wants to dismantle two aspects of the Federal system that serve the majority of us not perfectly but decently: the Women, Infants and Children Program (WIC), one of the most effective of all social welfare programs, and the Food and Drug Administration (FDA), among whose jobs is the increasingly difficult one of protecting us from the kind of outbreak of E. coli that just killed at least 39 people in Germany, gravely — perhaps mortally — sickened another 800 and gave another couple thousand a few of those days none of us ever wants.

As I wrote two weeks ago, we’ve had our share of foodborne illnesses in the past, but have not kept up with the increasing threat of E. coli. One in six Americans gets sick from the food we eat every year — that’s about 48 million people, or enough to fill your average baseball stadium a thousand times with people having extremely unpleasant symptoms — and there are 3,000 food-related deaths annually. This is a food system that Georgia Congressman Jack Kingston calls “99.99 percent safe.” I guess he wasn’t one of the 16 percent last year who fell ill, but maybe he should talk to a million or two of them; they should be easy enough to find.

As we near the 10th anniversary of 9/11, we’re going to be reminded more and more of how much 3,000 deaths from hostile attackers can hurt. Yet put aside the questionable decisions we made in anger and sorrow that have cost us $1.2 trillion — and another 6,000 or so American lives — in wars whose benefits are far from clear. Think, instead, that the annual costs of food-borne illness are estimated to be around $152 billion a year, and consider that the entire proposed FDA budget is around $4 billion (three percent of that $150 billion), and that a measly $280 million or so of that (about one-fifth of one percent of that $150 billion) was destined for the Food Safety Modernization Act, which would expand activity geared toward protecting us from E. coli and other foodborne threats.

In fact, the House majority proposes funding the FDA at nearly $87 million less than it’s currently getting, and $205 million less than President Obama’s modest request. Which means that the already-passed Food Safety Modernization Act probably will not even be implemented. Or, if funds are transferred from within FDA to allow its partial implementation, other FDA programs that are no less important — like the approval of medical devices and prescription drugs — will become less effective.

Cutting FDA funds is a direct attack on the health and welfare of every person in this country; cutting WIC by 10 percent — that’s the House’s idea of fairness — may at first seem to affect fewer people, but a closer look shows good reason for us all to be concerned. It’s estimated that half of all American infants and about a quarter of all kids under four have participated in WIC. Not only caring people but impartial people consider the WIC program money well spent: every dollar spent saves three in health care costs during the first two months of a child’s life. Not a bad return on investment.

Take that away, and who pays those added health care costs? You. Me. Us. (In general, Federal money absorbs about 60 percent of all health care costs; that number is greater, of course, if the people incurring those costs are low-income.) Yet the House version of the Agriculture Appropriations Bill would end food assistance for as many as 350,000 low-income women and children, and would put those women and children at risk for less-safe pregnancies, premature births, more infant deaths, worse nutrition and more. This from people who mostly claim to be “pro-life” yet for whom the great pleasure of claiming to “save” less than a billion dollars now outweighs the risk of spending many times that in the form of healthcare costs and mortality in the near future. Not to mention the suffering, which they don’t.

The numbers boggle the mind, but here it is, simply: With both FDA and WIC, we are talking millions in spending to save billions in health care costs. Shall we count the ways in which our representatives might save enough money to pay full freight for both of these programs, besides the future savings, besides coughing up 0.632 percent on what we’ve spent in Iraq, Afghanistan and Libya?

Let’s see: reducing direct subsidies for commodity crops, which costs us at least $5 billion? Negative. Cutting subsidies for ethanol, another $6 billion? Nope. Reduction or elimination of the Bush tax cuts, which have cost us somewhere around $39 billion in just the seven months since their extension by our good-guy president (with, by the way, no significant decrease in unemployment, the ostensible reason for the extension)? Fuggedaboutit. An enforcement of the corporate tax rates, which would yield tens of billions? Hah! (In fact, Citizens for Tax Justice found that 12 corporations paid negative 1.5 percent tax on $171 billion in profits. In other words, we paid them a couple of billion so they could earn a couple of hundred billion. Nice work if you can get it.)

The money for programs that improve our nutrition and food safety is there; it’s just a matter of looking in the right places, and straightening out our priorities. As soon as that happens, we can worry about getting our hands on some of those Bordeaux.

CNBC: 'Voting With Your Feet' and Can It Have Any Impact on The 2012 Election?

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Original Post

Tuesday, 21 Jun 2011

by Lori Ann LaRocco

We have all heard the phrase Americans "voting with their wallets."

But what about Americans voting with "their  feet?"

Some Americans tired of high taxes and lack luster local economies are moving to states where the opportunity for higher income growth and less taxes are available. A recent study from the Mercatus Center at George Mason University took at look at how a state's public policies can impact a person's economic, social and personal well being. 

I decided to ask Jason Soren, Assistant Professor of Political Science at the University of Buffalo and one of the co-authors of the study if this trend could have national or local political implications in the 2012 election and beyond.

LL: Your latest study shows people are voting with their "feet" moving out of states that infringe on their personal freedom and economic well-being. Will this trend have any impact on the 2012 election?

JS: It's had a small impact on apportionment of U.S. House seats, with conservative states like Texas and Arizona generally gaining seats and liberal states like New York and New Jersey tending more often to lose seats. Accordingly, the electoral college's makeup has shifted slightly to the benefit of Republicans.

LL: Are enough people moving where Blue States can turn to Red States or vice versa?

JS: Yes. California lost 4 percent of its 2000 population, on net, to other states, while Idaho gained 8 percent of its 2000 population, for example.

People moving from less free states to freer states might make the latter less likely to remain free, if the movers are representative of the states they left.

However, there is good reason to expect that they are *not* representative of the states they left. For instance, Andy Smith at the University of New Hampshire reports that surveys show that 56 percent of former Massachusetts residents who now live in New Hampshire say that high taxes were a primary reason for moving. So the usual trend is probably that red states will get redder, and blue states will get bluer, since red states tend to be freer on average than blue states.

However, there are some exceptions, and some blue states actually do well on freedom, especially personal freedom, and are also attracting migrants. Oregon is an example. In these cases it's not immediately clear who's moving in and what their electoral impact will be.

LL: From a political party point of view. Which states are considered more attractive to move to- Red or Blue?

JS: We don't find a relationship between partisanship and migration per se. Instead, it's freedom that attracts people. Moderate and conservative states are on average freer than liberal states, especially very liberal states. However, there are exceptions. The Great Plains and Mountain West states are generally freer than the Deep South states. The Midwest and Pacific are generally freer than the Northeast and Mid-Atlantic.

LL: Bottom line, its the government's policies that influence the economy. Based on the trends that you are seeing where people are moving and the dissatisfaction they are feeling, can you see which way Americans are leaning right now as we head into the Presidential election cycle? Are more people learning right or left?

JS: That phenomenon is really beyond the scope of our study. We just look at how past voting patterns explain existing policies.

LL: Given the economic situation we are in and the fiscal challenges facing states. Are you seeing more people move to states like North Dakota who have been booming?

JS: Yes. The Dakotas and Wyoming never had a recession. Texas and Virginia had tiny ones and are now growing strongly. People are apparently moving to these states. Texas had 143,423 more people enter the state from another state than leave for another state in 2009, the latest year for which data are available. The Dakotas, Wyoming, and Virginia all also had net in-migration in 2009.

LL: Where did taxes rank in your study?

JS: They're a major part of economic freedom. Together, taxes and government spending and debt made up one-quarter of our overall freedom index. New York had the highest state and local taxes in 2008 (the latest year for which data are available), at 14.5% of personal income. South Dakota had the lowest taxes, at 7.6% of personal income.

LL: How will these rankings impact the constitutionality of Obama's Affordable Care Act?

JS: Not directly perhaps, but the main message of our study - that the laboratory of federalism is working, allowing states to experiment with policies and thereby attract people and grow their economies - implies that the PPACA is bad policy. It wipes out all state experiments in health insurance for a one-size-fits-all policy. In fact, once the PPACA comes fully into effect in 2014, we will have to drop that entire category from our index.

LL: Citizens for Tax Justice was critical of your report calling it "shallow and misleading" in terms of your taxation analysis. What is your response?

JS: Their specific complaint was that our study ignores tax exemptions for corporations that work like subsidies and distort the marketplace.

If data on such exemptions were available for all 50 states, we would like to use them, but they aren't. But it's a very small piece of the puzzle anyway, since the vast majority of state tax revenue comes from taxes other than corporate income taxes. Even adding in property taxes paid by businesses isn't enough to alter the broad relationships we find.

LL: Speaking of taxes, if people are moving with their feet as your report indicates, how much of an inflow will these states that are more free see and how much in loss of capital will these less free states suffer?

JS: Our best estimate is that New York, for instance, would be seeing over 100,000 more people move into the state than leave the state each year if it had New Hampshire's level of freedom. Instead, it's been losing almost 200,000 people per year to other states. That gives a sense of the magnitudes of the effects that we find.

We also find that economic freedom increases personal income growth.

Our best estimate is that New York would be seeing over 1% more real personal income growth per year if it had New Hampshire's level of freedom.

That's a significant effect, since from 2000 to 2009 New York actually grew at a 0.7 percent annual rate.

LL: Less tax capital coming in will impact municipalities. Won't that further exacerbate the problem (meaning municipalities will have to tax more and drive more people out)

JS: Exactly! In states like California and New York, governments will have chronic trouble paying their bills as their tax base continues to flee.

The only way to staunch the flow will be significant spending cuts.

LL: How much did housing impact people's mental outlook on their state?

JS: Some relatively free states like Nevada, Arizona, and Florida had big housing crashes, just as some relatively unfree states like California did.

We expect the freer states to recover more quickly. In part, the problem in the former three states was that so many people were moving in that a bubble in house prices emerge. It was precisely these states'  attractiveness that caused their recent, probably temporary housing troubles.

Business Insider: 29 Facts about Extreme Income Inequality in America That Will Blow Your Mind

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Full, Original Post

by Michael Snyder

June 17, 2011

Today, average Americans have less power relative to the monolithic corporate and governmental institutions that dominate our society than at any other point in U.S. history....

What U.S. corporations are able to get away with is absolutely amazing.

The following figures come directly out of a report by Citizens for Tax Justice.  These are combined figures for the tax years 2008, 2009 and 2010.

During those three years, all of the corporations below made a lot of money.  Yet all of them paid net taxes that were below zero for those three years combined.

How is that possible?  Well, it turns out that instead of paying in taxes to the federal government, they were actually getting money back.

So for these corporations, their rate of taxation was actually below zero.

If you have not seen these before, you are going to have a hard time believing some of these statistics.....

