July 2011 Archives

Counter Punch: Debt Ceiling Dumbshow: Lots of Posturing, No Solutions

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Upate: CTJ contacted the editor and writer concerning a mischaracterization in the original version of this essay. CTJ does not claim that "none of the 12 corporations paid any federal income taxes for the period 2008-2010." The report shows that the 12 companies averaged a negative rate overall, but some individual companies did pay taxes. The essay below is the revised version reflecting that input.

Original Post

July 29, 2011

by ISMAEL HOSSEIN-ZADEH

t is self-evident that no sickness can be successfully cured without proper diagnosis of the illness. In their frantic efforts to remedy the plague of national debt and deficit, however, US policy makers tend to shy away from the root causes of the problem and focus, instead, on scapegoats.

What are the root causes of the national debt and deficit? They are, first and foremost, the multi-trillion dollar bailout packages that were bestowed upon Wall Street in order to rescue the financial gamblers, the constantly escalating costs of war and militarism, the huge tax giveaways to the wealthy, and the skyrocketing costs of healthcare, systematically jacked up by the insurance and pharmaceutical companies.

And what are the scapegoats? They are the entitlements (Social Security, Medicare and Medicaid) and non-military discretionary spending: health, education, housing, transportation, the environment, community development, science and energy, human services, and the like. I call these items scapegoats because they are not the sources of the continued escalation of debt and deficit.

Take, for example, Social Security. First of all, it is a self-financing insurance program, funded by payroll taxes, not a handout or courtesy of Uncle Sam. Secondly, although it no longer has as big a surplus as it used to, nonetheless it still enjoys a considerable surplus. Indeed, without Social Security's surplus, the Federal Debt would be bigger than it is. Thirdly, to the extent that the trust fund may face a shortage in the future, it can easily be remedied by, for example, raising the maximum level of taxable income (for payroll purposes) from the current $106,800 to a slightly higher level.

Like Social Security, Medicare is an insurance program that is funded by payroll tax. (Out of the 15.4% payroll tax 12.5% goes to fund Social Security and the remaining 2.9% goes to fund Medicare.) Only recently have Medicare expenses come close to surpassing its revenue. This too can easily be remedied if or once the maximum taxable income for payroll funding is raised above the current $106,800. The financial pressure on the Medicare program (like that on the Medicaid program) is not so much due to the revenue side of the program as it is due to the cost side, for which the pharmaceutical and HMO/insurance companies are to be blamed, not the program itself. Indeed, the program itself has been a very successful case of single-payer health insurance programs. There are reasonable suspicions that this is why Medicare has been targeted for destruction by the powerful interest groups that view it as a "bad" example of a cost-efficient and successful health insurance program.

Just as the entitlements are thus not the sources of the problems of debt and deficit, so are not the non-military discretionary spending such as health, education and all other social and infrastructural expenditures. For one thing, these expenditures (or more precisely, investments in maintaining or building the society's physical and human capital) constitute only a small portion (15%) of the total federal budget. For another, their share of the increase in federal outlays has in recent years been quite minuscule, only 14 cents out of every dollar over the past decade—hardly big enough to be blamed for the astronomical rise in the federal debt and deficit during this period (Economic Policy Institute, Policy memorandum #187, July 13, 2011).

It is obvious, then, that the budget negotiators, posturing and shouting over the debt ceiling, are shamelessly lying to the American people when they blame the entitlements and non-military public spending as sources of the federal debt and deficit. An honest approach to the problems of debt and deficit would, instead, look into the real causes of these problems: Wall Street bailouts, war and military expenditures, tax giveaways to the wealthy, and out-of-control costs of health care.

The ruling kleptocracy and the corporate media have created a huge misperception regarding the bailout of the Wall Street gamblers: that the government paid only $780 billion of the taxpayers' money (called TARP, or Troubled Asset Relief Program) to rescue the bankrupt or near bankruptcy speculators, and that once these financial speculators returned to profitability, they paid all they owed the taxpayers back—the end of the story!

In reality, however, the TARP money was only a small fraction of the government's giveaway of taxpayers' money to Wall Street. Other forms of government handouts, not known to the public, included trillions of dollars in terms of subsidies, backstops, guarantees, loans, purchases of worthless toxic assets at their pre-recession high prices, and a number of other confounding types of plunder. Here is how Senator Bernie Sanders (of Vermont) put it: "The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression." This explains why the federal debt has increased from $9.2 trillion in 2007 to $14.2 trillion in 2011, an increase of nearly 55%.

It is now common knowledge that a major contributor to the rising debt and deficit is the escalating spending on war and militarism, nearly doubled over the past decade (from $295 billion in 2000 to the current $560 billion). While the official Pentagon budget for the 2011 fiscal year is $560 billion, the real figure is nearly twice as much as the official figure. The reason for this understatement is that the official Department of Defense budget excludes not only the costs of the wars in Iraq and Afghanistan, but also a number of other major cost items.

These disguised cost items include: budgets for the Coast Guard, the Department of Homeland Security, nuclear weapons, veterans' programs, most military retiree payments, interest payments on money borrowed to fund military programs in past years, and more. Once these misplaced or disguised expenditures are added to the official Pentagon budget, total "security"/military-related budget items would amount to slightly more than $1.1 trillion, which absorbs about one-third of the entire 2011 federal budget of $3.4 trillion.

Another major contributor to the rising debt and deficit has been the huge tax breaks granted giant corporations and the very affluent layers of the society. For example, according to Citizens for Tax Justice (CTJ), known for its accurate reports on taxation, the combined amount of taxes paid by the following 12 corporations for the 2008-2010 period was zero—no, it was less than zero! Collectively, they got $2.5 billion in refunds.

The 12 corporations were: Exxon Mobile, Wells Fargo, DuPont, American Electric Power, Boeing, FedEx, IBM, General Electric, Honeywell International, United Technologies, Verizon Communications, and Yahoo. CTJ reports that "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." (It must be pointed out that although the total federal income taxes for the group of 12 as a whole was negative, 4 out of 12 paid some federal tax, but the little tax that those 4 paid was more than offset by the other 7 companies' not having paid any.)

This is an indication of how major US corporations pay—or avoid paying—their tax liabilities. The extremely rich and powerful interest groups have (since the late 1970s and early 1980s) deliberately used a combination of raising military spending and lowering their tax obligations in order to redistribute the national resources from the bottom up. As this combination leads to increases in debt and deficit, it then forces cuts on non-military public spending.

This represents a cynically clever strategy on the part of the ruling plutocracy that benefits from war, militarism, debt and deficit: instead of financing their wars and military adventures by paying taxes proportionate to their income, they give themselves tax breaks, finance their wars of choice through borrowing, and then turn around and lend money (unpaid taxes) to the government and earn interest. The wealthy have thus successfully converted their tax obligations to credit claims, that is, lending instead of paying taxes, which is in essence a disguised form of robbery.

It is obvious from this brief analysis that Washington's political dogs howling at the non-military public spending as the source of the escalating national debt and deficit are barking up the wrong tree. As long as the out-of-control spending on war and militarism is not contained, the multi-trillion dollar corporate welfare handouts (in the form of tax giveaways and costly rescue/bailout packages) are not curtailed, and the skyrocketing costs of health care are not restrained, the national debt and deficit are bound to continue their upward trend.

It is also obvious that the American people are lied to when they are told that all the wrangling that is going on in Washington over the debt ceiling is to reduce national debt. In reality, the national debt will continue to rise even if the corporate government takes a few trillion dollars out of it by further reducing the non-military public spending, that is, by further reducing the people's standard of living.

Ismael Hossein-Zadeh, author of The Political Economy of U.S. Militarism (Palgrave-Macmillan 2007), teaches economics at Drake University, Des Moines, Iowa.

 

Post-Star (NY): Commentary: Anti-tax Governors just getting started

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Original Post

By Matthew Gardner, Executive Director Institute on Taxation and Economic Policy

July 28, 2011

Twelve new governors who ran on anti-tax platforms have now signed their first fiscal year budgets. All of them will tell you they were elected with a mandate to get their state's fiscal house in order, rein in government spending and cut taxes. Some of them will even tell you they view Chris Christie as their model - a "primo example" according to Wisconsin's Scott Walker - of how a conservative governor governs. This should alarm you.

Gov. Christie recently vetoed a widely popular and eminently sensible tax on New Jersey millionaires.

This temporary tax, affecting a mere 0.2 percent of all households, would have generated around $500 million, primarily for public schools. In the same budget, Christie raised (yes, raised) taxes on his state's working poor by cutting about $45 million from the Earned Income Tax Credit, which helps people working full-time in low-wage jobs to make ends meet. He went on to shred the Democratic legislature's budget, which paid for things like police protection, a health-care safety net and college tuition grants. Christie said no to all of it, insisting the state didn't have the money.

And yet he managed to set aside $640 million ($365 million if you accept his revised math) he calls a "healthy and necessary" surplus - necessary to his career, maybe, but not healthy for his constituents.

New Jersey is one of more than 30 states that, in 2009, decided temporarily to boost some taxes to help make up revenues that were drying up with the recession. Even with those temporary infusions, states had to excise billions from their budgets to stay in the black. Those mostly two-year fixes have now expired, as have the federal stimulus dollars that kept many state budgets afloat. Now, with hospitals, schools and police forces scarcely shadows of their former selves, and college tuition up as much as a 50 percent and even 100 percent since 2008, governors like Christie are hoarding surpluses while heaping burdens on average taxpayers, too many of whom remain un- or under-employed.

In Michigan, with its infamously precarious economy, freshman Gov. Rick Snyder delivered a particularly irrational budget. He slashed all kinds of spending, cut business taxes by well over a billion dollars, then reduced the state's Earned Income Tax Credit by 70 percent, raising taxes on the state's working poor by more than $260 million each year. According to our analysis, the poorest 20 percent of Michiganders will be hit hardest by the package of tax hikes (including some on seniors) that Snyder pushed through. All to pay for allegedly job-creating tax cuts for business, even as the governor admits he "can't guarantee" economy-boosting results.

Governors across the country have signed budgets like these, with excruciating cuts in government services, incomprehensible tax increases for low- and middle-income households and utterly mystifying tax breaks benefitting businesses and individuals with healthy portfolios. Always in the name of "fiscal responsibility," and often - astoundingly - with a surplus squeezed out.

In Ohio, for example, Gov. John Kasich signed a two-year budget that cuts about $630 million in aid that local governments rely on, $700 million from public schools and $340 million from nursing home care. At the same time, it eliminates the estate tax, which, with its various exemptions protecting farms and other family businesses, is a genuinely progressive and productive tax. In 2011 alone, it generated $230 million for Ohio localities and $55 million for the state.

In Wisconsin, the new budget takes $56 million from the pockets of the working poor by reducing the Earned Income Tax Credit, and gives $36 million to wealthy Wisconsin investors in the form of a capital gains tax break. And, because Gov. Walker's budget cuts were especially hard on education, 354 teachers in Milwaukee alone just got pink slips.

Like Christie, each of these governors left hundreds of millions of available funds (previous surpluses or projected revenues) unspent. They like to call it "fiscally responsible," but sitting on millions while raising the cost of living for low- and middle-income families and passing the buck to cities and counties (which is exactly what these stripped down state budgets do, make no mistake) is anything but fiscally responsible.

It is, however, politically profitable. A governor who balances the budget during an economic crisis, cuts taxes and shows off a shiny new surplus to boot is someone we can trust, right?

Wrong. And taxpaying citizens should not fall for this shell game. Last November, when we looked ahead to this budget year, we anticipated the worst. Ohio's Kasich had campaigned on repealing the state's entire personal income tax, while Florida's Rick Scott and South Carolina's Nikki Haley campaigned on the promise of repealing corporate taxes. We were dreading flat-tax schemes and tax capping laws designed to choke off revenues into the future. But even though these new anti-tax governors didn't get everything they wanted this year, if they get away with calling this fiscal responsibility, then next year, they just might.