Profits: $4.9 billion
Taxes: -$34 million

*Fed Ex*
Profits: $3 billion
Taxes: -$23 million

*Wells Fargo*
Profits: $49.37 billion
Taxes: -$681 million

Profits: $9.7 billion
Taxes: -$178 million

Profits: $32.5 billion
Taxes: -$951 million

Profits: $2.1 billion
Taxes -$72 million

*American Electric Power*
Profits: $5.89 billion
Taxes -$545 million

*General Electric*
Profits: $7.7 billion
Taxes: -$4.7 billion

Are you starting to get the picture?

I wish I could make $7.7 billion, pay no taxes and have the government give me $4.7 billion on top of it.

Our system has become corrupted beyond all recognition.

We need to throw out the current system of taxation and come up with something entirely new.

In fact, the truth is that for most of U.S. history there was not a federal income tax at all.  But that is a story for another day.

If you believe in the U.S. Constitution and in the republic that our founding fathers established, then the very high concentrations of wealth and power in our society today should greatly concern you.  Income inequality is not a "Democrat" or a "Republican" issue.  A vibrant, thriving middle class should be a goal all of us can embrace.

Colbert Report: Pawlenty Plan Gives Big Tax Cuts to Rich

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June 14, 2011

In his Elephants in the Room segment on the GOP Presidential debate Monday night, Stephen Colbert features a Citizens for Tax Justice report on Tim Pawlenty's tax plan.

Colbert outlines some of Pawlenty's ideas and cites CTJ's report demonstrating it would bestow an average $2.4 million tax cut on Americans earning more than $10 million a year.

Watch the full segment here.

FrontpageColbert (2).gif

Pekin Daily Times: Knight: A decade of decadence for the rich

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Original Post

June 13, 2011

By Bill Knight

Millionaires should be giving to charity, not getting it from the rest of us.

And we should all be more skeptical of the “have your cake and eat it, too” philosophy that’s hurt the country for 10 years now.

Before extremists try balancing the budget on the backs of regular people by cutting Medicare and Social Security, jobless benefits and other needed expenditures, sensible voices should suggest letting the Bush tax cuts expire on schedule after 2012.

Last week marked 10 years for what’s known as “the Bush tax cuts,” but George W. Bush should not be exclusively blamed. Republican ideologues, Congress and lobbyists all were complicit, and many Americans were tricked by the foolish appeal to greed saying, “You can have something for nothing.”

In reality, the main reasons for decaying budgets and projected shortfalls over the next few years are continuing those tax cuts and the wars in Iraq and Afghanistan, reports the Center on Budget and Policy Priorities (CBPP) — $500 billion of 2009’s deficit and $7 trillion projected for the next 10 years.

“We are on the verge of trading tax cuts for the wealthy and spending on wars for large cuts to social programs,” said Nobel Prize-winning economist Paul Krugman, who scolds those who blame consumers for economic problems. “We need to place the blame where it belongs, to chasten our policy elites. Otherwise, they’ll do even more damage in the years ahead.”

Concern with budget deficits and the national debt — the sum of all deficits (and surpluses, like the Clinton administration left in 2000) — misses the point: The tax cuts and the wars will account for almost half of public debt by 2019 if policies don’t change, according to the CBPP. Add the recession’s effect on jobs and the loss of income revenue, and that already dwarfs the rest of federal spending.

At best, those tax cuts (in 2001, more in 2003, and renewed with Obama’s compromise last year) continued to bet on a long-shot that’s never happened — employment spurred on by enriched wealthy people. At worst, it was a political trick to get re-elected and maybe starve government, which has been unfairly generalized as incapable of doing anything citizens need.

President Reagan’s budget director, David Stockman, has conceded the philosophy’s flaws. Recalling Reagan cut taxes in 1981 but raised them in ‘82, ’83 and ’84 to make up for lost revenues, Stockman says “supply-side” failed. Instead of a trickle-down effect, the result was the rich saying, “I got mine.”            

Affluent individuals and big corporations benefited — the top 1 percent got 65 percent of the country’s income growth in the last decade.

The price tag for the tax cuts was about $2.5 trillion through 2010, according to Citizens for Tax Justice. That could have been invested in America, notes ThinkProgress blogger Zaid Jilani, who said the nation could have used that money to buy a decade’s worth of health care for 122 million poor children; provided Pell grants for 43 million students; provided care for 30 million military veterans; hired 4 million fire fighters or 3.6 million police officers; hired more than 3 million grade school teachers annually; or retrofitted 144 million homes for wind power or 54 million households for solar energy — each year.

The Economic Policy Institute reported that “the Bush tax cuts were expensive, ineffective and unfair. If continued, they will crowd out budget priorities such as economic security programs and investments in education, infrastructure, research and health.”

Why should 90 percent of the nation and its older citizens suffer to help those who don’t need it?

The Institute for Policy Studies’ Chuck Collins suggests the tax cuts for the wealthy should expire, tax rates on millionaires should rise, oil industry subsidies should go, and breaks for corporate tax dodgers like General Electric be eliminated.

A small-government conservative, Stockman criticizes the Bush administration for repeating “in much greater magnitude the errors we made in the early ‘80s: a massive increase in defense spending, a massive reduction in the revenue base (via tax cuts), and not even an effort at spending cuts.”

He suggests 1) cutting Defense $100 billion or more a year, 2) applying a means test to Social Security and Medicare (so those who don’t need assistance don’t get it), and 3) raising taxes (he favors taxing financial transactions: “We have a massive casino that is doing nothing but churning transactions by the millisecond, as a result of the Fed juicing the system continuously with overnight money that’s free,” Stockman told David Corn in Mother Jones magazine. “There’s no productive value for Main Street or the real U.S. economy.”

Congress must face facts, concede mistakes, and restore tax fairness.

Lexington (KY) Herald-Leader: Tax-cut anniversary

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Original Post

June 13, 2011

by Tom Eblem

June 7 marked the 10th anniversary of the huge federal income tax cuts that President Barack Obama and Congress must soon decide whether to cancel or extend.

What a difference a decade makes: President George W. Bush proposed the tax cuts after he inherited a budget surplus. Three months after the cuts became law, the terrorist attacks of Sept. 11 led to the war in Afghanistan, followed in 2003 by the invasion of Iraq. Then the housing bubble burst, and the United States plunged into the worst economic slump since the Great Depression. With record deficits and serious national needs, can we still afford those tax cuts?

To mark the anniversary, Citizens for Tax Justice and Kentucky Youth Advocates released an analysis showing that if the tax cuts are made permanent, the richest 5 percent of Kentuckians will benefit 10 times more than the bottom 60 percent.

"In many ways, these tax cuts are little more than a stimulus package for the wealthiest of Kentuckians," Terry Brooks, executive director of Kentucky Youth Advocates, said in a news release. "In these tough economic times, we need an approach where Kentucky's hard-working families are given the same breaks as multimillionaires."

To read the analysis, go to Ctj.org/bushtaxcuts10yrs.php.

AlterNet: Ten Years After Bush Tax Cuts, An Emerging Movement

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Original Post

June 9, 2011

by Chuck Collins

10 years on, the Bush tax cuts are a disaster—and we’re contemplating more tax breaks for the wealthy. How can we stop the madness?

GOP candidate Tim Pawlenty observed the 10th anniversary of the Bush-era tax cuts by proposing $2 trillion in additional tax cuts, primarily for millionaires and global corporations.

Have we learned nothing?

A decade since their passage, its clear that the Bush tax were a $2.5 trillion mistake that put us on the road to fiscal instability.

At the time they were passed, Congressional budget analysts projected a $5.6 trillion surplus over these last ten years. But even after the rosy projections turned to red ink, the tax cut bonanza continued. As a result, Congress engaged in a “decade of magical tax cut thinking,” responding to the deep economic challenges of the last ten years with a one-point program: cut taxes for the wealthy and expand tax loopholes for global corporations.

In 2001, Bob McIntyre of the group Citizens for Tax Justice argued that the tax cuts were a bad idea—that they were overly tilted to benefit the rich—and would eventually lead to deficits. Last week, in the face of massive deficits and deep cuts to crucial programs, CTJ released a report projecting that another ten-year extension of the Bush tax cuts would cost $5.5 trillion.

“There are some in Congress who believe that the best way to deal with the struggling economy right now is to extend the tax cuts and see if they work the second time around,” said McIntyre. “They didn’t work the first time, and they aren’t going to work the second time.”

A report from the Economic Policy Institute points out that the Bush tax cuts cost over $2.5 trillion over the last decade. An estimated 38 percent of those tax cuts—almost $1 trillion—went to households in the richest 1 percent, those with incomes over $645,000. Tax cut beneficiaries include some of the highest paid CEOs in America.

Bleak Moment or Emerging Movement?

At first glance, the prospects for shifting this anti-tax environment appear bleak. GOP presidential candidates and Congressional leaders are beating the same drum: “We’re broke,” “Deficits Kill Jobs,” “Must Cut Taxes…”

Behind the headlines, however, public attitudes are shifting. A growing number of citizens are taking on the fundamental unfairness of the current tax system. They see how growing inequality is destroying the middle class and contributing to economic instability.

Historically, public attitudes about taxing the wealthy have been somewhat ambivalent. In the abstract, many U.S. voters are reflexively anti-government and anti-tax. But when it comes down to the concrete ways we use tax revenues, citizens want a responsive government that includes retirement security, environmental protection, healthy communities, and the wide range of public services that we enjoy.

As states and the federal government make deep budget cuts, the things people appreciate about government will start to deteriorate or go away: the bus will be late, the state park closed, the school art department gone, the police unavailable.

Though GOP congressional leaders talk austerity and imply that the only solution to budget deficits are spending cuts, a strong majority of people in the U.S. want to put raising taxes on the table.

Public opinion polls reveal that over 72 percent of the public favors increasing taxes on millionaires and closing tax loopholes before further budget cuts. And support for progressive taxes will only increase as the impact of budget cuts further degrades the quality of life, public services, and infrastructure in our localities.

Revelations that huge corporations and the wealthy are paying historically low tax rates are fueling this public attitude shift. Recent IRS data reveals that the richest 400 U.S. taxpayers have seen their effective tax rates fall to their lowest levels since prior to the 1930s Great Depression. The cover story in Business Week during April’s tax season was “The Billionaires Guide to Paying No Taxes.” And reports that General Electric pays no federal taxes—and that other companies including Verizon, Federal Express, Boeing and bail-out recipient Bank of America pay no or ridiculously low taxes—touch a deep nerve.

The grassroots US Uncut movement has emerged to draw attention to the powerful juxtaposition between budget cuts and corporate tax dodging. As a result, the public conversation is shifting. A year ago, the Tea Party narrative dominated April 2010 tax day. This year, however, the news on Tax Day focused on millionaire and corporate tax deadbeats.

The 10th anniversary of the Bush tax cuts focused new attention on the irresponsibility of further tax cuts. Grassroots groups convened actions and press events around the country to dramatize the link between the tax cuts and local budget cuts that worsen unemployment.

Activists are coalescing around a number of revenue proposals that could raise trillions of dollars over the next ten years. One initiative is the Fairness in Taxation Act, introduced by Illinois Congresswoman Jan Schakowsky. Her legislation would add additional tax rates for millionaires, generating $74 billion a year. In an op-ed in the Chicago Tribune, Rep. Schakowsky writes, “Middle-class and low-income families didn’t create these budget deficits or reap economic rewards over the last generation. So our nation’s plan to get our fiscal house in order should not sacrifice the vitality of our middle class and our commitments to address poverty.”

An organized group of 200 millionaire business leaders added their voices to the debate. The Patriotic Millionaires, organized by the Agenda Project and Wealth for the Common Good, released a video message to Congressional leaders to increase taxes on millionaires. “It is self-defeating to pursue these tax policies, and it is inconsistent with our values as Americans,” said Dennis Mehiel, Chairman of US Corrugated at a press conference on the tenth anniversary. “We need to throw out the Bush tax cuts in a hurry and begin the process of restoring some fiscal sanity to the country’s budget.”

Business leaders are also speaking up about troubling economic implications created when global corporations use offshore tax shelters to dodge taxes. Paul Egerman, founder of eScription, wrote in the Madison Capital Times, “it is myopic to require domestic enterprises to compete on an unlevel playing field against another company based not on product quality and services, but on accounting gymnastics.” A new business coalition is backing the Stop Tax Haven Abuse legislation that will be reintroduced later this June.

Opposition is also building against the idea, lobbied for by companies like Google, Apple, Pfizer, and Oracle, of a “tax holiday” for corporations that have shifted more than $1 trillion in profits to offshore tax havens—a move that would cost the U.S. Treasury $80 billion. Business for Shared Prosperity is circulating a business sign-on letter to Congress calling on them to “reject demands by U.S. multinationals for a tax holiday to “repatriate” the funds they shifted offshore to avoid paying taxes.” Last week, US Uncut began to challenge Apple Computer for its role in lobbying Congress for a “tax holiday” for corporations that have moved over $1 trillion in corporate profits to offshore tax havens.

The message of these emerging movements is getting louder: No more budget cuts until millionaires and corporate tax dodgers pay their fair share.

Originally Published at YES Magazine

Senior scholar at the Institute for Policy Studies where I direct the Program on Inequality and the Common Good (www.ips-dc.org/inequality). Co-founder of Wealth for the Common Good (www.wealthforcommongood.org). Co-author with Bill Gates Sr. of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes. Co-author with Mary Wright of The Moral Measure of the Economy.

Forbes:Tim Pawlenty Plays Fantasy Tax Policy

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Original Post

June 8, 2011

Leonard Burman, The Impertinent Economist

There are all sorts of fantasy sports out there—fantasy baseball, basketball, football, even cricket and surfing.  All harmless fun.  And despite the fact that it’s all pretend, the best players are masters of statistics and evidence.  They know everything about a player before they add him to the line-up.

But there’s a dead serious fantasy sport being played in policy circles:  fantasy tax policy.  Just like fantasy baseball, the apparent purpose is to win—in this case, a presidential election.  Unlike fantasy baseball, the plans being constructed by participants bear little connection to actual facts and evidence.

The latest participant is Tim Pawlenty, the former governor of Minnesota who is vying for the Republican presidential nomination.  He proposes to cut the corporate tax rate from 35% to 15% and to cut the top individual income tax rate from 35% to 25%.  He’d also eliminate taxes on capital gains, interest, and dividends and repeal the estate tax.

Overall, he says that he’d limit tax revenues to 18% of GDP, the post-war average, by constitutional amendment if possible.  Actually, if his plan were enacted, there would be no worries as revenues would never get close to that level.  Michael Linden of the Center for American Progress estimates that the plan would reduce revenues by about $8 trillion over the next decade to less than 14% of GDP—less than the revenues in the Truman Administration, which was before Medicare, Medicaid, and the Great Society had been enacted and when the national highway system was just a glint in Dwight David Eisenhower’s eye.

Worst of all, that estimate is wildly over-optimistic because it ignores the giant, enormous, egregious tax shelters that would allow all moderately clever millionaires to slash their tax liabilities.  Here’s a simple one.  Create a corporation and pay yourself no salary but a healthy dividend.  Dividends are tax-free!  So your maximum tax rate falls from 25% to 15%.  And that assumes you’re paying the full 15% corporate rate on your income.  Any tax lawyer worth her salt could cut that substantially.

Never mind how offensive it is to be giving millionaires 40+% tax cuts (according to Citizens for Tax Justice) at a time when we’re running enormous deficits and economic inequality is exploding.

A fantasy sport player would have paid attention to that nasty deficit statistic, but fantasy tax policy maker Pawlenty basically assumes it away.  Like Congressman Paul Ryan, he assumes that federal spending can be immunized from the demands of population aging and rising health care costs.  It can’t.

And he assumes that GDP will grow at an average rate of 5%.  It might do that for a few years coming out of a deep recession, but there’s no way such growth could be sustained.  The episodes Pawlenty refers to in the 1980s and 1990s immediately followed recessions—and significant tax increases (as Dave Weigel points out).  They happened when the baby boomers were in their prime and women were entering the work force in droves.  Now, the baby boomers are retiring and the women who want to work are already in the labor force.  And the historical growth spurts didn’t last.

Pawlenty assumes that his tax cuts would create a supply side miracle.  In the real world (as opposed to tax fantasy land), the governor’s tax plan would create enormous opportunities for unproductive tax sheltering and the burgeoning deficits would lead to higher interest rates and a weaker economy.

If Pawlenty were playing fantasy basketball, he’d take Dallas Mavericks’ forward Caron Butler’s shoes away from him and assume that he’d jump higher and score more points than Miami Heat forward LeBron James.  Someone who checked the stats would note that James scores 12 points more per game than Butler, and, by the way, playing basketball shoeless is a bad idea.

Oh, there is one more difference between fantasy sports and fantasy tax policy.  The fantasy sport player is just some jock wannabee with a computer.  Tim Pawlenty could be the next president.

Huffington Post: Why Millionaires Who Want Higher Taxes Don't Just Donate Money To The Government

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Original Post

by Arthur Delaney

June 8, 2011

WASHINGTON -- The self-described Patriotic Millionaires who want the government to close its budget gaps with higher taxes on the rich think it's ridiculous to expect wealthy people to just "tax themselves" and donate their extra money to the government.

"The idea that people are just going to send in $1 million or $500,000 or $5 million or something to reduce the national debt is just preposterous on its face," Dennis Mehiel, the founder and chairman of cardboard box manufacturer U.S. Corrugated, said on a conference call with other millionaires this week.

A reporter had asked the millionaires why, if they want the government to take more of their money, don't they just hand it over voluntarily?

"We have a system of compulsory taxation and everybody gets treated the same under the law," Mehiel said. "We disagree with what the law is right now. We think its outcomes are unfair."

Paul Egerman, founder of a medical transcription company called eScription, also scoffed at the suggestion millionaires who advocate for higher taxes should take it upon themselves to send money to the government.

"Running any government is a shared responsibility of its citizens," Egerman said. "Government is not a charity, and you can’t imagine a situation where the Department of Defense runs a bake sale to build an aircraft carrier."

But one Florida man said he didn't mind sending some free cash to Uncle Sam. He thought it was such a good idea that he himself donated $5,000 to the U.S. Treasury this week, according to an email receipt the man shared with HuffPost. The man, who said he does not earn anything near a million dollars a year but is financially quite comfortable, spoke to HuffPost on condition of anonymity for fear of alienating coworkers who might earn less than he does.

Like the Patriotic Millionaires, the man felt he'd benefited unnecessarily from the tax cuts of the early 2000s, which according to left-leaning advocacy group Citizens for Tax Justice have added nearly $2.5 trillion to the national debt. He also said he doesn't like the rise in income inequality over the past few decades.

"After a year watching the gap between the richest and the poorest get greater and greater I finally got really cynical about it," the man said. "We're moving back to the way it was when there was a landed gentry and some small percentage of people own everything and everyone else is dirt poor."

To make his donation, the man went to www.Pay.gov and then found the "Gifts to Reduce the Public Debt" page. Making the donation took a couple minutes.

According to the Treasury Department, the government has received $1.7 million worth of donations to relieve the public debt so far this year. In 2009, it received $3 million worth of donations, the most ever.

But even if each of the nearly 200 millionaires who signed a letter demanding congressional Republicans consider tax increases donated $1 million to the government, they wouldn't put a dent in the government's debt, which currently stands at $14.3 trillion. According to CTJ, if the tax cuts are extended beyond their current expiration date of January 2013, they'll add another $5.5 trillion to the debt.

The cuts disproportionately benefit the richest 1 percent of Americans, according to an analysis by the Tax Policy Center, a project of the Brookings Institution and the Urban Institute.

ABC News.com: New Jersey and New York Ranked as Worst States for "Individual Freedoms"

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Original Post

June 8, 2011

by Susanna Kim

Live free or die? New Hampshire may be on to something, according to researchers at George Mason University's Mercatus Center.

They used a variety of statistics to rank the 50 states for their just-published report on which states are the freest -- and least free -- from taxes and government regulation.

Their horserace has ranked New York as the "least free state in the Union" followed by neighboring New Jersey. New Hampshire and South Dakota were in a virtual tie for most "free" state.

The professors who authored the study believe that this freedom as they define it makes a lot of difference to the happiness and well-being of the Many people "don't want to have their lives dictated by people in their state capital," says William Ruger, political science professor at Texas State University-San Marcos, who co-authored the report with Jason Sorens, political science professor at the University at Buffalo, State University of New York.

"As academics, we were first interested in the scientific question of how states differ, why, and with what implications," said Ruger. "It was natural to then compare them in terms of their respect for individual freedom given how important this is to both of us."

Ruger, who is in the reserve component of the Navy, served in Afghanistan from 2008 to 2009. He said his project was not related to his time in Afghanistan, though "those who love freedom ought to take it upon themselves to defend and uphold our individual rights."

"Sometimes we do so with the pen, sometimes with the sword," he said.

New York was ranked dead last in part because it has the highest taxes in the country, including those on property, selective sales, individual income and corporate-income, according to the report. They cited New York's spending on "other and unallocable" expenses, including public welfare, hospitals, electric power, transit, and employee retirement, as another reason for its ranking.