Matthew Gardner is executive director of the Institute on Taxation and Economic Policy, a non-partisan research organization that works on federal, state and local tax policy issues.

Huffington Post: Small Businesses Demand Debt Deal Address Corporate Tax Dodging

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Original Post

July 27, 2011

by Zach Carter

WASHINGTON -- As political leaders push to reduce the nation's deficit with dramatic spending cuts, small business owners are asking Washington to lower the deficit by closing offshore tax loopholes, which cost the United States as much as $100 billion a year.

"This is just another example of how the tax issue is distorted by members of Congress," says Kelly Conklin, owner of Foley-Waite Associates, a small company that designs and manufactures customized wood home interiors. "Offshore tax havens don't have any impact on what most people consider small business to be."

American corporations routinely set up sub-companies headquartered in nations such the Cayman Islands, which do not charge corporate taxes. Even in cases where companies are making their money in the United States, they can avoid paying U.S. taxes by stashing their profits in offshore tax havens.

On Wednesday, Rep. Lloyd Doggett (D-Texas) and 43 other House Democrats introduced the Stop Tax Haven Abuse Act, a companion to legislation Sen. Carl Levin (D-Mich.) unveiled earlier in July. The bill targets tax dodging by both corporations and wealthy individuals, who can also stash money in secretive offshore bank accounts and even set up their own foreign corporations to avoid paying U.S. taxes. Doggett and Levin say their bill could generate $100 billion a year in revenue that is currently just sitting in corporate coffers abroad.

The legislation has the strong support of several small business groups.

"It's outrageous that companies can take advantage of our country's legal, social and economic infrastructure, yet they do whatever they can to avoid paying their fair tax rate to support it," says Jody Gorran, Chairman of the New Jersey-based Aquatherm Industries, a company that makes solar-powered heating for swimming pools. "It would bring in $100 billion a year. That's $1 trillion over the 10-year window. Go for it, for God's sake."

Scott Klinger, Tax Policy Director at Business for Shared Prosperity, a nonpartisan small-business advocacy group, said offshore tax loopholes are not just bad tax policy, they also mean job loses for American workers. "Tax loopholes that reward corporations for shifting jobs and investment offshore undermine small and domestic businesses that invest and create jobs in America."

But as the clock ticks down on debt ceiling negotiations, Speaker of the House John Boehner (R-Ohio), Senate Majority Leader Harry Reid (D-Nev.) and President Barack Obama have all declined to include the bill as a component of any deal to narrow the federal budget deficit and raise the debt ceiling.

The refusal to deal with tax havens reflects more general Republican opposition to increasing tax revenues during a recession. Raising taxes, top GOP officials repeatedly say, will kill jobs and hamstring the economic recovery.

Some small business owners dispute that characterization, including Gorran. "This mantra that every dollar in tax increases is a dollar away from job creation -- give me a break," says Gorran, who employs 45 full-time workers. "It's not taxes that affects job creation, it's demand."

But the lack of support from the administration for cracking down on offshore tax havens is the latest in several economic policy moves that appear to put the interests of large corporations ahead of the nation's broader economic well-being. President Obama is currently pushing three trade agreements that appear likely to cause significant American job losses -- but they are expected to also provide a big boost in corporate profits.

Earlier this year, the administration tentatively promoted "revenue-neutral" corporate tax reform -- a plan that would end some special tax sweeteners for connected corporations but would also lower overall corporate tax rates. Obama touted the plan even as he rolled out a budget proposal that included harsh cuts to the social safety net.

Conklin, who has eight full-time employees and has run his company since 1978, says that dodging the tax haven bill is simply a giveaway to big companies.

"I don't decide to hire or buy equipment based on tax policy," Conklin says. "We know how to make shit out of wood. If some knucklehead called and asked me if we wanted to set up an offshore corporation, it would be a real simple conversation -- click."

In 2008, the Government Accountability Office found that 83 of the 100 largest U.S. corporations were operating subsidiaries in tax-haven nations. And this past June, the nonpartisan tax policy advocacy group Citizens for Tax Justice published a study concluding that 12 American corporations paid no federal income taxes from 2008 through 2010 on average, despite reaping combined U.S. profits of $171 billion. The companies included some of the biggest names in American business, including Boeing, Exxon Mobil, FedEx, General Electric, IBM, Verizon Communications, Wells Fargo and Yahoo. The primary tax avoidance technique? Offshore tax havens.

"These 12 companies are just the tip of an iceberg of widespread corporate tax avoidance," Citizens for Tax Justice Director Bob McIntyre wrote in the report. "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."

Instead, politicians appear to be battling between competing plans offered by Boehner and Reid, both of which rely heavily on spending cuts -- which small firms worry could restrict demand and hurt their operations. Boehner's plan would cut the deficit primarily by placing caps on government spending, according to the Congressional Budget Office, while text Reid would couple spending cuts with assumed savings from winding down the wars in Iraq and Afghanistan.

"This is one trillion dollars in revenue over the next ten years that is low hanging fruit for Congress and the President to pick for deficit reduction," said Frank Knapp, president and CEO of the South Carolina Small Business Chamber of Commerce. "That’s what we should be doing right now, not taking an ax to programs in the federal budget that strengthen our economy and help create jobs on Main Street."

Carolina Journal: What's Fair Is Fare

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Original Post

July 27,2011

by John Hood

RALEIGH – Debates about government spending – whether they be legislative wrangling in Raleigh or debt-ceiling standoffs in Washington – only seem to be about budgets, taxes, and job counts.

They are really moral debates. That is, they represent differences of opinion about what it is right for political authorities to use physical force to accomplish.

If you believe that government has the moral authority and responsibility only to provide a few basic services that citizens cannot provide for themselves through voluntary means, then you will tend to conclude that current levels of government spending and taxation are too high.

If you believe that government has a broader moral authority and responsibility to redress social and economic grievances, either by redistributing income directly as cash or through government services that redistribute it indirectly, then you will tend to conclude that current levels of government spending and taxation are too low.

Have you noticed that both sides talk about what is “fair”? President Barack Obama did it Monday night in his televised address on the debt debate. So did the Republicans who think his ideas are too radical and Democrats who think they are too timid.

The reason everyone feels comfortable making fairness claims is that definitions of fairness vary wildly.

In my view, fairness means treating like people and like situations in like manner. In fiscal policy, for example, it is grossly unfair that some households and businesses have significantly lower tax burdens than others simply because of political pull. That’s why I detest targeted tax incentives and other devices of fiscal unfairness.

But in the minds of others, including the president and his allies, fairness isn’t about treating people the same. It’s about treating them differently. It is fairness as equity, not fairness as equality. That’s why they seem so fascinated with models of “tax fairness” that I see as obviously and grotesquely unfair.

When it comes to government taxes and spending, no one outside of a few cranks believes that every citizen of the republic should pay the same amount of tax. Instead, the debate is essentially about whether the effective tax rate – the amount of taxes paid divided by some tax base, such as income or consumption – ought to be proportional or progressive.

That is, should taxpayers be compelled to surrender roughly the same percentage of their resources to government – be they rich or poor – or should taxpayers be compelled to surrender a significantly higher percentage of their resources to government as they become more affluent?

As I have previously argued, I think proportionality is the right standard. I think the cost of government ought to be something like an insurance premium – or a income-variable fare, if you will.

If you have twice as much income or stuff as I do, you ought to pay about twice as much in tax as I do. Ditto for the likes of Bill Gates or Warren Buffet, whose “stuff” multiplier is a great deal higher than two.

If, instead, you think progressivity is the right standard, I would ask you this question: How do you know when you get there? If I have two times as much stuff but pay three times as much tax, is that enough? Or do you think I should pay four times as much, or 10 times as much?

Because the progressivity standard arises not from the logic of fairness but from the emotion of envy, the question has no satisfactory answer.

To bring this discussion from the theoretical to the actual, consider the current distribution of taxes in the United States. I’ll use 2010 figures from the Citizens for Tax Justice, a left-wing group, even though I don’t fully agree with its methodology.

If you combine federal, state, and local taxes (and you always should), the least-affluent quintile of Americans pay about 16 percent of their income to government. The next quintile (call them lower-middle income if you like) pay 21 percent. The third quintile (true middle) pay 25 percent. The fourth quintile (upper-middle) pay 29 percent. The final quintile, the most affluent Americans, pay about 31 percent.

That is, the effective tax rate on the top earners is about twice the effective tax rate on the bottom earners (some of whom are no-earners). Keep in mind that the bottom earners are also the most likely to derive a significant share of their real consumption from government programs, and that the top earners stop paying Social Security taxes on a significant share of their income because they aren’t eligible for Social Security benefits on it. If one adjusted for these factors – using a net-transfer standard rather than gross taxes paid – that would further widen the gap between the two effective tax rates.

So if you think the current tax system is unfair to the poor, you and I speak different languages.

Hood is president of the John Locke Foundation.

Reuters: Tax Crusader Sees Slim Chance of Reform For Now

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Original Post

July 26, 2011

by Kevin Drawbaugh

When the last top-to-bottom overhaul of the U.S. tax code happened, almost miraculously, in 1986, Bob McIntyre helped usher it in.

The unassuming and dogged tax activist -- whose research on corporations turned the head of President Ronald Reagan -- is pessimistic about another reform anytime soon, despite growing talk of a tax code overhaul in the urgent debt ceiling talks.

"It's going to take a different Congress," says the director of Citizens for Tax Justice, a not-for-profit group that advocates for fairer taxes for ordinary Americans.

From modest offices in Washington, McIntyre and a small staff crank out studies countering the agenda of the capital's legions of tax lobbyists for businesses and the wealthy.

The nonpartisan center leans decidedly leftward, but McIntyre, 62, does not hesitate to point the finger at Democrats or Republicans when he sees a tax inequity.

President Barack Obama? McIntyre says he sounded like a tax reformer early in his campaign, but he has changed.

"Obama's campaign platform owed a lot to us -- get rid of deferral for foreign profits; crack down on a whole array of tax shelters. It was great," he says.

"But as the campaign went on, people of influence started talking to him and he started scaling back ... Then he got elected and scaled back some more," McIntyre says.

Now, amid increasingly frantic debt ceiling negotiations, Obama and lawmakers are talking about agreeing to tackle tax reform in 2012, but analysts are skeptical that this could be done in an election year.

In the near term, McIntyre says, he doubts the debt ceiling discussions will produce meaningful new tax revenue as long as the House is controlled by Republicans who have nailed their flag to opposing any and all new taxes.

"I don't know how they switch on it," he says.

The center issued a high-profile report in June that said General Electric Co (GE.N), DuPont Co (DD.N), American Electric Power (AEP.N) and many other companies paid far less than the statutory 35-percent corporate tax rate from 2008 to 2010.

A more detailed report is expected within the next two months or so, said McIntyre from behind a desk cluttered with raw data and rough drafts requiring his review.

"For decades, Bob McIntyre has been blowing the whistle on the manipulation of our tax code," said Democratic Representative Lloyd Doggett.

"Bob and his indefatigable troops at Citizens for Tax Justice are an invaluable source of expertise to which I have turned again and again."

WORKED WITH NADER

After graduating from Providence College and University of Pennsylvania Law School, McIntyre was briefly a fellow at Georgetown University Law Center. He went to work in 1976 for consumer activist Ralph Nader as a tax researcher, then joined the newly set up Citizens for Tax Justice in 1980.

President Reagan, who had just been elected, famously slashed taxes in 1981. Then when a deep recession failed to ease, he reversed himself and raised taxes in 1982 and 1984, which was the year that McIntyre made his mark.

After months of poring over corporate reports and crunching the numbers on his own, McIntyre issued a study saying many large U.S. corporations paid no taxes between 1981 and 1983.

Reagan was informed that his secretary was paying more in taxes than GE, and that cemented the Republican president's growing conviction that a thorough tax code reform was needed. The result was the landmark Tax Reform Act of 1986.

Twenty-five years later, with no equally comprehensive effort intervening, "1986 is kind of like the Holy Grail in the tax academy," said University of Colorado Law School Associate Professor Victor Fleischer at a recent congressional hearing.