The report created four other lists ranking freedom based on fiscal policy, regulatory policy, economic freedom and personal freedom. They did not attempt to weigh the benefits bestowed on the populace by their government and its policies.

Maryland was ranked last based on personal freedom, though it was #43 in overall freedom. The report cited Maryland's gun laws, which are the second-strictest in the country, as well as "fairly harsh" marijuana laws, extensive auto regulations, harsh gambling laws, "burdensome" homeschooling laws, high drug arrest rates and lack of status for same-sex partnerships.

The report makes policy recommendations for each state, such as proposing that Maryland legalize same-sex civil unions and strengthen medical-marijuana laws while decriminalizing low-level possession.

It is unclear how Georgia's ranking -- #15 in overall freedom, #11 in economic freedom and #31 in personal freedom -- may bode for the Obama administration's health care law. A federal appeals court in the Peach State will hear a challenge on Wednesday brought by 26 states to the constitutionality of the Affordable Care Act signed into law in March 2010.

George Mason University's report is not without its critics, however.

Carl Davis, senior policy analyst for the nonprofit group Citizens for Tax Justice, is critical of the report's "shallow and misleading" analysis of taxation when scoring a state's freedom score.

"You can't just count the number of dollars coming in," Davis said. "It's just as important to look at how those dollars are collected, and from whom, and the study makes basically no attempt to do either of these things."

But Ruger said there are two critical policy implications from the study that could have serious economic implications.

First, freer states are attracting citizens from other states while less-free states are losing citizens -- and their tax dollars.

"This is true for both economic freedom and personal freedom," Ruger said. "People are voting with their feet and moving to open, tolerant, and economically free states and away from nanny-states."

As an example, increasing points on the "freedom scale" by 0.5 points, from Connecticut to Iowa, for example, increases net migration by 5.9 percentage points, based on population figures from 2000, according to the report.

Second, Ruger said that economic freedom is associated with income growth. The study results showed that a 0.25 unit increase in economic freedom increases the average annual growth rate in personal income by about 0.25 percentage points.

Statistically speaking, South Dakota should have a growing population and increasing incomes because the state ranked first in economic freedom and second in overall freedom. Census Bureau data shows more people at least moved to South Dakota from other states (29,631) than left for another state (25,950) in 2009.

American Prospect: Ten Years and Still Terrible

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Original Post

Jun 7, 2011

by Jamelle Bouie

Today marks the 10-year anniversary of the President Bush's tax cuts, which were signed into law as a response to the leftover Clinton-era surplus. With their heavy cuts to capital gains, investment income, and estate taxes, the Bush tax cuts were weighted toward high-income earners, with the top 0.1 percent of taxpayers receiving an average tax cut of $520,000. From 2001 through 2010, according to the Economic Policy Institute, the Bush tax cuts added $2.6 trillion to the public debt and are responsible for nearly 50 percent of the total debt accumulated during this period. And far from jump-starting the economy, the Bush tax cuts did nothing to boost economic growth, yielding an economic expansion characterized by the worst wage, salary, and job growth since the end of World War II.

Because of President Obama's tax deal last December, the Bush tax cuts are scheduled to expire next year, and given their huge role in driving short- and long-term deficits, full expiration would dramatically increase revenues and stabilize the debt load for the next decade.

But what happens if Congress renews the Bush tax cuts, as is required by the budget passed by House Republicans? Here is a chart from Citizens for Tax Justice, showing the full impact of extending the Bush tax cuts for 2013:

(Graphics at original post link)

According to CTJ, an extension would deliver an average tax cut of $514,786 to the top 5 percent of income earners, or more than 17 times the cut received by the bottom 60 percent, and more than 115 times the cut received by middle-income families. A permanent extension would almost double the budget deficit in the short term and cost the government $4.6 trillion over the next decade. If allowed to continue, as the Economic Policy Institute points out, the Bush tax cuts would crowd out investments in economic security, education, infrastructure, research, and health care. In other words, the Bush tax cuts were a terrible idea, and they need to end.

Washington Current: A Decade Later, Wealthiest 5% Reap Nearly Half Of Bush Tax Cuts, Projection Finds

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Original Post

Monday, June 6, 2011

by Scott Nance

As Congress and President Obama debate whether and on what conditions to raise the debt ceiling, the nation will mark the tenth anniversary of the policy change that accounts for much of the federal budget gap: the Bush tax cuts.

On June 7, 2001, President George W. Bush signed into law the first of the tax cuts that would turn the budget surpluses of the 1990s into historic deficits. A new analysis from Citizens for Tax Justice explains that making these tax cuts permanent would almost double the long-term budget deficit.

The tax cuts became a signature domestic achievement for the Republican Bush presidency.

The richest 1 percent of taxpayers, with an average income of about $1.4 million in 2013, would get an average tax cut of $68,079 that year if the Bush tax cuts are extended again. The poorest three fifths of taxpayers, with an average income of $29,000 that year, would receive an average tax cut of just $487.

The analysis also finds that the higher a filer's income, the larger the tax cut as a percentage of income. If the Bush tax cuts are extended again, in 2013 the poorest one fifth of taxpayers would receive tax cuts equal to less than one percent of their income, while the richest one percent would enjoy tax cuts equal to 4.6 percent of their income.

Some in Congress have threatened to cause the federal government to default on its debt obligations unless Obama agrees to major cuts in federal spending to reduce the budget deficit, but they simultaneously demand the Bush tax cuts be made permanent.

Obama late last year agreed to extend the Bush-era tax cuts through 2012 as part of a deal with Republicans. Republicans had threatened to allow tax cuts for middle class Americans to expire unless Obama and his Democratic allies extended the tax cuts for the wealthiest Americans, as well.

Obama subsequently has promised not to further extend the Bush tax cuts for the wealthiest Americans. Republicans have taken a hard line against any tax increases, including an end to the Bush-era cuts.  Some on the left, including Sen. Bernie Sanders (I-Vt.) wants the president to be much more aggressive in negotiating an end to tax cuts for the rich in exchange for any cuts to the federal budget deficit.

"Will the president demand that any deficit reduction agreement end Bush-era tax breaks for the wealthy? Will he fight to eliminate corporate tax loopholes? Will he end the absurd policies that allow the rich and large corporations to avoid taxes by establishing phony addresses in off-shore tax havens?" Wall Street pressure on Republicans should strengthen President Obama's hand in budget negotiations, Sanders says. "This gives the president a lot of leverage."

Individual fact sheets for all 50 states and the District of Columbia along with facts about the costs of the Bush tax cuts nationally are online here.

Rhode Island Future: Ten Years After the Bush Tax Cuts, Are You Doing Better?

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Original Post

June 6, 2011

by Kate Brock

Flashback to June 7, 2001. Newly elected President George W. Bush signed a bill cutting taxes by $1.35 trillion over ten years. This was the first of several tax cuts that Bush would sign, which would end up costing our nation a total of two and a half trillion dollars in lost revenue over a decade. Then Senator, now Governor Chafee voted against them, but his sensible opposition was not enough.

Ten years later, the promised prosperity that was supposed to emerge from these tax cuts has failed to materialize. Rhode Island’s official unemployment rate in June 2001 was 4.4 percent. Today the seasonally adjusted rate is more than double that, 10.9 percent. Nationwide, the unemployment rate was 4.7 percent. Today it is hovering around 9 percent.

At the end of last year, supporters of Bush’s policies held the extension of unemployment benefits hostage to push through an extension of the Bush tax cuts for another two years. Many of these same lawmakers say they want to extend the tax cuts again into 2013 and beyond, which would almost double the federal budget deficit.

A few people – the super wealthy – are better off because of the Bush tax cuts. According to new figures released by Citizens for Tax Justice, the wealthiest one percent of Rhode Island residents, who will have an average income of just over $1 million in 2013, would receive an average tax cut of $50,617 in that year.

In contrast, the poorest 60 percent of Rhode Islanders, with an average income of $27,754, would receive a tax cut of just $429 in 2013.

To put that number into perspective, the average American household pays $300 a month just to fill their gas tank. Fair? Hardly.

The lawmakers who want to increase the deficit again by extending the tax cuts are the same lawmakers who claim that the deficit forces them to slash public services.

Here in Rhode Island and in state legislatures across the country our leaders are pushing through budgets and tax policies based on the same flawed premise, that tax cuts for the wealthy will create jobs. Rhode Island lost over one hundred million in revenue from the flat tax since 2007. Last year’s tax overhaul effectively codified the flat tax, giving our state’s top earners a 4.1% tax break. And what have we seen as a result? Devestating cuts to socail services that support Rhode Island families.

We can prosper by building a state and a country that works for all of us – that rewards hard work with good American wages and benefits, including affordable health care. We need to create good-paying jobs and help middle-class families reclaim their security while at the same time giving low-income families the opportunity and mobility to move into the middle class, and none of that investment can happen without ending tax breaks for the wealthy.

Congress should commemorate the tenth anniversary of the Bush era tax cuts for the rich by ending them and use the money to invest in American families. Members of the General Assembly should rectify last year’s error and pass a 1% personal income tax increase on our state’s top earners. Click here to ask your Rep and Senator to stand up for working families. But we can and must do more. Congress should invest in a budget that creates jobs. It can raise the money for that by passing Rep. Jan Schakowsky’s Fairness in Taxation Act, which taxes millionaires and billionaires. Plus it can close corporate loopholes that allow corporations to profit when they ship jobs and profits overseas.

While we can’t go back in time and change June 7, 2001, we can learn from our mistakes and create a more prosperous tomorrow. We can invest in our most valuable resource, our people and reclaim hope and opportunity for our state and for our nation.

Kate Brock, Executive Director, Ocean State Action

Benziga: Shark Bite - GE Style

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Original Post

June 6, 2011

by Bruce Krasting

Some ugly data from Citizens for Tax Justice on corporate taxes paid in America.

The conclusions:

From 2008 through 2010, these 12 companies reported $171 billion in pretax U.S. profits. But as a group, their federal income taxes were negative: –$2.5 billion.

All but two of the dozen companies enjoyed at least one no-tax year over the 2008-10 period, despite reporting substantial pretax U.S. profits in those no-tax years.

Eight of the twelve companies reported net tax benefits over the full three-year period.
It's old news that America's biggest corporations pay little in taxes. It's been well documented that GE is a functional tax deadbeat. I don't

think these big companies are cheating on their taxes. It's the tax code that those same big companies (and their lobbyists) have written over the years.

IMHO two things are needed:

1) There has to be a minimum tax on current year corporate profits. I don't give a damn what paper losses these companies can engineer from prior years. If they are in the green in a calendar year they can reduce their tax obligation with deductions, but not below a minimum rate. I would suggest that the minimum be set at 10%.

Note: I think there is not a snowballs chance in hell that a minimum current year corporate tax could get passed. The opposition would be too great. My fallback position is that there is never a possibility that a US company benefits from a negative tax rate. If a company has a loss carry forward let them carry the cost, not the country.

2) President Obama has to dump Jeff Immelt (GE CEO) as his economic adviser. This fat cat of all fat cats is sitting on the President's right hand side. Jeff's influence and power has been elevated as a result.

I see it differently. I see GE/Immelt as a predators. They're not friends of this country. They're the enemy.

Daily Kos: What the Bush tax cuts hath wrought: $2.5 trillion in lost opportunities

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Original Post

June 7, 2011

by Meteor Blades

As noted Monday in Tenth anniversary of disastrous Bush tax cuts, Americans have seen economic inequality rise sharply because of the tax cuts enacted 10 years ago today. According to an analysis by Zaid Jilani at ThinkProgress, those cuts have caused immense amounts of other damage, too, while pouring cash into the hands of those who already had the lion's share.
By the reckoning of Citizens for Tax Justice, the cost of that massive upward transfer of wealth was $2.48 trillion by the end of 2010. And, of course, still climbing since the cuts remain in place as a consequence of a Faustian bargain made last December.

Using a tool provided by the National Priorities Project, Jilani came up with 10 alternatives that could have been paid for with the money those harmful tax cuts made unavailable:

That $2.5 trillion would have gone a long way toward repairing America's crumbling infrastructure, too, providing vast numbers of jobs in the process, an investment in our future.

In place of funding any one of these alternatives, however, millionaires got to lower their taxes by more than twice what the median American household earns in total income every year.

So, what are we hearing on the anniversary of this plutocratic miracle? Calls for still more tax cuts that would further reduce progressivity and hand over another chunk of money to the "job creators" who have done so well at that task with the previous cuts they have obtained.

We can see for ourselves what the cuts plainly have not done. They have, however, done what their promoters wanted them to do. The never-will-be-satisfied, cut-taxes-for-the-wealthy crowd is absolutely determined that the path to prosperity for the few in America will be strewn with economic catastrophe for the many. It's not a bug; it's a feature.

Augusta Free Press: Groups Push for End to Bush Tax Cuts

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Original Post

June 7, 2011

As Congress and the president debate whether and on what conditions to raise the debt ceiling, America marks the tenth anniversary of the policy change that accounts for much of the federal budget gap: the Bush tax cuts. On July 7, 2001, George W. Bush signed into law a $1.35 trillion tax cut that primarily benefited the wealthiest Americans while leaving our country with massive debt.

Virginia Organizing supporters gathered today in front of Rep. Robert Hurt’s office in Danville and the Fredericksburg Public Library to bring attention to the terrible effects the Bush tax cuts have had in Virginia. Participants shared their experiences over the past 10 years and what they think the money could have been used for locally instead. Residents also expressed their concerns for Rep. Hurt’s, Rep. Rob Wittman’s and other Virginia members of Congress’ recent vote in support of Rep. Paul Ryan’s controversial budget proposal to end Medicare, as we know it.

Tuesday’s events were part of dozens taking place around the country as supporters of Medicare, Medicaid and Social Security protest efforts to cut essential services while giving trillions of dollars in additional tax cuts, exemptions and loopholes to the super-rich and to corporations.

In Fredericksburg, participants like Joe Katz flushed play money down a toilet, to represent the valuable capital that went to millionaires instead of schools, health care, police and libraries. “I believe there’s no excuse for our leaders in Washington to cut our Medicare, Medicaid, or Social Security so that millionaires can have huge tax breaks. The Bush tax cuts didn’t create jobs for Virginians, they basically went down the toilet.”

“The working people of Virginia did not fire Americans and send their jobs overseas. We didn’t take absurd risks on Wall Street. We didn’t get a bailout from the government or make the housing market implode. The wealthy corporations and banks did that, and we’re not going to give up our Medicare, Social Security, and other lifelines so that the people who ruined our economy can keep avoiding taxes,” added Katz.

David Harrison of the Virginia Organizing Danville Chapter joined other residents in front of Rep. Hurt’s office today in Danville. “I came out today to highlight the fact that our country’s descent into debt began in 2001 with a choice, not a crisis. I’m tired of the conservatives in Washington making the elderly, poor and middle classes pay for tax cuts that the wealthy do not need. How can leaders in Congress claim they are serious about reducing the deficit and continue to give tax breaks to the rich?”

“The country needs the top two percent and major corporations to pay their fair share in taxes. By closing corporate loop holes and ending the Bush tax cuts, the country would be able to pay for vital services working Americans need,” added Harrison.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (the first of a series of Bush-era tax changes) was enacted on June 7, 2001. Ten years later, the Bush tax cuts have exacerbated trends of widening income inequality, accompanied the weakest economic expansion since World War II, and turned budget surpluses into deficits. As detailed in a new Economic Policy Institute policy memorandum, these tax cuts were heavily targeted toward the wealthy at the expense of middle class families, poorly designed as an economic stimulus, and costly—significantly more so than advertised.

According to new figures released by Citizens for Tax Justice, the wealthiest one percent of Virginia residents, who will have an average income of $1.3 million in 2013, would receive an average tax cut of $70,149 in that year.

In contrast, the poorest 60 percent of the state’s residents, with an average income of $31,828, would receive a tax cut of just $569 in 2013. To put that number into perspective, the average American household pays $300 a month just to fill their gas tank.

The Tennessean: Lawmakers bump heads on debt ceiling

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Original Post

June 7, 2011

by Mary Mancini

Debate distracts from unfair tax cuts, lack of jobs

Debt ceiling, schmebt ceiling. Will Congress just raise it already so we can start the conversation that we should be having: “What are the real solutions that will put Americans back to work?”

In June 2001, President George W. Bush signed a bill cutting taxes by $1.35 trillion over 10 years. Now, 10 years and $2.5 trillion later, it’s hard to find any evidence that these tax cuts created the prosperity that was promised.

Tennessee’s unemployment rate in June 2001 was 4.6 percent. Today, the seasonally adjusted rate is more than double that, 9.6 percent. Nationwide, the unemployment rate then was 4.7 percent. Today, it is 9.1 percent.

A few people, the super-rich, are better off. According to new figures released by Citizens for Tax Justice, the wealthiest 1 percent of Tennessee residents, who will have an average income of just over $1 million in 2013, would receive an average tax cut of $57,428 in that year.

In contrast, the poorest 60 percent of the state’s residents, with an average income of $26,459, would receive a tax cut of just $503 in 2013. To put that number into perspective, the average American household pays $300 a month just to fill their gas tank. Fair? Hardly.

At the end of last year, supporters of Bush’s policies pushed through an extension of his tax cuts for another two years. Many say they want to extend the tax cuts again into 2013 and beyond, which would almost double the federal deficit. These are the same lawmakers who claim that the deficit forces them to slash public services.

The U.S. House of Representatives has passed a budget that would cut trillions of dollars in essential services like Medicare while giving trillions of dollars in additional tax cuts to the super-rich and to corporations in the form of lower rates, exemptions and loopholes. U.S. Rep. Paul Ryan calls this approach a pathway to prosperity. We call it a road to ruin.

So I ask again, when will we start focusing on what really matters: putting Tennesseans back to work and rebuilding a strong middle class? When will we once again focus on creating good-paying jobs with solid benefits to help middle-class families reclaim their security and give low-income families the opportunity and mobility to move into the middle class? When will we realize that we can prosper only by building an America that works for all of us?Congress should commemorate this historic 10th anniversary of the tax cuts by first stop using the debt ceiling as a political football and start concentrating on what they really need to do to invest in America families.

Passing Rep. Jan Schakowsky’s Fairness in Taxation Act, which taxes millionaires and billionaires and closes corporate loopholes that allow corporations to profit when they ship jobs and profits overseas, would be a good first step.

We must learn from our history and get our priorities in order. While we can’t go back and change June 2001, we can look work for a prosperous tomorrow. We can reclaim hope and opportunity for our state and for our nation.

Mary Mancini is executive director of Tennessee Citizen Action, a nonprofit, community-based public interest and consumer rights organization.

BNA: CTJ Spotlights Disparities in Tax Treatment for Rich

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Original Post (subscription required)

June 7, 2011

To commemorate the 10th anniversary of President Bush's original signing of his 2001 tax cut legislation, Citizens for Tax Justice issued a June 6 report to illustrate that high-income households get the bulk of the benefits from the tax cuts....

The Hill: Hatch, liberal group respond to Pawlenty tax plan

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Original Post

June 7, 2011

By Bernie Becker

Sen. Orrin Hatch (R-Utah) seems pretty amenable to the tax plan proposed by Tim Pawlenty, the former Minnesota governor and Republican candidate for president.

The left-leaning Center for Tax Justice? Not so much.

Pawlenty, in a Tuesday speech at the University of Chicago, called for slashing the top corporate and individual tax rate, both of which currently stand at 35 percent, to 15 percent and 25 percent, respectively.

The former two-term governor also called for eliminating tax credits and deductions, as well as taxes on dividends, interest income, capital gains and the estate tax – all part of his plan to ramp up economic growth. (The Hill’s Jordan Fabian has more on the speech here.)

Hatch told reporters Tuesday that he thought it was “feasible” to reduce the top corporate rate to 15 percent, while also sounding enthusiastic about rolling back taxes on capital gains.

“I’d love to see it at 15,” said Hatch, who added that he thought a drastically lower rate could entice more multinationals to establish their headquarters here.

But Hatch, the ranking member on the Senate Finance Committee, also noted that more policymakers pushing for tax reform had been eyeing a top rate more like 25 percent. (That includes Reps. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, and Paul Ryan (R-Wis.), the chairman of the House Budget Committee.)

For its part, Citizens for Tax Justice, a group with significant ties to organized labor, released a study declaring that Pawlenty’s plan would amount to a 41 percent average tax cut for millionaires.

On the individual side, Pawlenty proposes to install a 10 percent rate for income up to $50,000 for individuals or $100,000 for married couples. All income above that would be taxed at the 25 percent rate.

CTJ – which assumed in its analysis that the Pawlenty proposal would be paired with the elimination of all itemized deductions and tax credits – said that would mean that a taxpayer with annual income of $10 million or more a year would see a 46 percent tax cut.

Pittsburgh Post Gazette Editorial: Tax freedom: Some corporations get it, while the rest of us pay

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Original Post

Monday, June 06, 2011

Three months ago, General Electric made headlines with a report that it earned $14.2 billion in profits last year but paid no federal taxes. In fact, it got a $3.2 billion tax credit.

Turns out America's largest corporation is not alone.