Many of the congressional aides who helped clean up the tax code in 1986 later resigned and became lobbyists. Their work since then has riddled the code with hundreds of loopholes.

McIntyre chuckles and recalls a quip from a mid-1980s farewell party for one tax aide. As he departed Capitol Hill for a lucrative job as a K Street lobbyist, the aide said: "We've done tax reform. Now we're going to do tax deform."

New York Times Economix: Of Loopholes and Potholes

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Original Post

July 25, 2011

by Nancy Folbre

Many Democrats want to close tax loopholes in order to increase revenue. Many Republicans believe that government spending should be cut because it hurts the economy, rather than helping it — digging potholes, as it were, rather than fixing them.

But many tax loopholes for big business are potholes for the rest of us. Closing and filling them would cut spending and improve economic efficiency.

Special provisions in the tax code often provide specific subsidies to distinct groups. Such tax expenditures have the same effect as spending programs.

The word “loophole” implies an opportunity for clever manipulation that leads to unintended results. While some loopholes fit this description, others represent explicit efforts to provide special benefits, reflecting greater political priorities and intense lobbying efforts.

As Senator Russell Long of Louisiana once put it, a tax loophole is “something that benefits the other guy; if it benefits you, it’s tax reform.”

Corporate tax policies in the United States provide significant benefits to shareholders, at considerable cost to everyone else.

Our statutory corporate tax rate, at 35 percent, looks high relative to those of other countries. But the many deductions, credits and other special breaks mean that the effective rate (or taxes actually paid) is much lower — an estimated 13.4 percent of profits over the 2000-5 period, lower than the average for other major industrialized countries.

As my fellow blogger Bruce Bartlett noted, “The United States actually has the lowest corporate tax burden of any of the member nations of the Organization for Economic Cooperation and Development.”

The proliferation of special breaks helps explain why corporate taxes have declined over time as a percentage of gross domestic product and as a percentage of total federal tax revenues.

Robert McIntyre of Citizens for Tax Justice points out that tax expenditures for corporate and other businesses will cost about $364.5 billion in 2011. That’s about a billion dollars a day.

Many special corporate tax breaks also contribute to serious economic inefficiencies.

Corporations that invest overseas rather than within the United States enjoy a huge advantage in the form of deferred taxes on profits. Republican policy makers are now proposing a “tax holiday” or even total elimination of American taxes on offshore profits.

Such policies would further encourage corporations to relocate to countries with the lowest tax rates and avoid contributing to social investments in health, education and environmental protection.

There also is good reason to believe that increased “offshoring” will reduce employment growth.

Some companies, especially those that rely heavily on intellectual property rights like patents, can simply shift their profits to offshore tax havens. Small business owners who cannot easily engage in such practices are rightfully indignant.

Other members of the business community are also speaking out. A Caterpillar executive recently filed suit against his company (the world’s largest construction equipment manufacturer), asserting that he was demoted for criticizing the company’s tax minimization strategy.

Everyone concerned about environmental sustainability should take a close look at corporate tax loopholes. The United States, like most other industrialized countries, continues to provide billions of dollars of special tax subsidies for fossil fuel industries that contribute to global warming.

Nuclear power is also on the dole. Without public subsidies, including limits on economic liability in the event of an accident, it would not be economically viable.

If only we could throw these loopholes into the potholes and have a real discussion of tax form, instead of getting buried by partisan obsession with the ratio of overall tax increases to spending cuts.

Political Affairs: Close the Trillion Dollar Tax Loophole to Reduce the Deficit

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Original Post

July 19,2011

by Joel Wendland

With all of the talk about the debt ceiling and deficit reduction, small business owners may just have a good idea to close the budget gap by $1 trillion over the next decade without cutting essential services or carving out benefits for retirees and the disabled.

U.S.-based multinational corporations avoid some $100 billion annually through the creation of offshore tax havens. The situation is fundamentally unfair to small business owners and hurts taxpayers now being asked to make more sacrifices to reduce the federal deficit, says a coalition of business groups behind a new campaign to force big business to pay its fair share of taxes.

“It’s obscene to put everything from the Small Business Administration to Medicare and Social Security on the chopping block while corporate tax dodging deprives us of major revenue," said Scott Klinger, tax policy director of Business for Shared Prosperity.

"Today, large corporations as a group contribute just nine percent toward federal government bills – down from 32 percent in 1952," he added. "It’s time to plug the trillion dollar hole in the U.S. Treasury from tax haven abuse.”

“Small businesses are the lifeblood of local economies. We pay our fair share of taxes and generate most of the new jobs,” said Frank Knapp, president and CEO of the South Carolina Small Business Chamber of Commerce.

“While our members are in South Carolina, small businesses across this country, from California to Washington DC, understand that while they are paying their taxes, many U.S.-based multinational corporations are not," he added. "That’s not fair and it makes us angry. Why should we be subsidizing U.S. multinationals that use offshore tax havens to avoid paying taxes?”

Big companies who move their capital offshore to hide it from taxation in the U.S. still demand subsidies and benefits from taxpayer-funded programs, Klinger said.

“Increasingly, U.S. multinationals want to benefit from government spending on research, education, defense, infrastructure and much more without paying for it," he stated.

The coalition of small business owners called for passage of the Stop Tax Haven Abuse Act, just introduced by Sens. Carl Levin, D-Mich., and Kent Conrad, D-N.D.

The bill is designed to stop the use of tax havens that both cost the federal treasury some $100 billion a year and give U.S. corporations an incentive to move profits and jobs overseas. Right now, loopholes in the tax laws allow corporations and hedge funds to avoid U.S. taxes by setting up shell companies in places like the Cayman Islands, Bermuda and elsewhere.

Tax havens also allow corporations to report profits to their shareholders but losses to the government at tax time. Paul Egerman, founder of a medical information technology company and a member of Business for Shared Prosperity, explained it this way: “It is simply wrong that a U.S. multinational company is able to report profits to their shareholders and losses to Uncle Sam. When Google or Pfizer deploy armies of accountants to game their taxes down, it means the rest of us are left responsible for the bill. Paying our fair share of business taxes is the price we pay not only to live in a civilized society, but also a reasonable levy to conduct business in a vibrant, regulated marketplace with property rights protections, public infrastructure and the rule of law.”

The coalition of small business groups behind this campaign includes Business for Shared Prosperity, Wealth for the Common Good, American Sustainable Business Council, the Main Street Alliance, and Growth and Justice.

Ironically, congressional Republicans tout small businesses as the "engine" that drives the American economy, but few have chosen to stand with them to halt huge tax gifts to big companies. For example, in May, Senate Republicans filibustered a bill that would have ended special subsidies to major oil companies who already earn record profits.

Defenders of offshore tax havens claim that high corporate taxes in the U.S. force company to seek tax havens elsewhere. However, a study by Citizens for Tax Justice (CTJ) found that major U.S. corporations pay substantially higher tax rates on foreign profits.

In testimony to the Senate in March, CTJ Director Robert S. McIntyre explained, "we firmly believe that business subsidies are the biggest problem in the tax code today. They are distributionally harmful, which means they create even greater inequality."

Corporate tax rates in the U.S. in 2009 ranked 25th lowest of 26 industrialized countries (for whom data was available) in the Organization of Economic Cooperation and Development, according to CTJ. Only Iceland had lower tax rates.

Reuters: Left warns, CEOs laud Gang of Six on overseas tax

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Original Post

July 20, 2011

by Kevin Drawbaugh

(Reuters) - Left-wing activists and politicians on Wednesday sharply criticized a plan to end U.S. taxation of most corporate offshore profits as endorsed by the Senate's so-called "Gang of Six."

In backing the idea of a territorial tax system, a deficit-reduction plan from the Gang of Six would hand multinational corporations a victory in their fight for lower and simpler taxes on profits they post outside the country.

The Business Roundtable, a lobbying group for the CEOs of many of the nation's largest companies, praised the plan for "supporting lower corporate tax rates and moving toward a competitive territorial system of taxation."

The Gang of Six plan is short on specifics and likely to change as Congress and President Barack Obama negotiate an increase in the U.S. debt ceiling. But the backing in the plan of territorial taxation alarmed liberal activists.

Citizens for Tax Justice, a group that advocates for fairer taxes for all, ripped into the plan. "We already have huge problems with corporations moving jobs overseas and shifting their profits to tax havens to reduce their U.S. tax bills," said Robert McIntyre, director of the center.

"Giving corporations a permanent tax exemption for their purported offshore profits will make things much worse."

Independent Senator Bernie Sanders said the plan would "hurt American workers by giving U.S. companies more incentives to avoid U.S. taxes by shipping jobs to low-tax countries."

Unlike many nations, the United States taxes U.S.-based corporations' profits no matter where they are earned, with an important exemption. Taxes on active profits earned overseas do not have to be paid right away. Instead, they can be deferred as long as the profits are not brought home, or repatriated.

At present, an estimated $1 trillion in profits is being held offshore by U.S. companies. They pay taxes on those profits to the countries where the profits are held but not to the United States under the complex deferral system.

A territorial system, backed by many businesses but not all, would end taxation of most overseas profits, aligning U.S. policy with that of Britain, Japan and other major powers.

Such a move would "give tax incentives for corporations to export good jobs overseas," said Richard Trumka, president of the AFL-CIO labor organization in a statement.

Some corporations, such as retailers and others with few overseas operations, have little to gain from a territorial system. As a result, they might be cool to it if adopting it meant making trade-offs in other areas of the tax code.

The Gang of Six plan also endorses slashing and standardizing the corporate income tax rate to a range of 23 percent to 29 percent from the present top rate of 35 percent, while raising the same amount of revenue from it.

That goal could be attained by closing some corporate tax loopholes but the plan is not specific on that issue.

The Hill: Lobbyists fear Gang's tax plan

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Original Post

July 21, 2011

by Bernie Becker and Erik Wasson

Lobbyists and interest groups are closely monitoring proposals from the Senate’s Gang of Six to overhaul the tax code and are fearful that popular credits and deductions could be targeted.

The group of three Democrats and three Republicans released a $3.7 trillion deficit-reduction plan to great fanfare Tuesday. President Obama cheered the proposal as a “significant step,” and it instantly became a factor in talks to raise the $14.3 trillion debt ceiling.

But despite the warm reception from Obama and many lawmakers, the Gang’s plan was light on details. It said tax-reform provisions could generate up to $1 trillion in revenue for the government, but didn’t specify how.

Interested parties say their lobbying efforts won’t move into full throttle until they know more.

“We are not going to respond to outlines with huge holes in them,” Blair Latoff, a spokeswoman for the U.S. Chamber of Commerce, said in a statement. “We will wait until a plan comes together that will be considered in Congress, rather than jump up and say something about every ‘float the balloon idea’ that pops up.

Under the Gang of Six proposal, the Senate Finance Committee would have six months to complete a tax-reform package that lowers individual and corporate tax rates, switches to a so-called territorial system and ditches some tax credits and deductions.

On Wednesday, some business-friendly groups embraced that push to lower rates and limit taxation on corporate profits made abroad, while progressive groups and unions slammed the proposals for encouraging companies to shift jobs overseas.

The Gang’s framework also proposes to “reform, not eliminate, tax expenditures for health, charitable giving, homeownership and retirement, and retain support for low-income workers and families.”

Some of the most popular, and expensive, tax expenditures in the code would fit under that umbrella. The nonpartisan Joint Committee on Taxation, for example, estimates that a tax exclusion for employer contributions to healthcare would cost the government $659 billion in revenue between 2010 and 2014, while the deduction for mortgage interest would total $484 billion. JCT also projects that three separate expenditures relating to retirement contributions could add up to roughly $597 billion over that time frame.

Given the Gang’s goal of wringing $1 trillion out of the tax code to rein in deficits, the Finance panel likely would have to take a close look at those expenditures to meet its targets — a prospect that worries some interest groups.

Bill Rys, the tax counsel for the National Federation of Independent Business, said the plan was too sparsely detailed to judge its effects on health benefits and retirement accounts. Generally speaking, the government allows people to defer paying taxes on contributions to 401(k)s, and taxing them could mean employers have to pay more in payroll taxes.

Rys added that he was glad the Gang was looking at both the individual and corporate tax codes, as many small businesses pay taxes as individuals.

The AARP is not yet focused on possible changes to retirement tax breaks, a spokeswoman said. But the powerful seniors group did blast out a statement slamming the Gang’s proposed cuts to Social Security and healthcare entitlements.

Meanwhile, any push to reform the mortgage interest deduction would likely consider whether to limit its use to primary residences.

Jerry Howard, the chief executive of the National Association of Home Builders, told The Hill that industries affected by that sort of change have been gearing up for a fight for nine months, ever since the president’s fiscal commission considered doing away with the tax break altogether.

Howard also called fiddling with the mortgage deduction absurd, saying it would devastate the housing sector at a time when economists already believe it is weighing down the economic recovery.

“Proposing this shows no intuitive feel for the economy at all,” he said. “This is a horrible idea.”

Still, Howard added that he did not see the Gang proposal advancing very far, at least this year. A National Association of Realtors spokeswoman also said that her group did not have an official position on the plan, because it lacked details.

“Politically, we don’t see this any time soon.” Howard said.

But over in the charitable world, Steve Taylor, a United Way Worldwide vice president, was concerned that the Gang’s work was gaining traction.

Groups in that sector were already on edge, with President Obama having sought to curtail the deduction for charitable giving in three consecutive budgets and the fiscal commission seeking to make changes to it as well.

In a Wednesday letter to Gang of Six members, Taylor reiterated charitable groups’ view that policymakers should not reduce incentives for giving during a down economy.

“We are very concerned about a resolution that would come at the expense of people who benefit from charitable services,” Taylor told The Hill.

As for the corporate tax code, such groups as the Business Roundtable responded positively to the Gang’s idea of installing a single corporate tax code of between 23 percent and 29 percent, down from a current top rate of 35 percent. The proposal would essentially subject only corporate profits made in the U.S. to American taxation.

The senators’ plan identifies two specific elements of a comprehensive growth strategy we need to succeed in the highly competitive global marketplace,” John Engler, the Roundtable’s president, said in a Wednesday statement. 

But such groups as the AFL-CIO and Citizens for Tax Justice — not to mention Sen. Bernie Sanders (I-Vt.) — blasted the proposed changes to overseas profits.

In a statement, Citizens for Tax Justice said the current system, which basically allows corporations to defer paying taxes on foreign profits until they are brought to the U.S., already encouraged job-shifting and the use of tax havens.

“There would be even more incentives for corporations to do both these bad things under the ‘territorial’ tax system promoted by corporate lobbyists and included in the Gang of Six plan,” the group said.

Still, CTJ’s Steve Wamhoff said, while the gang’s proposal was part of a worrying trend on corporate taxes, he was skeptical it would be ready soon.

Epoch Times: Corporate Tax Debate Heating Up

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Original Post

July 19, 2011

By Heide B. Malhotra

US one of the lowest taxed countries if loopholes and tax credits considered

The debate about corporate tax rates is heating up, with one side claiming that corporate tax cuts would put Americans back to work, and the other side insisting that such breaks don’t create jobs and will put Americans out of work.

The tax holiday legislation, as it is called by opponents of corporate tax cuts and officially called the “Freedom to Invest Act of 2011,” was introduced by U.S. Representatives Kevin Patrick Brady, a Texas Republican, and James David “Jim” Matheson, a Utah Democrat, in May. The bill was sponsored by 13 Republicans and five Democrats.

This piece of legislation temporarily (for 2011 and perhaps 2012) modifies the Internal Revenue Code of 1986 for U.S. corporations, allowing firms to deduct dividends earned by their foreign subsidiaries from their taxable income. It also calls for a penalty if the firm does not maintain a certain number of full-time U.S. employees.

Tax reduction proponent Grant Thornton LLP claimed that a corporate tax cut would bring jobs back to the United States, and therefore “Grant Thornton supports tax reform aimed at lowering effective business tax rates in order to promote global competitiveness for U.S. businesses.

“Low effective tax rates encourage investment and business activity, [and] spur job creation,” testified Mark Stutman, national managing partner of tax services at Grant Thornton, at a June U.S. House Ways and Means Committee hearing.

Corporations are spending millions in an effort to push favorable corporate tax legislation through the House and the Senate.

Apple Inc. noted in its most recent disclosure report that it paid $560,000 to lobby the legislature and government officials during the first three months of 2011, according to the AppleInsider website. However, Apple spent only one-third of what Google Inc. ($1.2 million) and Microsoft Corp. ($1.7 million) paid to lobbyists during the same time.

During 2010, Microsoft spent $6.9 million, up from $6.7 million in 2009, on lobbyists, according to the seattlepi website. Google spent 25 percent less on lobbying during 2010, but still spent $5.16 million, up from $4.03 million in 2009. Wells Fargo & Co. spent $1.9 million during the first quarter of 2011, almost doubling its 2010 spending, according to the Pro Public blog.

“Lobbyists for big business, along with many Republican political leaders … call for changes that would reduce corporate tax payments by trillions of dollars over the upcoming decade,” stated Citizens for Tax Justice (CTJ) in a press release.

Apple found itself beleaguered because of its corporate tax cut lobbying efforts in early June. US Uncut, in an effort to expose what it calls “corporate tax cheaters,” tricked people attending an Apple conference in San Francisco into listening to the music video “Apple: Tax Cheating Doesn’t Sync with My Values.”

Also, beginning in June, US Uncut protested in front of a number of Apple stores, claiming that Apple could receive a $4 million tax break should the corporation successfully lobby Congress to pass tax cut legislation. US Uncut is a grassroots movement that takes on corporate tax evaders.

The picketers demanded that Apple withdraw from the Win America Campaign (WAC), which claims that the proposed tax cuts would bring $1 trillion back to America and put people back on the payroll. In effect, the supporting firms are saying that they refuse to invest in America, preferring to keep the money invested in foreign countries because of the U.S. tax system.

US Uncut alleges in a press release that “if Congress gives the corporations in the WAC coalition this tax loophole, it would cost American taxpayers over $80 billion.”

Putting Corporate Taxes Under a Microscope

Neither side appears to have taken the time to look at the actual taxes paid by corporations, such as Exxon Mobil Corp., The Boeing Company, Verizon Communications Inc., FedEx Corp., General Electric Co. (GE), and numerous other corporations.

CTJ analyzed 12 of America’s Fortune 500 companies and suggested that with the exception of two of the companies, 10 paid no taxes during at least one year between 2008 and 2010.

More than half of these companies were awarded $62.4 billion in tax subsidies, and at the same time, the combined companies showed a negative $2.5 billion federal income tax when including loopholes, tax credits, and subsidies, while filling the corporate coffers with $171 billion in profits.

President Barack Obama went on record saying that he favors simplifying the corporate tax system, calling for the reduction or elimination of existing corporate tax subsidies.

“Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change,” said Obama in his State of Union Address.

Although the effective corporate tax rate for companies based or operating in the United States is 35 percent, GE collected $4.7 billion in tax benefits on a pretax profit of $4.7 billion. Although Exxon Mobil was found to pay the highest taxes among the 12 companies, it only filled America’s tax coffers at a 14.2 effective tax rate, which is 59 percent lower than the 35 percent tax rate for corporations.

The companies in the CTJ study would have paid close to $60 billion in taxes at the 35 percent tax rate, yet given the subsidies, these companies made a killing by not paying $62.4 billion in taxes.

“It is our view that significantly reducing the corporate tax rate will improve U.S. competitiveness. We believe lowering the corporate rate would dramatically reduce tax policy pressure and rhetoric by ensuring that U.S. companies are competitive,” testified James Zrust, vice president at The Boeing Company, at the Committee on Ways and Means hearing.

Challenging the Corporate Tax Cut

“Tax cut proponents want to encourage domestic employment by subsidizing American companies who employ foreign workers in overseas plants,” said Mark Sunshine, president and CEO of MA Sunshine Capital, a financial advisory firm, in the Sunshine Report.

The proposed corporate tax cut would be a slap in the face of companies that kept jobs in America, therefore helping the country to recover from the most recent economic meltdown. These companies will still have to pay at the existing 35 percent tax rate and derive no benefit from the legislation if passed.

Sunshine suggests that the tax cut hype is based on a misunderstanding of tax realities. “For some odd reason everyone who is advocating the tax holiday has forgotten that the tax code already contains a ‘foreign tax credit’ which eliminates the double taxation of foreign earnings.”

In short, companies get a tax credit equivalent to the taxes paid overseas and are not double taxed as the firms’ lobbyists’ claim. In reality, the firms with foreign subsidiaries would, under the proposed corporate tax reduction bill, get away with paying barely any taxes whatsoever, while the company that kept operations in the United States still has to pay at a 35 percent tax rate to Uncle Sam.

“If tax cutters were serious about supporting American jobs they would be talking about tax increases on foreign profits and offsetting tax cuts on domestic earnings. A simple elimination of the foreign tax credit and a dollar for dollar domestic tax credit would do the trick,” proposed Sunshine.

US as a Tax Heaven

The “U.S. is already one of the least taxed countries in the developed world,” informed CTJ in a recent article.

America takes second place among the world’s developed countries with corporate income taxes at 1.3 percent of Gross Domestic Product (GDP) in 2009, while in 1965 these taxes amounted to 4 percent of GDP. The only country with a lower rate was Iceland.

The average corporate tax rate as a value of GDP among all Organization for Economic Cooperation and Development (OECD) countries was 2.4 percent, 1 percent higher than the U.S. corporate tax rate when compared to the GDP.

GDP is the percentage that takes into consideration all goods produced and services provided, plus goods and services imported, minus those exported during a given year.

Although the numbers quoted are from 2009, some were drawn from recent numbers released by the OECD, the U.S. Office of Management and Budget, and the U.S. Census Bureau, and are still considered realistic, according to CTJ.

If one just looks at the 35 percent U.S. corporate tax rate, Uncle Sam has the highest tax rate worldwide. But when taking into consideration the loopholes, subsidies, and other types of credits, U.S. corporate taxation is the second lowest in the world.

“Many corporate leaders have noted that other OECD countries have lowered their corporate tax rates in recent years, but fail to mention that these countries have also closed corporate tax loopholes while the U.S. has expanded them,” according to the CTJ release.

Experts suggest that the corporate tax reduction wouldn’t address the dismal U.S. unemployment situation. The reasons firms are not hiring is not because they can’t afford it and have to pay high tax rates on their income, but because they haven’t landed contracts, have outsourced the jobs to foreign shores, and have modernized, thus eliminating the need for more workers.

Democracy Now!: Ralph Nader's Solution to Debt Crisis: End Corporate Welfare and Corporate Tax Loopholes

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Original Post

July 19, 2011

by Amy Goodman

As negotiations continue on a debt deal, we ask longtime consumer advocate Ralph Nader for his solution. Nader says, “Now we have the situation with the deficit and the debt and spending and jobs. And it’s not that difficult to get out of it. The first thing you do is you get rid of corporate welfare. That’s hundreds of billions of dollars a year. The second is you tax corporations so that they don’t get away with no taxation. The Citizens for Tax Justice put out a report recently. They had 12 major corporations, like Honeywell, Verizon, General Electric, and in three years, they made $167 billion in profit, paid zero tax, and got $2.5 billion back from the Treasury.”

Stand Up with Pete Dominick: Radio Intervivew w/CTJ's Rebecca Wilkins

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July 13, 2011

On the Politics of the United States Siruis/XM radio station, host Pete Dominick talks to CTJ's Rebecca Wilkins about Senator Levin's Stop Tax Haven Abuse Act and other federal tax isses.