Citizens for Tax Justice, an advocacy group that seeks fair tax policy for middle- and low-income families, released a report last Wednesday that showed other blue-chip corporations have taken similar advantage of the tax code's loopholes, subsidies and exemptions. Some of the provisions, of course, encourage job creation, research and other positive behaviors.

From 2008 through 2010, 12 companies -- including GE, DuPont, Verizon, Boeing, IBM and ExxonMobil -- reported $171 billion in pretax U.S. profits, but their federal taxes were a negative $2.5 billion, meaning the government paid them. Ten of the companies saw at least one no-tax year.

No one is saying this friendly tax treatment was illegal. But to the average American taxpayer, who gets far smaller breaks, seeing profitable companies pay nothing is outrageous.

With the standard corporate tax rate 35 percent and some in Congress eager to reduce it, these numbers are a timely reality check, not to mention a sad commentary on who is really paying their fair share.

The New York Times: False Choices

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June 4, 2011


Friday's jobs report was abysmal.

The U.S. added 54,000 jobs in May, far fewer than expected, and the unemployment rate ticked up to 9.1 percent.

This is the latest in a cavalcade of worrisome economic indicators -- from double-dipping home prices to flagging consumer confidence -- that illustrate just how fragile the recovery has been, just how inadequate and anemic the stimulus was and just how tenuous the government's grip is on the reins.

It is against this backdrop that Republicans have decided to play chicken with the nation's credit -- insisting on spending cuts while steadfastly resisting tax increases.

This is part of the modern doctrine of a compassion-free conservatism that's using the fog of the fiscal crisis to push a program of perverse wealth inequality as sound economic policy: The only way to jump-start the economy is to slash taxes on the wealthy and on companies; the only way to compensate for the deficits that those tax cuts exacerbate is to slash benefits to the poor and vulnerable. It would be comical if it weren't so callous.

Not only is this faulty logic, it's a false choice. We'll need sensible tax increases and sensible spending cuts to address the deficit, and both can be offset to some degree by stronger economic growth. It's not an either-or proposition.

And the wealthy can absorb a bit of a shock because they appear to be doing just fine. Quarterly earnings at luxury retailers like Neiman Marcus, Saks Fifth Avenue, Movado and, yes, Tiffany all beat expectations, signaling that the rich can still splurge on the carats they wear. Meanwhile, working-class people continue to fret over the carrots they eat.

Furthermore, there is a mound of evidence that corporations are in no need of more tax breaks.

First, the tax burden of American companies is lower than that of other Organization for Economic Cooperation and Development countries, as economist Bruce Bartlett pointed out this week. Also, a report issued on Wednesday by Citizens for Tax Justice looked at 12 Fortune 500 companies from 2008-10 and found that on $171 billion in profits earned, their effective tax rate was negative-1.5 percent because of corporate loopholes, shelters and special tax breaks.

And, as Time magazine reported in its June 6 issue, ''In the 18 months since the Great Recession, which ended in June 2009, U.S. annualized corporate profits rose 42 percent, to a record $1.68 trillion in the fourth quarter of 2010.''

Corporations aren't hurting. They're hoarding.

Republicans have taken an untenable position on taxation that threatens to not only undermine the country's credit worthiness and push us to the brink of default, it is antithetical to the health and sustenance of a just and striving society.

The full stealing from the plates of the starving simply isn't an American ideal.

BNA: Lawmakers Open to Trading R&D Credit, Section 199 Deduction for Lower Tax Rates

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Original Post (subscription required)

June 3, 2011

House Ways and Means Committee leaders said June 2 that they are willing to consider eliminating the research and development tax credit and the tax code Section 199 manufacturing deduction as part of a broader effort to reduce the corporate tax rate....

Some Democrats used the hearing to question why U.S. companies needed lower tax rates at all.
Rep. Pete Stark (D-Calif.) questioned James Zrust, vice-president of tax at The Boeing Co., on the company's activities, citing a June 1 report from Citizens for Tax Justice that found that the company—along with 11 other major corporations—had negative tax liabilities despite healthy U.S. profits over the period 2008 to 2010....

The Ed Show on MSNBC: Inside Wall Street's Greed (Video)

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Video Clip

June 2, 2011

"Big Companies, Big Profits, Zero Taxes. That's the latest headline out of the latest report from the nonprofit, Citizens for Tax Justice...."

Watch the news segment here 

Original Post

June 1, 2011

By Zaid Jilani

All around the country, conservative lawmakers continue to cut services and investments in Main Street America, claiming that these steps are necessary to close budget deficits. At the same time, major corporations and wealthy individuals continue to benefit from special tax breaks and loopholes that allow them to get away with paying little to nothing in taxes.

Today, Citizens for Tax Justice (CTJ) released a new report chronicling the tax rates of some of the nation’s major corporations. CTJ looked at a sample of a dozen major corporations and analyzed both their profits and their effective federal corporate income tax rates between 2008 and 2010.

CTJ found that from 2008 to 2010, these major corporations earned $173 billion in profits put together. Yet these major corporations paid an average federal corporate income tax rate during this period of -1.5 percent, meaning they actually got money back from the Treasury in the form of tax benefits. ThinkProgress has assembled the average tax rates of these corporations over this period in the following graph: (GRAPHIC AT ORIGINAL POST)

Americans would certainly find it unfair that companies raking in billions in profits are getting away with paying so little in taxes or in some cases actually getting a net tax benefit. As ThinkProgress economy editor Pat Garofalo writes, as of yet, both major parties have not been able to put together a vision of corporate tax reform that would actually raise net revenues to really tackle deficits without unduly harming Main Street. He concludes that “failing to raise additional corporate tax revenue will simply shift more of the deficit reduction burden onto a middle-class already battered by the Great Recession.”

Forbes Policy Page: How Our Largest Corporations Made $170 Billion During Great Recession And Paid No Taxes

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Original Post

June 2, 2011

By Rick Ungar

Yesterday I wrote about how the GOP is falsely pushing the argument that America’s corporations are overtaxed. I included some great data courtesy of conservative commentator Bruce Bartlett whose New York Times piece did an extraordinary job of putting the lie to the Republican assertions.

Today, and not a moment too soon, the non-profit Citizens For Tax Justice (CTJ) has put out their findings revealing that twelve of the nations largest Fortune 500 companies, while making $170 billion in profits during the period of The Great Recession, paid an effective tax rate of negative 1.5%.

Yes, you read that correctly.

Not only have these twelve companies paid zero in taxes for the years 2008-2010, they actually received tax subsidies that added $62.4 billion to their bottom lines.

The companies were chosen by the CTJ to represent a range of industries, including manufacturing, energy, services, transportation and high tech and include – in alphabetical order – American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell International, IBM, United Technologies, Verizon Communications, Wells Fargo and Yahoo.

Here are the bullet points presented by the report:

•From 2008 through 2010, these 12 companies reported $171 billion in pretax U.S. profits. But as a group, their federal income taxes were negative: –$2.5 billion.
•All but two of the dozen companies enjoyed at least one no-tax year over the 2008-10 period, despite reporting substantial pretax U.S. profits in those no-tax years.
•Eight of the twelve companies reported net tax benefits over the full three-year period.
According to the study, not a single one of these companies paid an amount even close to the 35% statutory tax rate.

In fact, the tax rate paid by Exxon Mobile, when spread over the full three years, was only 14.2% – a full 60% below the 35% rate that corporations are supposed to be paying.  And if we take a look at what Exxon paid over just the past two years, it totals a mere 0.4% on their pre-tax profits of $9.9 billion.

And get this – Exxon Mobile paid the most in taxes of any of the twelve companies on the list.

Here is my favorite part – had just these twelve companies paid at the actual 35% tax rate the GOP is telling us they are chaffing under, the sum would have added a full 12% to the totals the United States of America’s treasury received through corporate taxes.

We sure could use that money.

Take a look at this chart, provided courtesy of Thinkprogress.com, and be amazed.


What I don’t know is whether or not the preponderance of American corporations are getting away with the same kind of tax avoidance that these twelve companies are managing to pull off.

Bob McIntyre, director of Citizens for Tax Justice, seems to believe that they are.

These 12 companies are just the tip of an iceberg of widespread corporate tax avoidance. Our elected officials have a duty to the American public to make reducing or eliminating the vast array of corporate tax subsidies the centerpiece of any deficit-reduction strategy.

McIntyre is certainly right when he points out the duty of our elected officials. But they are not the only ones with such a responsibility.

We, as voters, also have a duty to react when the GOP majority in the House of Representatives tries to tell us we need to reduce this phantom corporate rate from 35% to 25% so that these corporations can pay even less in taxes while they pocket even greater amounts of taxpayer money via corporate subsidies.

Worse still, Boehner, Ryan and friends have the unmitigated gall to make their pitch while asking the rest of us to give up the social programs that are so essential to most Americans.

Seriously, people, do we need an anvil to fall on our heads before we get it?

These numbers don’t lie – but your GOP Member of Congress is and it’s time to come to terms with this.

For those of you who continue to buy into the belief that following what passes for conservative ideology today will save this country, the rest of us really need you to approach this issue with a more open mind. We ask that in the hope that you might arrive at the conclusion that you are being played solely for the benefit of these large corporations and wealthy Americans who stand in line to bankroll these Republican politicians.

The time to do it is now as we take on the issue of raising the nation’s debt ceiling.

If you don’t believe we should raise our ability to take on more debt because we spend more than we should, I get it.

However, if you believe that the answer to lowering the debt is to cut or destroy services and benefit programs that you depend upon while allowing wealthy corporations and individuals to severely underpay their taxes – or simply pay none at all – then you must examine this self-destructive streak that will, unfortunately, take us all down with you.

The Democrats will agree to budget and deficit cuts when the GOP agrees to get rid of the corporate subsidies and tax shell games that allow the kind of results disclosed today by the CTJ. The Democrats will agree to budget cuts when the GOP agrees to raise taxes on those earning over a million dollars per year.

How does this hurt you?

It doesn’t.

But allowing those who want to sucker you into paying for our deficit while giving a complete pass to the corporate and wealthy interests will most assuredly cause you and your family enormous pain.

The American middle-class must take a step back from the ideological precipice and review what is in their own best interest. Destroying Medicare and Medicaid is not the answer. Threatening to create havoc in the world economic system by playing chicken with the debt ceiling (and no, we don’t know for certain that this will happen but is it really necessary to test it?) is not the answer.

We need to get spending under control to be sure. But we also need to require the entities who have bought their way into legalized greed to pay up. Clearly, they aren’t prepared to do this because it is in the national interest. Thus, we must force them to do so with the only weapon we possess – our votes.