Rebecca Wilkins on Stand UP w Pete Dominick 7-13-11 by taxjustice

Reuters Column: How I misread News Corp's taxes: David Cay Johnston

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Original Post

July 13, 2011

by David Cay Johnston

(Reuters) - Readers, I apologize. The premise of my debut column for Reuters, on News Corp's taxes, was wrong, 100 percent dead wrong.

Rupert Murdoch's News Corp did not get a $4.8 billion tax refund for the past four years, as I reported. Instead, it paid that much in cash for corporate income taxes for the years 2007 through 2010 while earning pre-tax profits of $10.4 billion.

For the first time in my 45-year-old career I am writing a skinback. That is what journalists call a retraction of the premise of a piece, as in peeling back your skin and feeling the pain. I will do all I can to make sure everyone who has read or heard secondary reports based on my column also learns the facts and would appreciate the help of readers in that cause.

No excuses. But I will explain how I made such a bonehead error.

The other facts I reported remain:

* Among the 100 largest companies in the United States, News Corp has the third largest number of subsidiaries in tax havens, a Government Accountability Office study found in 2009.

* On an accounting basis, which measures taxes incurred but often not actually paid for years, News Corp had a tax rate of under 20 percent, little more than half the 35 percent statutory rate, its disclosures show.

* Murdoch has bought companies with tax losses and fought to be able to use them, which reduces his company's costs.

* News Corp lawyers and accountants are experts at making use of tax deferrals, though the company's net tax assets have shrunken from $5.7 billion in 2007 to $3.3 billion last year as the benefits were either used or expired.

CHECKING THE RECORDS

Tax is my beat, and I was simply looking for what the record showed since Mr. Murdoch is much in the news these days. Some of his British journalists hacked into voicemails, paid off cops and interfered in a murder investigation. Having a long career writing not just about tax, but also about journalistic misconduct, I wondered if there was anything of interest in News Corp's annual disclosure reports, known as 10-K forms. I examined them back to 2004, the year that it switched from an Australian to an American company.

What I found was four years of big negative numbers in the "cash paid for taxes" line in the footnotes to the consolidated statements of cash flows.

The most common convention is to report tax payments as positive numbers and to use negative numbers to report net refunds from government to a company.

Professor Ed Outslay, who teaches graduate accounting at Michigan State University and is an authority on extracting tax information from disclosure statements, teaches his students "normally 'parens' mean a tax benefit, not an expense."

While that is the norm, it is not universal and I knew that. Some big companies report "cash paid for taxes" with payments in parentheses and refunds as a positive number. This reversal makes sense from a company's point of view, though few companies do it that way.

I saw that over the seven years that News Corp has been a U.S. company it reported "cash paid for taxes" as positive numbers in 2004 through 2006 and then as (negative) numbers for 2007 through 2010.

ERROR ALERT

The first suggestion I had erred came in the middle of the night when a post at taxprofblog (I teach at Syracuse University College of Law) said I had made an error. I checked the disclosures and then wrote back that the poster was in error. Still, the note troubled me and before dawn I was reviewing every document. As I was rechecking my work, Robert S. McIntyre of Citizens for Tax Justice, who is respected across the political spectrum for the care he takes with numbers, sent me a note saying I had it wrong. News Corp, he said, was using negative numbers to report outflows, rather than tax inflows, starting in 2007.

Here is how the same number, in millions of dollars, for "cash paid for income taxes" for its 2006 fiscal year was reported in News Corp's 2006 annual disclosure report and then in the 2007 report:

$558 $(558)

Add up the negative "cash paid for taxes" number for the years 2007 through 2010 and you get the negative $4.8 billion number I reported as tax dollars flowing to News Corp instead of to governments, as they actually did.

How did I miss the switch in convention for reporting positive and negative numbers? The company disclosed in its 2007 annual report that it was changing the way it reported some numbers. Here is the entire disclosure, from Note 2 on Page 87:

Certain fiscal 2006 and fiscal 2005 amounts have been reclassified to conform to the fiscal 2007 presentation.

COMPLEX STATEMENTS

I do not recall if I read that line, but even if I had I would not have connected it to the switch from positive to negative numbers in the "cash paid for taxes" line. In its profit and loss statement News Corp uses almost all positive numbers, even for costs. It lists revenues, for example, and operating expenses as positive numbers even though expenses, like cash paid for taxes, flow out of the company.

But in the "cash paid for taxes" and some other lines in the same document, I know now, it follows a different convention and that it switched conventions four years ago. Indeed, another journalist pointed out to me that within one of the tables in its latest disclosure News Corp made inconsistent use of positive and negative numbers.

Disclosures are complex statements, but they also are intended to inform investors and regulators, not confuse as can happen when mixing and matching positive and negative numbers. Here is a question for the SEC: Should companies be allowed to use inconsistent conventions on positive and negative numbers in the same document?

Before even writing my column I called News Corp. Neither of the News Corp spokespeople so much as coughed when I said my first column would be about News Corp making $4.8 billion from the tax system in the previous four years. I also instantly emailed my spreadsheet, at News Corp's request, though the company says it did not get it. The company did not get back to me -- they were, after all, besieged with other calls from journalists -- and I did not check back again, though I should have.

SETTING THE RECORD STRAIGHT

As a further check, when I enter numbers in spreadsheets I use a yellow background to remind me that at least a second check needs to be done before publication. When I later examined the spreadsheet against the source document the numbers matched so I changed the background to white to indicate to myself that I had double-checked the numbers.

To keep my column as simple as possible I limited the graphic I roughed out to the four years starting in 2007. When the 2005, 2006 and 2007 numbers from the 2007 disclosure statement matched what was in my spreadsheet I clicked to the white background. I should have checked the earlier years where what was negative had been reported as positive.

When more than a day after the column was posted, a News Corp publicist called me, I had already discovered the mistake and told her it was being withdrawn and a correct column written. She also helped me tie down some crucial details, like finding that 2007 disclosure.

I often write tart notes at the Romenesko blog for journalists, the Columbia Journalism Review, Nieman Reports and elsewhere about what I consider flawed reporting by others. I lecture to young reporters around the world on the duty of care they need to take with facts and teach how to check and cross check. Until now I have never made a big mistake, but this is a painful reminder that we all put our pants on one leg at a time. The measure of character, I say in my posts and lectures, is whether when an error is found you forthrightly and promptly correct.

So I hope readers will trust that while I made a whopper of a mistake, it has been corrected forthrightly and promptly.
(Editing by Howard Goller)

USA Today: Who exactly has the tax target on them?

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Original Post

July 13, 2011

by Richard Wolf

WASHINGTON — Millionaires and billionaires. Owners of corporate jets. Hedge fund managers. Oil and gas profiteers. Those are the people President Obama says he's targeting as he seeks to raise revenue for what could be a historic deficit-reduction agreement.

But individuals earning $200,000, couples earning $250,000 and, to a lesser extent, all taxpayers could lose money in the deal as their tax rates rise or they move into higher tax brackets.

How much would be raised and from whom? Those questions are at the heart of the debate between the White House and Republicans in Congress as they seek to slash government red ink in turn for raising the government's $14.3 trillion debt limit before a threatened Aug. 2 default.

Obama refuses to cut trillions of dollars in spending over the coming decade without raising taxes on upper-income Americans like himself, or at least wiping out special-interest tax breaks he considers unwarranted.

"As part of a broader package we should have revenues, and the best place to get those revenues are from folks like me who have been extraordinarily fortunate," Obama said. "Millionaires and billionaires can afford to pay a ittle bit more."

While the wealthiest would get hit by far the most, Republicans opposed to any tax increases have railed against the possible impact of Obama's proposals on the economy and jobs, which could spread the impact.

"It starts with the so-called rich, with the owners of the corporate jets, but pretty soon it hits the family flying in coach," Senate Minority Leader Mitch McConnell says.

The debate is occurring while taxes are relatively low as a percentage of the economy. Americans are paying the smallest share of their income for taxes since 1958.

But higher taxes are on the way for the well-to-do: The 2010 health care law passed by Democrats and signed by Obama included increased Medicare payroll taxes for upper-income workers, an excise tax on high-end health insurance plans and a higher threshold for medical deductions. Health insurers, drugmakers and medical device manufacturers also will pay more.

Republicans have steadfastly refused to consider higher taxes as part of any deficit-reduction package. Most have signed a pledge against raising taxes with the anti-tax group Americans for Tax Reform, headed by Grover Norquist.

Still, anything's possible now or in the future as Obama and Democrats press for what they call a "balanced" plan with "shared sacrifice." Here's a look at the leading candidates:

•Let the tax cuts enacted in 2001 and extended last December expire for individuals with adjusted gross income above $200,000 and couples above $250,000.

This would restore the 36% and 39.6% rates that existed until 2001, beginning in 2013, when the economy presumably would be in better shape. It would raise about $800 billion over 10 years.

Some Democrats want to target only taxpayers with income above $1 million. "There is some flexibility about whether this should be about millionaires as opposed to quarter-millionaires," quips Clint Stretch, a tax principal at Deloitte Tax.

•Limit the value of itemized deductions to 28%. This would prevent those in higher tax brackets from getting larger deductions. It would raise about $290 billion over 10 yearsTax increases that target upper-income taxpayers are a way of going after "the saving class," says Robert McIntyre of Citizens for Tax Justice, a liberal group. "None of them would have any significant bad effects on the economy," he says.

But Pete Sepp of the National Taxpayers Union says the impact would be widespread. "There's not much money to be gotten out of millionaires and billionaires, despite the rhetoric," he says. "To raise tens of billions of dollars a year requires reaching much further down the income scale" — at least to $200,000.

•Change the way inflation is measured to reflect changes in consumer behavior. The impact would be a less generous inflation factor, causing faster "bracket creep" as wages rise.

This was recommended by Obama's fiscal commission as a way to raise about $60 billion over 10 years. But it affects all taxpayers — those at lower income levels even more, because tax brackets are closer together. And Social Security recipients would get smaller benefit increases.

"It would be particularly harmful on the lower end (of the income scale)," says Ryan Ellis of Americans for Tax Reform.

•Eliminate tax breaks for oil and gas companies, venture capitalists, business inventory and corporate jets.

Special-interest tax breaks cost the Treasury more than $1 trillion a year, but most of them are huge and popular, such as the mortgage interest deduction and the exclusion of employer-paid health insurance. These proposals would go after smaller tax breaks that affect fewer people.

"It seems that they are picking provisions for sound-bite purposes," says Eric Toder, a tax expert at the non-partisan Urban Institute. Still, he says, "They're quite progressive in terms of how they affect people's positions. There's no doubt they're targeting high-income people."

Mark Thompson's Make it Plain: Radio Intervivew w/CTJ Senior Counsel

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July 13, 2011

On SiriusXM Satellite Radio's Liberal Talk channel, host Mark Thompson talks to CTJ's Rebecca Wilkins about corporate tax loopholes.


CTJ's Rebecca Wilkins discussing Tax Loopholes with Mark Thompson by taxjustice

David Sirota Show: Interview w/CTJ Legislative Director on Low U.S. Tax Rates

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Original Podcast

July 12, 2011

David Sirota Radio Show on AM 760, Progressive Talk in Colorado

Legislative Director at Citizens for Tax Justice Steve Wamhoff joins the show to discuss recent data that shows the U.S. is one of the least taxed developed countries.

David Sirota Show: Interviews CTJ Legislative Director on Low U.S. Tax Rates by taxjustice

Accounting Today: Senators Introduce Bill to Stop Offshore Tax Havens

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Original Post

July 13, 2011

by Michael Cohn

Sen. Carl Levin, D-Mich., and several other senators have introduced a bill to close offshore tax loopholes and strengthen offshore tax enforcement.

he “Stop Tax Haven Abuse Act” builds upon earlier bills that Levin has introduced in past congressional terms, and is a product of the investigative work of the Permanent Subcommittee on Investigations, which Levin chairs (see Senate Probes Offshore Dividend Tax Dodges). Over the years, the subcommittee has conducted multiple inquiries into offshore abuses, including the use of offshore corporations and trusts to hide assets, the use of tax haven banks to set up secret accounts, and the use of U.S. bankers, lawyers, accountants and other professionals to devise and conduct abusive tax shelters.

The bill is co-sponsored by Senate Budget Committee Chairman Kent Conrad, D-N.D., along with Senators Bill Nelson, D-Fla., Bernie Sanders, D-Vt., Jeanne Shaheen, D-N.H., and Sheldon Whitehouse, D-R.I.

“Offshore tax abuses are not only undermining public confidence in our tax system, but increasing the tax burden on middle America,” Levin said in a statement. “People are sick and tired of tax dodgers using offshore trickery and abusive tax shelters to avoid paying their fair share. This bill offers powerful new tools to combat offshore and tax shelter abuses, raise revenues, and eliminate incentives to send U.S. profits and jobs offshore. Its provisions, which can help stop the $100 billion per year drain on the Treasury, will hopefully be part of any deficit reduction package this year, but should be passed in any event.”

The 112th Congress is the fifth Congress in which Levin has introduced a comprehensive bill to combat offshore and tax shelter abuses. A number of provisions from past bills have made it into law, such as measures to curb abusive foreign trusts, close offshore dividend tax loopholes, and strengthen penalties on tax shelter promoters. Levin’s efforts also helped spur enactment of the Baucus-Rangel Foreign Account Tax Compliance Act to increase detection of hidden offshore accounts. 

President Obama, when he was a member of the Senate, co-sponsored Levin's offshore tax bills in 2005 and 2007. Rep. Lloyd Doggett, D-Texas, joined by multiple co-sponsors, has introduced House companion bills in the past and will do so again.

“It is long past time to take effective action to stop offshore tax dodging.” said Doggett, a  senior member of the House Ways and Means and Budget Committees. “Revenue lost to these tax avoidance schemes contributes to the soaring budget deficit and increases the burden on small businesses, families, and others who play by the rules.”

The 61-page Stop Tax Haven Abuse Act contains a host of measures to combat offshore and tax shelter abuses. The first section would authorize the Treasury Secretary to take special measures against foreign jurisdictions or financial institutions that impede U.S. tax enforcement. The next section would create rebuttable presumptions to help the IRS establish ownership and control of offshore entities. The third section would stop corporations whose management and control are located primarily in the United States from claiming status as foreign corporations, instead treating them as domestic corporations for tax purposes. 

Another provision would close an existing tax loophole that allows credit default swap payments to escape taxation if sent from the United States to persons offshore, such as an offshore hedge fund or foreign bank. The bill would close this CDS loophole by treating CDS payments sent offshore from the United States as taxable U.S. source income. 

Another provision would address U.S. dollars and other assets that are supposedly kept offshore by foreign subsidiaries of U.S. corporations but, in reality, are deposited into accounts physically located in the United States.  The bill would deem the funds deposited into U.S. accounts as taxable distributions by the foreign subsidiaries to their U.S. parents.

Still another provision would increase publicly available information about multinational corporations by requiring them to include basic information on a country-by-country basis in their filings with the Securities and Exchange Commission to increase transparency and facilitate IRS inquiries into transfer pricing, foreign tax credits, and abusive offshore tax shelters.

In addition, the bill would strengthen penalties on tax shelter promoters and aiders and abettors of tax evasion by increasing the maximum fine to 150 percent of any ill-gotten gains.

The bill is supported by a wide array of small business, labor, and public interest groups, including the Financial Accountability and Corporate Transparency Coalition, American Sustainable Business Council, Business for Shared Prosperity, Main Street Alliance, AFL-CIO, SEIU, Citizens for Tax Justice, Tax Justice Network-USA, U.S. Public Interest Research Group, Global Financial Integrity, Global Witness, Jubilee USA, and Public Citizen.

However, the prospects for getting such a bill passed are slim, especially in the House, as Republican lawmakers have staunchly opposed any tax increases. Still, Congress has been holding a series of hearings on tax reform, and some Republicans have expressed a willingness to close some tax loopholes in a revenue-neutral way in exchange for lower overall tax rates.

Spring Grove (MN) Herald: Rally in Preston urges support of Dayton's 'Tax the Rich' plan

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Original Post

July 12, 2011

by Lisa Brainard

A group of around 35 citizens held a "Tax the Rich" rally at the trailhead park in Preston last Saturday to back Minnesota Gov. Mark Dayton, DFL, as he holds to a state budget plan that would include further taxes on the "rich."

Meanwhile, the state government shutdown continues, speakers noted, as Republican legislators want to use other ways to balance the budget than taxing the rich. Republican leaders say they are not compromising on Dayton's call to put further taxes on the rich.

Fillmore County DFL Chair Dennis DeKeyrel held a tall pole to illustrate how much money the rich make compared to the average person. The pole, around 17 to 18 ft. tall, represented Minnesota Twins baseball player Joe Maurer's salary of $23 million a year.

Laughing, DeKeyrel joked, "Now most of you here make $100,000," at which the crowd also laughed. "That is about 1 inch on this pole."

He continued, "The average income in Houston and Fillmore counties is $34,000, while the average household income is $48,000. That's roughly half an inch on this pole. Joe only pays Social Security taxes on the first $108,000 he earns."

While those present liked their Twins player, it also was apparent they'd like to see him further taxed.

DeKeyrel said he was trying to protect his pocketbook in his front pocket. Referring to the "no new taxes" pledge of the Republicans, he stated, "But they got the money from my back pocket - for property taxes."

He also noted that comments saying the rich pay 70 percent in taxes are incorrect. DeKeyrel encouraged people to look at figures from the Citizens for Tax Justice website. He said the top 1 percent of the wealthy pay 30 percent in taxes - and those taxes include federal, state and local.

Big issues to be resolved

District 30A Rep. Tina Liebling (DFL - Rochester) said, "These are big issues. For the Republicans it seems to be protecting the wealthy at all costs... We are taxing the wrong people... and spending the wrong way... How much is enough? How much (money) do people need?"

Ken Tschumper (DFL - La Crescent) - who is running against incumbent Greg Davids of Preston and defeated him to hold the District 31B seat from 2007-'08 - said the rally was being held by his election committee and the Fillmore County DFL following a comment by Davids that was quoted in the July 4 Star Tribune. Davids had stated in the article that Gov. Dayton had "really broken any trust I had with him..." and the story further quoted Davids as saying people at the Branding Iron in Preston, where he'd eaten a cod fish meal, had told him, "Hang in there... Don't you dare raise my taxes."

Davids is chair of the House Tax Committee. Tschumper and the others present at the rally disagreed with his claim that everyone backs his stand against taxing the rich.

Liebling said, "He's in a powerful position... If he doesn't get his way, he can be a bully. Ask him what he's done. I don't see him doing anything for his own district."

Liebling continued, changing the topic to Gov. Dayton. "He's a good man. He really cares. He doesn't want the rich to pay more because being rich is evil, but because it's fair. He feels the wealthy would be willing to be fair."

She also pointed out Dayton had made seven compromise offers to the Republican-majority-led House and Senate, even in his initial budget. On the other hand, she said the Republicans had offered borrowing as a source of new revenue.

"Shifts, tricks and gimmicks - that's how (former Republican Gov. Tim) Pawlenty balanced the budget... It's as easy to change the tax policy as well as the spending policy," stated Liebling.

Budget aftermath

Tschumper said over 140,000 would go off healthcare with budget compromises. Creating a tax on clothing would just target a higher proportion of taxes to families.

Other speakers also touched on what the middle and lower classes would look like with a budget where the rich are not taxed further.

Robin Yaffe Tschumper, Ken's wife and director of Houston County Women's Resources, said with the government shutdown all staff other than her have been laid off. Her proposed budget would be cut by 35 percent, which is more than one staff person. Serving as volunteers, some staff members are still helping. If their clients need a free meal, they tell them where they can go in La Crosse, since local food shelves only have a few canned goods.

She stated, "Taxes support all of us. When did it become unpatriotic to pay your fair share?"

Yaffe Tschumper said she'd spoken with Davids at his St. Paul office since the shutdown, while at the Capitol for other issues. He said he'd been donating his salary to charity.

"Most don't," she said of the legislators. "But in any case, they only give it to who they want."

Theresa Coleman, who lives in Lanesboro and is the city administrator at Spring Grove, said many young families are feeling the budget crunch. She also noted how cuts to libraries and recreation sources like swimming pools, further hurt families.

Coleman said, "We make our communities tick. If our income tax goes up because others can't pay, cities will suffer."

Sue Ames of La Crescent, a teacher, addressed education cuts saying, "Public education is the most important thing in this country."

Peggy Hanson of Lanesboro, a former opponent for Davids' seat, said kids in foster care are being affected by the budget dilemma. Hanson supports Dayton and urges him not to give in to Republican compromises. "It's a game of political chicken and it's really high stakes," she said.

The rally closed by urging people to contact Gov. Dayton and tell him they believe and support him.

"We need to martial public support for Mark Dayton."

Huffington Post: Shame on You, GOP! True Colors Shown

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Original Post

July 12, 2011

by Ryan Mack

I am not one who likes to protect those who want a handout. I don't think that a single dime of taxpayer dollars should be given to anyone without the proper measures put in place to ensure the accountability of how those dollars will be used by the recipient in a responsible manner. I believe this standard should be applied to everyone who receives government support in this country -- no matter their level of income or class level. If you want Government help, you must also deal with the stringent terms and conditions that come along with it.

This is why it has been such a disappointment to see those who call themselves fiscal conservatives fight so hard to strip away financial support for those who need it most only to put the entire economy in jeopardy to protect the corporate welfare (handouts) for the rich. They choose to go to battle on behalf of the oil companies, hedge fund managers, millionaires, and corporate jet owners while they tell the least of those in this country to "pull yourself up from your own boot straps" while many of them can't even afford boots.

Let's look at the oil companies who the GOP believes can't afford to live without the billions of dollars of tax credits and loopholes they receive every year. In 2010 ExxonMobil earned $30.5 billion (an increase of $11 billion from 2009), Chevron earned $19 billion (up $8.5 billion from 2009), and ConocoPhillips earned $8.8 billion (up almost $4 billion from 2009). These numbers are billion with a "B"! While the rest of the country were not even traveling for vacation, arranging car pools just to get to work, and many men who I personally know in Detroit weren't even asking women on dates because they couldn't afford the price of the gas needed to put in the car ... these companies were enjoying record profits! These are the entities that need their welfare protected? These are the people who the GOP believes represent the fabric of America and to reverse the loopholes that save billions will hurt the economy because it eats into their record profits?! (Closing these loopholes could generate $40-$50 billion in revenue for the country.)

Let's look at the hedge fund managers. John Paulson, hedge fund giant, earned $158 per second in 2010 to a personal profit of $5 billion which beat out the $4 billion that he earned by betting against the subprime market. Yes that is correct -- while the rest of America was suffering from the collapse of the entire economy caused largely because of the subprime mortgage industry, John Paulson earned $4 billion from it. All in all the top 25 hedge fund managers earned a collective $25.3 billion in 2009! Now I don't begrudge them from making money. I would have loved to be on the receiving end of a $4 or $5 billion trade! Give me the opportunity and I would never turn down that chance. However, the GOP is fighting for these guys to keep their tax loophole of only being taxed at 15% as opposed to paying ordinary income taxes just like every other person in this country. Why should they get the opportunity to pay less taxes on their income than you and I have to pay? (Closing this loophole could generate $4 billion in revenue for the country.)

Let's look at the tax cuts for millionaires. First of all ... there has never been a president in history of this country that has ever given a tax cut during a time of war. George Bush broke this record when he gave the rich people tax cuts that were not asked for by the rich, were not paid for by this country, and are bankrupting this country. Citizens for Tax Justice estimates the total cost of these bankrupting tax cuts that transpired under George Bush from 2001 through 2003 to be $2.5 trillion through 2010 and rising! Over half of all of these benefits went to the RICHEST 5% of taxpayers for a total cost that was more than twice the amount of the health care legislation passed by President Obama to help keep people alive! If you ever had to put price tag on a life it is obviously much less than $2.5 trillion in the eyes of the GOP because they obviously value those tax cuts much more than your life and mine.