Accounting Today: 12 Major Corporations Pay Less than Zero in Taxes

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Original Post

June 1, 2011

By Michael Cohn

(Washington DC) A dozen multinational corporations paid an effective tax rate of negative 1.5 percent on billions of dollars in profits while reaping billions in taxpayer subsidies.

A new study by the advocacy group Citizens for Tax Justice identified the 12 companies as American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell International, IBM, United Technologies, Verizon Communications, Wells Fargo and Yahoo. Together they reported $171 billion in profits over the 2008 to 2010 period, while getting $62.4 billion in tax subsidies. The release is part of a larger report that the group plans to release later this summer.

CTJ noted that President Obama has indicated that he wants to reduce or eliminate corporate tax subsidies, but use the increased revenue to lower the statutory corporate tax rate. Lobbyists for big business, however, have rejected the so-called “revenue neutral approach” and called for changes that would reduce corporate tax payments by trillions of dollars over the upcoming decade.

Among the companies on the list, over the 2008 to 2010 period, GE received $4.7 billion in tax benefits on top of its $7.7 billion in pretax U.S. profits. Exxon Mobil paid an effective three-year tax rate of only 14.2 percent, or 60 percent below the 35 percent rate that companies are supposed to pay. Over the past two years, however, Exxon Mobil’s net tax on its $9.9 billion in U.S. pretax profits was only $39 million, an effective tax rate of only 0.4 percent.

WSJ Washington Wire Blog: Study Finds Some Big Companies Paid Little in Taxes.

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Original Post

June 1, 2011

By John D. McKinnon

Some of the largest U.S. corporations have been adept at avoiding federal taxes, according to a liberal research group. A few of the companies disagree, however.

In a much-anticipated new study of corporate tax payments, Citizens for Tax Justice finds that 12 big U.S. companies paid an average -1.5% rate during 2008-2010, while earning $171 billion in profits. If they had paid at the full 35% U.S. statutory rate, they would have coughed up about $60 billion in taxes, the study says. Instead, they actually got a little money from the government, on net – about $2.5 billion, to be exact.

CTJ, a liberal group with ties to organized labor, used similar findings to help build momentum for tax reform in the 1980s. It says the new study shows that corporations get too many tax breaks. It wants savings from a new corporate tax overhaul to go toward reducing budget deficits and improving infrastructure and education, rather than cutting corporate rates as the business community wants.

CTJ also argues that the high U.S. statutory rate doesn’t matter much, while many businesses say it’s still a crucial factor, particularly in deciding where to make new investments.

Not surprisingly, several of the companies disagreed with CTJ’s findings and conclusions.

Verizon Communications Inc., for example, shows up in CTJ’s study with a -5.9% effective rate for 2010 in the study. By Verizon’s reckoning, though, its effective tax rate was 32.1%, when you clear out some accounting clutter arising from its Verizon Wireless partnership with Vodafone (and even with the clutter, it says its rate was 19.4%).

Verizon includes taxes that have been deferred for various reasons, however. CTJ doesn’t. Taxes can be deferred for a wide variety of reasons such as accelerated depreciation.

“Verizon fully complies with all tax laws and pays its fair share of taxes,” a spokesman said.

Exxon Mobil Corp. said it has sent a letter to CTJ, expressing concern with its methodology. The company says its effective tax rate over the last 6 years is 29.1%, when state income taxes are excluded. Its three-year average is somewhat closer to CTJ’s figure of 14.2% (which was the highest on the list).

CTJ’s study concludes that General Electric Co. takes the cake, with a -61.3% effective rate over the three-year period. A spokesman for GE, whose CEO, Jeffrey Immelt, heads President Barack Obama‘s Council on Jobs and Competitiveness,  said last week that the company is “fully compliant with all tax laws.” He pointed out that the company’s GE Capital division lost billions during the financial crisis, and said GE’s tax rate will be much higher in 2011. U.S. tax law typically lets companies make generous use of losses in one year to offset taxes in other years.

The Hill: Study finds many corporations pay effective tax rate of zero

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Original Post

June 1, 2011

The Hill: Study finds many corporations pay effective tax rate of zero

By Bernie Becker
A number of U.S. corporations had an effective tax rate of less than zero in recent years, a new study has found.

Citizens for Tax Justice (CTJ) released an examination on Wednesday that said that a dozen major companies had, between them, an average effective tax rate of roughly -1.5 percent between 2008 and 2010 — well below the top marginal corporate rate of 35 percent.

The liberal-leaning group’s analysis comes more than a quarter-century after it released a similar report that is widely credited with adding momentum to the push for the last successful overhaul of the tax code, which was completed in 1986.

Robert McIntyre, CTJ’s director, said that he hopes the center’s effort has a similar impact this time around, especially given the country’s current fiscal situation. CTJ is among the groups calling to eliminate corporate tax credits and deductions and use the profits to help pay down deficits.

“Now we’re even more desperate to get money out of these guys,” McIntyre told The Hill.

Still, McIntyre’s comments, and the study itself, also underscore the challenges policymakers face in deciding how much revenue to raise during the current efforts to reform the tax code.

The center’s new release is something of a snapshot of a fuller study it hopes to release in the coming months that will look at the effective tax rate of Fortune 500 companies. McIntyre said he expected the broader analysis would still find an average effective rate of below 15 percent.

In all, CTJ found that two-thirds of the 12 companies in the analysis, which come from a wide range of industries, had an overall negative effective tax rate between 2008 and 2010. (When the group says negative rate, it means the companies got a tax benefit — not necessarily that the business got a check from the government.)

The Treasury Department, CTJ added, would have collected roughly $60 billion from the 12 companies over those three years if they had paid the top 35 percent rate.

General Electric came in with the lowest tax rate of the dozen, -61.3 percent over those three years, after The New York Times earlier reported that it had paid no 2010 taxes and claimed a $3.2 billion tax benefit for that year. Jeffrey Immelt, GE’s chief executive, is the chairman of President Obama’s Council on Jobs and Competitiveness.

But seven other companies — American Electric Power, Dupont, Verizon, Boeing, Wells Fargo, FedEx and Honeywell — had tax rates between -0.7 percent and -9.2 percent, according to CTJ.

IBM (3.8 percent effective rate over the three years) and United Technologies (10 percent) were the only two of the dozen to have a positive effective rate all three years. ExxonMobil had the highest effective rate of the 12, at 14.2 percent, and Yahoo came in at 8.7 percent.

Aside from Immelt, the chief executives of Dupont and Boeing are also on Obama’s jobs council, while Dave Cote of Honeywell sat on the fiscal commission and voted for its recommendations. The president also announced Tuesday that he was nominating John Bryson, who sits on Boeing’s board, for Commerce secretary.

For their part, the companies themselves have said they had much higher effective rates. IBM’s most recent annual report, for instance, put its effective rate at either 25 percent or 26 percent each year between 2008 and 2010.

McIntyre said the companies reported higher rates because they included state and local taxes, taxes they deferred paying and taxes paid to foreign governments, while CTJ looked solely at a companies’ U.S. profits and what they forked over to the federal government.

“The debate here is about U.S. tax policy, not about how Saudi Arabia treats ExxonMobil,” McIntyre said.

But Scott Hodge, the president of the Tax Foundation, said it was hard to put too much weight behind the CTJ study because it relied on companies’ financial reports to shareholders.

“For very good reasons, none of us can have and should have access to their tax returns,” said Hodge, whose nonpartisan group advocates for lower tax rates, among other things. “Financial and accounting records are not the same as a tax return, and they tell two different stories.”

Either way, the report is something else for policymakers to consider when it comes to tax reform.

Some Democrats — and Sen. Tom Coburn (R-Okla.) — have expressed interest in a tax code revamp that lowers rates, eliminates tax loopholes and helps pay down the deficit, an approach endorsed by President Obama’s fiscal commission.

The Obama administration, meanwhile, has called for a corporate tax overhaul that would neither add nor subtract from the deficit, though Treasury Secretary Timothy Geithner has signaled lately that tax reform will be a lower priority as long as the debate over raising the debt ceiling is center stage.

On the other side of the aisle, Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, and others have said they back a revenue-neutral approach, but prefer tackling the corporate and individual code in tandem.

And some business leaders have said a tax overhaul should not necessarily be concerned with breaking even at first, revenue-wise. In a 2007 study, the Treasury Department said that getting rid of a broad set of so-called tax expenditures would be able to offset lowering the top corporate rate to 28 percent, a figure many corporate leaders still believe is too high.

Bloomberg: Tax 'Subsidies' at GE, Boeing and FedEx Targeted by Washington, D.C. Group

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Original Post

June 1, 2011

By Steven Sloan

Eleven U.S. corporations including General Electric Co. (GE), Boeing Co. (BA) and Wells Fargo & Co. (WFC) together reported $62 billion in domestic profits in 2010 while paying a negative 3.6 percent federal tax rate, according to data released today by Citizens for Tax Justice.

The Washington-based interest group, which is backed by labor unions, hopes the data will help persuade President Barack Obama to abandon his efforts to rewrite the corporate tax code without collecting additional revenue. The organization said the figures make the case for using a corporate tax overhaul to generate more revenue.

“Our elected officials have a duty to the American public to make reducing or eliminating the vast array of corporate tax subsidies the centerpiece of any deficit-reduction strategy,” Bob McIntyre, the director of Citizens for Tax Justice, said in a press release accompanying the report.

Included in the report is General Electric, whose chief executive, Jeffrey Immelt, serves on Obama’s Council on Jobs and Competitiveness. Citizens for Tax Justice said the Fairfield, Connecticut-based company’s effective tax rate during 2010 was a negative 64 percent on $5.1 billion in U.S. profits.

“GE is fully compliant with all tax laws,” company spokesman Andrew Williams said in an e-mailed statement. “There are no exceptions.”

‘Small’ Liability Anticipated
GE plans to file its 2010 federal tax return by September and anticipates that it will have a “small” tax liability, Williams said in the statement.

Many factors can contribute to high domestic profits and low federal tax rates for U.S. companies, such as the results of audits of previous years’ returns. Also, companies can take deductions for domestic expenses related to income they earn overseas. The U.S. doesn’t tax overseas profits until they are brought home.

Besides GE, Boeing and Wells Fargo, Citizens for Tax Justice included in the data Exxon Mobil Corp. (XOM), American Electric Power Company Inc., E.I. du Pont de Nemours & Co., Verizon Communications Inc. (VZ), FedEx Corp. (FDX), Honeywell International Inc. (HON), IBM, Yahoo! Inc., and United Technologies Corp. (UTX) Information from FedEx was for 2008 and 2009 only; the company’s 2010 fiscal year ended yesterday and was not included in the study’s 2010 calculation.

Together, the 12 companies earned $171 billion in U.S. income between 2008 and 2010 while paying an effective tax rate of a negative 1.5 percent in that period.