Now finally ... a loophole that won't make much money but does point out to the absurdity of the debate. As a part of legislation signed in 2010 called the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 ... the right fought hard for a loophole to be inserted in the legislation that allowed the cost of corporate jets to be depreciated 100% during the year that it is purchased as opposed over 5 years. The net result for corporations is a 40% reduction in cost of corporate jets. I do many workshops in public housing and I have never, nor will I ever, meet someone that lives in public housing that will benefit from this loophole. Please notice the name of the legislation! In order for the president to sign into law tax relief for the middle class, give those who are unemployed additional support, and to help fund programs to create JOBS for Americans, those on the right made the point to fight for those who were purchasing corporate jets! The president was fighting for the middle class, the unemployed, and for jobs -- the right was fighting for the right for the rich to get a discount on their purchase of a corporate jet!

Currently we are in a national debate that involves everyone. This is a debate to ensure the US can continue to have a perfect record or never defaulting on our debt, which could result in our debt rating to be slashed, which would throw the stock/bond market into a downward spiral, and would kill this economy. There was a clear line in the sand that once again showed who was actually on the side of the American people and who was on the side of only the rich. The President offered the largest deficit reducing agreement in the history of this country that would cut $4 trillion from the national debt. $3 trillion of that $4 trillion was for spending cuts which most in his own party felt should never have been on the table. The other $1 trillion were for tax reform which didn't raise taxes, but effectively eliminated loopholes like the ones discussed above. No taxes would be raised in 2010, 2011, or 2012 as a part of this monster deal. Did the GOP agree to these terms ... what do you think?

The GOP has consistently talked about their love for America ... but their actions have shown they have no love for Americans! As Paul Ryan sits down for lunch drinking $350 bottles of wine with some of the most prominent hedge fund managers making billions of dollars per year, I wonder what they talk about. Do they talk about that teacher who is living check to check, driving a Ford Focus that she must share with her husband, as they try to raise a family of four in a small one bedroom apartment? Do they talk about the fireman who has to take another job on his days off or struggle hard to start his own business because he fears after 20 years of laying his life on the line the pension cuts will leave him with a retirement that won't cover his already meager living expenses? Do they talk about the 52 year old working class woman who is suffering from breast cancer and lives her life in fear of the Paul Ryan version of Medicare passing because she knows she will never be able to afford her treatments? Do they talk about the young man who has to go to school in classroom sizes of 50 students because the budget cuts in his city caused his school across town, near his home to be closed? I don't think so. I would wager they talk about that d@mn loophole that will allow the hedge fund manager to continue to be taxed at 15% and that means his continued support of his friends to Paul Ryan's campaign.

America, it is time to wake up and understand which side you are voting for. I know the president might not go as far as many would like him to go in defense of the working class and the impoverished ... but he is light years away from what you have read above. Shame on you GOP, shame on you!

Atlanta Journal Constitution: Corporate giants find ample shelter

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Original Post

by Russell Grantham

July 09, 2011

Atlanta’s corporate giants pay widely varying tax rates to Uncle Sam under a murky system that allows companies to reap tax benefits from mergers, overseas expansions and other moves.

Some cut their taxes the hard way. Delta Air Lines expects to pay no federal income taxes for several years, it said in regulatory filings, because of tax credits stemming from huge losses in recent years.

But it appears that other highly profitable companies pay federal income taxes significantly below the top corporate income tax rate of 35 percent, regulatory filings indicate. Sometimes, that rate is lower than the typical middle class family. And sometimes, it’s nothing.

Companies don’t disclose what federal income taxes they actually pay, but some tax experts say so-called “current” income tax expenses disclosed in their regulatory filings are a good indicator. Companies also disclose the total of their yearly cash income tax payments to all state, local, foreign and federal jurisdictions where they operate.

A review by The Atlanta Journal-Constitution of tax disclosures by five of the largest Atlanta companies showed:

- Coca-Cola’s “current” federal tax expense — not counting “deferred” taxes that might not be paid for decades, if ever — was $470 million last year. That was only 6.5 percent of the $7.2 billion in pre-tax profits that Coca-Cola reported for its U.S. operations in annual disclosures to investors last year. (A Coca-Cola spokesman said the company actually paid federal income taxes “significantly higher” than $470 million last year. It also said its federal tax rate worked out to 38 to 39 percent because its taxable income was lower than the $7.2 billion reported to shareholders, but didn’t release supporting figures.)

- Home Depot paid triple the “current” federal taxes that Coca-Cola did last year — $1.48 billion. Because it could only defer a small fraction of its federal income taxes, Home Depot’s current tax rate was 30.4 percent of its U.S. pre-tax profits of $4.9 billion. (A Home Depot spokesman said the tax rate was accurate but declined further comment.)

- Coca-Cola Enterprises’ “current” federal income taxes have rarely topped 2 percent of its yearly U.S. income since 2000, filings show. Globally, the company paid cash income taxes of $1.1 billion during that period, but its “current” foreign taxes accounted for more than $1 billion. The large bottler isn’t likely to pay much taxes to Uncle Sam in the future; Coca-Cola took over its North American operations last year. (CCE did not return a reporter’s calls.)

Role in debt debate

Such disparities are getting more attention these days as President Barack Obama and Republican lawmakers haggle over a deal to keep the U.S. government from defaulting on its debt before an Aug. 2 deadline.

A compromise to raise the federal debt limit may also eliminate some corporate accounting maneuvers that now produce big tax savings for some companies but not others.

Democrats are pushing to collect more revenues by ending tax breaks for oil companies, hedge fund managers and corporate jet owners. They’ve also proposed to eliminate a widely used method of accounting for sold goods that usually reduces companies’ taxable profits and, therefore, their taxes.

While Republican political leaders want a deficit reduction plan that is limited to spending cuts, some have said existing corporate tax loopholes can be tightened.

Back in the 1980s, President Ronald Reagan led a major overhaul of the tax system to close corporate tax loopholes. Since then, a growing pile of tax credits and deductions have allowed many companies to move into new tax shelters. These days, some companies making billions of dollars feel less of a pinch from Uncle Sam than the typical middle-class family.

Individual taxpayers — who pay the lion’s share of federal income taxes — shelled out an average of 12.2 percent of their income to Uncle Sam for such taxes in 2008, the latest year for which data is available from the IRS.

Meanwhile, companies’ share of federal tax revenues have dropped by half since 1950, according to the nonpartisan Congressional Budget Office. Companies paid $304 billion in taxes in 2008, or 12 percent of total federal tax revenues, down from 26.5 percent in 1950. Individuals’ share grew from 40 percent to 45 percent during 1950-2008, to $1.1 trillion.

Still, many companies argue that the United States’ top corporate tax rate of 35 percent — one of the world’s highest rates — makes it difficult to compete with foreign rivals.

But critics counter that, because of the many tax shelters available in the U.S. tax code, many companies’ tax rates are lower here than overseas, especially compared to other developed nations in the Organization for Economic Cooperation and Development.

“We have one of the higher marginal tax rates in the OECD but one of the lowest effective tax rates in the OECD,” said Tad Ransopher, a tax lawyer and director of Georgia State University’s graduate taxation program.

Last year, the Congressional Budget Office estimated that corporate tax breaks will allow companies to trim a total of $190 billion from their federal tax bills during 2009-13. The most costly tax breaks, according to the CBO, include deferred profits from overseas subsidiaries, credits for domestic production of oil and other products, and accelerated depreciation of factory equipment and other investments.

However, a big problem with the hodge-podge of loopholes and tax breaks is that some companies end up paying very high tax rates while other profitable companies pay little or nothing.

“There’s not any loopholes for retailers,” said Bob McIntyre, director of the union-backed watchdog group, Citizens for Tax Justice. That’s why Home Depot ended up paying a tax rate of over 30 percent last year, he said.

On the other hand, big multinational companies like General Electric — which paid no federal income taxes last year — have found ways to shift profits to lower-tax overseas units, he said. “It’s costing the government about $70 billion a year at least,” he said.

Some of those companies are now lobbying for a so-called “repatriation holiday” that would allow them to cut their federal income taxes from 35 percent to 5.25 percent for foreign profits that they transfer home.

They say the cash transfer would stimulate corporate expansion and job growth in the United States.

Critics say a similar move in 2005 didn’t work well because most companies just used the money to pay dividends and buy back stock.

Coca-Cola and CCE both took advantage of a similar repatriation holiday in 2005 to transfer billions of dollars of overseas profits, saving hundreds of millions of dollars on their federal taxes.

Global payments

The bottom line is that — for a variety of reasons, ranging from lower overseas tax rates to credits for past years’ losses — most of the largest Atlanta corporations’ total income tax burdens were well below the 35 percent federal rate.

Coca-Cola’s current global income tax rate — for federal, state, local and foreign taxes — was a little more than 12 percent of its worldwide income of $14.2 billion last year. Most of the tax payments went to overseas governments.

The company reported cash payments of almost $1.8 billion for its global income taxes.

“The Coca-Cola Company is a compliant taxpayer globally. We pay all legally required income taxes in the U.S. and every country in which its subsidiaries operate,” said Coca-Cola spokesman Kent Landers in emailed responses to questions.

Landers said Coca-Cola’s average tax rate is lower than the U.S. tax rate because the company sells 80 percent of its products in overseas markets that have lower tax rates. As a result, the company’s average tax rate across its global operations was about 23 percent, not counting special items related to its acquisition last year of CCE’s North American operations. Those items inflated the U.S. income Coca-Cola reported to its shareholders last year, but not its taxable income.

“We estimate the tax rate on our U.S. operations has been in the 38-39 percent range,” Landers said.

Coca-Cola’s 2010 deal with CCE split its then-largest bottler in two.

While Coca-Cola got the bottler’s North American operations in the $12 billion transaction, CCE kept its European operations and added some from Coca-Cola.

The deal also left CCE with an odd structure that has tax consequences for the bottler. While 100 percent of its revenues come from Europe, its headquarters, executives and many of its shareholders are in the United States. With no income from the U.S., that means the company pays almost no taxes in the United States — except on the foreign profits it repatriates to pay its headquarters staff and to buy back shares or pay dividends to its shareholders.

In filings, CCE said it paid current federal income taxes of $8 million last year.

Its global cash tax payments last year totaled $185 million, or 25 percent of its pre-tax income, all from overseas.

On the other hand, Home Depot, which generated most of its sales and profits in the United States, said its cash payments for federal, state, local and international income taxes were almost $2.1 billion for its most recent fiscal year, or 39 percent of its pre-tax income of $5.3 billion.

Package shipper UPS, which said a third of its operating profits came from overseas operations, reported tax rates that were somewhere in the middle.

On a cash basis, it paid $1.3 billion in taxes in 2010, or almost 24 percent of its total $5.5 billion pre-tax income. But in the previous two years, its cash payments of income taxes were much smaller: $443 million in 2009 and $760 million in 2008. The three-year average cash tax bill was 18 percent of worldwide income.

On a current tax basis — ignoring deferred taxes — UPS’ federal tax expense last year was $776 million, or 16 percent of its U.S. pre-tax income as reported to shareholders.

Finally, Delta, which acquired Northwest in 2008, didn’t pay any federal income taxes last year because of both carriers’ massive losses in recent years. In fact, Delta may not pay any federal taxes for a decade or more in the future.

“We believe we will not pay any cash federal income taxes during the next several years,” the airline said in regulatory filings, noting that it had $17.1 billion worth of so-called “net operating loss carry-forwards” at the end of last year. By offsetting future profits on the company’s tax returns, those carry-forwards allow the company to avoid paying federal income taxes until they are used up or expire.

Tax experts say the IRS has long allowed companies to use such tax credits to even the playing field. Otherwise, companies in boom-and-bust industries could end up paying higher taxes than companies that churn out the same total profits over several years, but without losses.

Delta’s tax credits don’t start expiring until 2022, meaning the company could potentially avoid roughly $6 billion in taxes over the next 10 years.