Representative Richard Neal, a Massachusetts Democrat and senior member of the House Ways and Means Committee, said the current tax code is responsible for the low tax rates paid by the corporations.

The companies “hired good tax attorneys and accountants,” he said in a brief interview. “It’s the code. It’s not them.”

1986 Tax Rewrite
Similar data released by Citizens for Tax Justice more than 20 years ago helped spur the 1986 tax overhaul, the last major rewrite of the U.S. tax code.

The current top tax rate for U.S. corporations is 35 percent. House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, has proposed lowering that rate to 25 percent without providing details. The committee plans to hold a hearing tomorrow exploring the macroeconomic effects of a tax overhaul on companies.

Citizens for Tax Justice said the data it released today is a “preview” of a broader study of the tax rates paid by Fortune 500 companies.

The interest group said it based its findings on company filings with the Securities and Exchange Commission that specify the companies’ tax expense. That number can be different from what companies pay in taxes to the Internal Revenue Service, which is kept private.

Wall Street Journal: Studies Fuel Dueling Views on U.S. Corporate Taxes

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June 1, 2011

Original Post

By Kristina Peterson

WASHINGTON—While Congress duels over whether U.S. companies should pay more in taxes, a pair of reports provided fodder for each side of the debate this week.

Adding fresh evidence of businesses' contributions to the government, a report from an independent research team at Standard & Poor's found that companies within the broad S&P 500-stock index paid almost 21% more in cash taxes in calendar year 2010 than the previous year. The index's 500 companies paid almost $257 billion in aggregate cash taxes in calendar year 2010, up from $212.9 billion in 2009, though the total is still below the 2007 peak of $334.4 billion, according to a report from S&P Valuation and Risk Strategies, using Capital IQ data. Cash taxes reflect all corporate taxes paid, including income and other taxes.

The S&P analysis likely will come as welcome news to Republican lawmakers, who last week unveiled a new plan to create more jobs in part by lowering corporate taxes to a top rate of 25%, down from their current 35% level. This week the House Ways and Means Committee will hold a hearing on how overhauling business-tax issues could generate new jobs.

As lawmakers on both sides struggle to pay down the federal deficit, Democrats have said tax breaks for certain industries must be repealed to regain the country's fiscal footing. But without the support of a handful of conservative Democrats, a bill eliminating tax breaks for five major oil companies failed to pass the Senate in May.

Still, a new report from the liberal nonprofit Citizens for Tax Justice could help Democrats make the case that U.S. companies end up paying far less than 35% in taxes, thanks to a host of industry-specific breaks. A survey of 12 public companies—chosen because they represented a range of industries and all recently had been profitable—found that the dozen businesses reported $171 billion in pre-tax U.S. profits between 2008 and 2010, but paid an effective tax rate of negative 1.5%.

Over the three-year period, all but two of the 12 companies had at least one year in which they did not pay taxes despite reporting "substantial pretax U.S. profits in those no-tax years," and eight of the companies reported net tax benefits over the period, the nonprofit's report found. The companies included industrial conglomerate General Electric Co., chemicals firm DuPont Co., Verizon Communications Inc., shipping company FedEx Corp., technology giant International Business Machines Corp. and Exxon Mobil Corp., the world's largest publicly-traded oil company.

"Had these 12 companies paid the full 35% corporate tax rate, their federal income taxes over the three years would have totaled $59.9 billion," the report stated. "Instead, they enjoyed so many tax subsidies that they paid $62.4 billion less than that."

Some companies have said previously that they paid lower tax rates as a result of losses incurred during the recession and they expect to pay higher taxes in the coming years.

Reuters: Tiny tax bite for 12 big U.S. corporations - study

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Reuters Online Story With Updates

Wed Jun 1, 2011

By Kevin Drawbaugh

-Tax research group targets GE, 11 others in new report
-It says cos paid -1.5 pct effective rate in 2008-2010
-Group calls for crackdown on "corporate tax subsidies"

WASHINGTON, June 1 (Reuters) - 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 that General Electric Co (GE.N) and 11 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.

Critics say tax loopholes promoted by corporate lobbyists and enacted by Congress are to blame for a system that lets companies avoid taxes, usually in perfectly legal ways.

Some business leaders have said they could live with closing some of these loopholes, but in return, they have said they want the statutory tax rate lowered. It is among the highest rates in the industrialized world.

Both President Barack Obama and Republicans want to trim the rate. Obama has said he wants to end enough corporate tax breaks to compensate for the revenue that would be lost from a lower rate. Republicans have blasted that as "tax hikes."

The Business Roundtable, a lobbying group for corporate CEOs, issued a report in April that said U.S.-based companies faced an average effective tax rate of 27.7 percent in the 2006-2009 period, more than their non-U.S. competitors.

The debate promises to go on for months and possibly years. U.S. Treasury Secretary Timothy Geithner last week predicted movement on tax reform later in 2011.

Citizens for Tax Justice produced a report in the 1980s that helped lead to President Ronald Reagan's landmark 1986 tax reforms. The group's latest findings singled out GE, American Electric Power (AEP.N), DuPont Co (DD.N), Verizon Communications (VZ.N), Exxon Mobil Corp (XOM.N) and other companies.


"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.

GE spokesman Andrew Williams said the company is "fully compliant with all tax laws. There are no exceptions."

He said GE's 2010 tax rate was low because the company lost billions of dollars in GE Capital, its financial arm, as a result of the global financial crisis. "GE's tax rate will be much higher in 2011 as GE Capital recovers," 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.

Exxon Mobil had a 14.2 percent effective tax rate over the 3-year period, the highest of the 12 companies cited in the report, according to the group.

Exxon Mobil spokesman Alan Jeffers said, "Our effective tax rate in this country over the past six years has averaged about 32 percent. Last year our total taxes and duties to the U.S. government were $9.8 billion, which includes an income tax expense of $1.8 billion."

American Electric Power and DuPont did not respond to requests for comment. DuPont effectively paid $258 million in taxes in the first quarter of 2011, a 15.2 percent tax rate. (Additional reporting by Matthew Daily and Ernest Scheyder in New York, Anna Driver in Houston, Scott Malone in Boston; Editing by Richard Chang) 

New Haven Advocate: Connecticut Can Still Raise Taxes on the Rich, Even if Washington Doesn't

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By Mark Engler
May 24, 2011

In 2009, when then-New York Gov. David Paterson signed a temporary tax increase on the state's wealthiest individuals — one of the so-called “millionaire's taxes” that have passed in recent years in select states across the country — at least one multimillionaire was not happy. Rush Limbaugh proclaimed he was selling his condo and abandoning that state as a part-time residence.

While Limbaugh attempted to depict himself as part of a wider trend, new studies show that surtaxes on the wealthy do not cause an exodus. Moreover, surveys demonstrate that Limbaugh's unhappiness represents a minority position. With debate in Washington focused on reducing the federal deficit and states facing yawning holes in their budgets, few ideas garner more public backing than that of top earners stepping up to help cover the gaps.

In New York, 71 percent of residents surveyed in a recent Siena poll favored an extension of higher taxes on the state's wealthiest. “This has broad popular support ... Republicans and Democrats, conservatives and liberals, upstate and downstate,” says Sunshine Ludder of New York's Center for Working Families. “If you ask people whether they'd rather have a millionaire's tax or have a billion dollars cut from education and healthcare budgets, the numbers go even higher."

Responding to similar sentiments at the national level, a group led by Illinois Democrat Jan Schakowsky introduced the Fairness in Taxation Act on March 16, which would create a federal millionaire's tax.

The tax code makes few distinctions among the top 3 percent. Households making $250,000 per year are subject to rates almost identical to those making hundreds of millions. The Fairness in Taxation Act would create new tax brackets, starting at $1 million and going up to $1 billion. “There's no reason to treat the wealthiest 1 percent any more specially than anyone else,” said Arizona Democrat Raúl Grijalva, co-sponsor of the House bill, “and right now that's exactly what our tax system is doing.” The measure would raise more than $74 billion this year, according to estimates by the Citizens for Tax Justice.

With a Republican majority in Congress, the chances of passing a greater levy on the rich at the federal level are slim. But that has not stopped advocates from pushing to reform tax codes in the states, which tend to do even less to separate middle-class families from the most affluent residents.

Since 2008, Connecticut, Hawaii, Maryland, New Jersey, New York, North Carolina, Oregon and Wisconsin have all enacted some version of a tax increase on top earners, with varying thresholds for when new rates kick in. The measure passed in New York in 2009 raised the state's top tax rate by 1 point for individuals with incomes over $200,000 (or over $300,000 for couples) and by just over 2 points for those with incomes over $500,000.

The impact of these changes has been significant. “They have been able to help states avoid some really deep and painful cuts in important public services — layoffs of teachers and firefighters — and helped them continue to adequately fund healthcare and other safety net programs,” says Carl Davis, senior analyst at the Institute on Taxation and Economic Policy.

Despite these benefits, almost all of the taxes on the wealthy passed in 2008 and 2009 were temporary. With these expiring, state legislatures are debating about whether surcharges should be extended. Yet the political climate for these drives has been inhospitable of late.

In Hartford, the Connecticut Business & Industry Association convinced Gov. Dannel Malloy that any additional increase on top of the new top rate of 6.7 percent will send wealthy residents fleeing. New York Gov. Andrew Cuomo joined Republicans to thwart a renovated millionaire's tax this spring. And in New Jersey, Gov. Chris Christie vetoed a similar measure in 2010, vowing to do so again this year.

When Oregon reported it collected substantially less from its tax on high earners during its first year than projected, the Wall Street Journal pounced, casting the discrepancy as the result of an entirely predictable choice by wealthy taxpayers to depart.

But information from Oregon's Legislative Revenue Office indicated that the decline in the number of millionaires had little to do with migration. It suggested people were simply making less money in a recession, thereby falling into lower brackets that were not subject to the new tax.

In April, Jeffrey Thompson of the Political Economy Research Institute at the University of Massachusetts published an analysis of IRS migration data in New England. Pointing out that “more than half of American adults have never lived in any state other than where they were born,” the report demonstrated that migration across state lines is rare and taxes have little role in people's decisions to move.

“These papers show that while state policy-makers may be afraid of taking the steps to generate revenue, some of their worst fears are unlikely to be realized,” Thompson says.

The billions already collected from taxes on top earners are hardly insignificant for cash-strapped states, and these measures could be even more vital in the long term.

“With so much income growth having been concentrated at the upper end of the scale, calibrating your tax system to take account of that fact is a good thing,” Davis says. “If millionaires continue to do as well in the years ahead as they have in years past, these can become very effective revenue-raising measures.

A version of this article appeared in slightly different form in The Nation.