CBS News: The role of Bush tax cuts in the deficit

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(Original Post)

July 10, 2011 2:08 PM

By David Morgan (CBS News)

In a debate on "Face the Nation" today about the need for a deficit reduction agreement, Sen. Bill Nelson, D-Fla., argued that the present problem with the federal deficit was created by an imbalance between a drop in taxes collected and a rise in spending, and said that tackling both must be a part of any agreement.

"How did we get into this problem of the big deficit?" Nelson said. "It's basically a fall-off of revenues and an increase in spending. So you got to correct that imbalance; otherwise you're not doing real deficit reduction."

In debating the tax revenue part of the equation with fellow guest Sen. Jeff Sessions, R-Ala., Nelson said, "Jeffrey, you have to acknowledge that part of our deficit problem was the huge Bush tax cuts in the early part of the decade. What was handed off to the new administration of over a trillion dollars of annual deficit, that accounted for almost half of it. If you're going to be real about the numbers, you're going to have to address these kinds of things."

"That's not accurate, Bill," Sessions responded. "The revenue went up every single year after those tax cuts were put in. The revenue is down now because of the low economy ... It's not because taxes have been cut in recent years. It's because people are not making money. They're not paying as much taxes. So increasing taxes on that weakened economy is not the way to increase revenue. "

Sessions: Dem tax demands killing debt deal

A review of data from the White House Office of Management and Budget shows that tax revenues did not consistently increase after the Bush tax cuts went into effect.

In FY 2001, tax revenue in dollars was $1,991.1 billion. For FY 2002 - the first budget of the Bush administration, which went into effect after President George W. Bush signed tax cuts into law in June 2001 - revenue dropped to $1,853.1 billion.

Bush signed two more tax cuts into law over the next two years. In FY 2003, revenue dropped further, to $1,782.3 billion - about a 10-percent reduction from two years earlier.

This drop in tax revenue occurred even as economic activity - the nation's GDP - was continually rising, according to Bureau of Economic Analysis data.

Revenues then increased for four years - from $1,880.1 billion in FY 2004 to $2,568 billion in FY 2007 - before sliding to $2,524 billion in FY 2008, and then dropping further to $2,105 billion in FY 2009 as the recession exploded.

Source Data: White House Office of Management and Budget - Historical Tables

As a percentage of gross domestic product, the amount of tax revenues as a part of the economy has also varied widely, though it is still less today than in FY2001, when it represented 19.5% of GDP. It has dipped from as low as 16.1% in FY2004, to as high as 18.5% in FY2007, before finishing out FY 2009 at 14.9% - its lowest level since 1950 (14.4%).

It is true when Sen. Sessions said spending has increased every year from FY2001 - the last year the government spent less than it took in.

In FY2001 spending was $1,862.8 billion; by FY2009 spending was at $3,517.7 billion - more than $1.4 billion more than what was collected in taxes.

Analysis by Citizens for Tax Justice claims that the Bush era tax cuts resulted in $1,918.9 billion in lower revenue from FY2001 through FY2009, and that the total cost if implementing the cuts (including interest payments on debt) was $2,141 billion.

Moneywatch: Did the Bush tax cuts lead to economic growth?

Editor's note: Figures were updated 7/12/11.

CBS BNET: Freeloaders: U.S. Corporate Tax Rates Are Among the Lowest in the World

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Original Post

July 7, 2011

by Alain Sherter

American companies are taxed to death.
American companies are taxed to death.
American companies are taxed to death.

Sorry, just wanted to see if repeating that particular chestnut, intoned like a mantra by Republican presidential candidates, CEOs and Tea Partiers alike, would eventually make it true. Guess not. U.S. corporate income taxes as a share of GDP are the second-lowest among 26 developed economies, according to a new report from Citizens for Tax Justice (see chart at bottom; click to enlarge). Only Iceland, a country that flopped worse during the financial crisis than LeBron James in the fourth quarter, has lower rates.

Between 1965 and 2009, corporate income taxes in the U.S. have plunged from 4 percent of GDP to 1.3 percent. That compares with an average of 2.4 percent for nations in the Organization for Economic Cooperation and Development. Claims that the U.S. has the highest tax rates in the industrialized world only look at the 35 percent statutory rate, without factoring in the various loopholes, credits and other subsidies many American companies (if not small businesses, it’s worth noting) typically get.

Such figures make the dispute in Washington over the debt ceiling even more surreal than it already is. Republicans have so far refused to budge an inch on proposals to raise taxes as a way to reduce the federal deficit. This intransigence has even conservative pundits, from David Brooks to Bill Kristol, mystified. And for good reason. Not only are corporate taxes low, but they’re also doing nothing to stifle business profits. As my BNET colleague Constantine von Hoffman notes, corporate earnings are positively percolating. And they did even better in the ’90s, when taxes were higher.

What’s more, companies already have an estimated $2 trillion socked away on their balance sheets. They’re putting off hiring not because they lack cash, but because they lack customers. Cutting their taxes even more might fatten their profit margins, but it will do nothing to lift the economy.

None of which is to say that our corporate tax system isn’t in need of repair. While low for some companies, particularly multinationals heady enough to hire platoons of tax lawyers, rates are considerably higher for others. Global players are encouraged to stash money overseas, discouraging them from investing in the U.S. Federal tax revenue is plunging.

It’s a problem. Which is exactly why any serious discussion about tax reform must do away once and for all with the by now thoroughly debunked notion that heavy taxes are smothering domestic firms. It’s pure fiction.

Chart courtesy of Citizens for Tax Justice

BNA Daily Tax Report: United States One of Least-Taxed Countries, CTJ Says as Debt Ceiling Debate Continues

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July 6, 2011

The United States is one of the least-taxed countries in the world, Citizens for Tax Justice said in a report that comes as some lawmakers are refusing to consider revenue increases as part of the negotiations to raise the federal debt ceiling....

In a June 30 report, the liberal tax group said that in 2009, only two OECD countries, Chile and Mexico, had lower overall taxes as a share of gross domestic product than the United States. Only Iceland had lower corporate taxes as a share of GDP in 2009, the report noted.
CTJ said it based its findings on the most recent data from the Organization for Economic Cooperation and Development, the Office of Management and Budget, and the Census Bureau....

U.S. Taxes Ranked 26th, Report Says
....“In most cases, the difference in tax levels between the U.S. and OECD countries is not even close,” the report said. Of those 25 OECD countries with taxes higher than those in the United States, 22 have taxes that are at least 25 percent higher, and 15 have taxes at least 50 percent higher, CTJ noted....

Corporate Taxes Seen Low As Share of GDP

Although many corporate leaders point to the fact that other OECD countries have lowered their corporate rates in recent years, CTJ said, they “fail to mention that these counties have also closed corporate tax loopholes while the U.S. has expanded them.”

As a result, the report said, the United States collects less corporate taxes as a share of GDP than all but one of the 26 OECD countries for which data are available. In 2009, CTJ said, only Iceland had lower corporate taxes as a share of GDP.

Bandera (TX) Bulletin: When a House is Not a Home

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Tuesday, July 5, 2011

By Bob Garvin (Democratic Party Leader)

Barack Obama called Ugland House on Hog Sty Bay in the Cayman Islands “either the biggest building in the world or the biggest tax scam in the world.” That’s because it would take the biggest building in the world to provide the bedrooms and bathrooms for the 19,000 “persons” who claim Ugland House to be their home. Could more residents than live in Boerne crowd into that single 5-story structure?

To figure out what’s going on, don’t forget that our conservative-dominated Supreme Court has decreed that: 1) Corporations are persons, just like you and me. 2) Corporations, being persons, have the right to freedom of speech, just like you and me. 3) Money is a form of speech, giving corporations the right to make political contributions, just like you and me.

The comparisons end there. Unlike you and me, businesses can use their donations to gain access to elected officials and influence policy. And so we get Ugland House, an ugly place that is not a home for 19,000 real persons but rather a haven—a tax haven—for 19,000 corporations that don’t have a single employee working there. The business “friendliness” of the tiny Canary Islands has attracted 45 of the top 50 banks and rendered it the fifth leading financial center in the world.                           

Why so many “persons” claimed the Canary Islands as their home was outlined in Senate testimony of Michael Brostek, Director of Strategic Issues for the Government Accounting Office (GAO). Key reasons include facilitating U.S.-foreign transactions and minimizing taxes, but also to illegally evade income taxes or hide such illegal activities as securities fraud or money laundering.

That not just tax avoidance but tax evasion is the name of the game in the Caymans is shameful. We are told constantly that “shared sacrifice” is required to solve our serious problems. The world of big business still complains about taxes even though the corporate share of tax revenue has fallen from nearly 30 percent in the 1950s to well under 10 percent today.

Wouldn’t shared sacrifice mean that some of the $14.2 billion of worldwide profits earned last year by General Electric, the nation’s largest company, should be collected in taxes? GE says no—-that it has billions in refunds coming.

General Electric runs its massive tax department as a profit center, which benefits from the $200 million in lobbying efforts with Congress over the last decade. Results include accelerated depreciation, renewable energy subsidies, and the use of transfer pricing to minimize profits in the U.S. GE’s creative accounting may be legal, but should it be?

Citizens for Tax Justice reports that GE and 11 other major corporations made $171 billion in pre-tax profits over the last three years. At the statutory tax rate of 35 percent, the Treasury could have received $60 billion to help reduce the deficit. Instead, loopholes, shelters subsidies and other tax breaks left the government owing $2.5 billion to Wells Fargo, Fedex, Verizon, Exxon-Mobil, Yahoo, GE and the others.

Conservative Bruce Bartlett points out that “Federal taxes are at their lowest level in more than 60 years” and that the average tax rate on the 400 richest Americans dropped from 26.4 percent in 1992 to 18.1 percent in 2008. He could have added that billionaire hedge fund managers, through a quirk, pay a tax rate of only 15 percent.                       

You might think that, in this time of crisis, the party known to be coziest with big business and that wraps itself in the mantle of patriotism would call on its friends to share in the sacrifice, to be patriotic, and to give up some of their unwarranted tax loopholes, as President Obama and the Democrats are proposing. But no, Tea Party Republicans are protecting their benefactors and throwing up roadblocks to any revenue increases. They want the burden to fall on the old (Medicare), the young (Head Start, college funding), the poor (Medicaid, food stamps).

About 75 percent of voters believe corporations have too much influence on policy and 66 percent believe the rich benefit most from the government. Ignoring this, the GOP charges President Obama with waging class warfare. Billionaire Warren Buffet rebuffed it: “There’s class warfare all right but it’s the rich class that’s making war and we’re winning.”

Seattle Times: Boeing's wartime tax rate: less than zero

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July 2, 2011

by Danny Westneat

Who would you guess pays more in federal taxes: me or Boeing?

I don't mean in rates but in actual dollars. Has the federal Treasury gotten more money of late from the huge aerospace company, which booked $4.5 billion in pretax profits last year? Or from me?

"It's not even close," says Bob McIntyre. "In the past three years, you have paid way more into the system than Boeing."

McIntyre is a tax wonk, the director of a couple Washington, D.C., think tanks that focus on who actually pays the government's bills.

Last month, his group, Citizens for Tax Justice, released a study showing that 12 major U.S. businesses, with $171 billion in profits, combined to pay negative $2.5 billion in federal taxes the past three years. Meaning that even with all that profit, they paid no taxes.

Boeing was in this group. The company made $9.7 billion in profits in 2008, 2009 and 2010. It paid nothing in federal taxes, booking $178 million back from the government in various credits, for a total federal tax rate of -1.8 percent.

These figures are from the company's financial reports. Still, I was expecting when Boeing executives went to Congress recently to ask for even lower taxes that they would deny this report. But they didn't.

"Over the last three years, we have not paid," confirmed James Zrust, Boeing's vice president for tax.

One congressman was incredulous.

"I think in testimony I heard earlier that Boeing would like lower taxes," said Rep. Pete Stark, D-Calif. "How much lower could you possibly need?"

Zrust explained the zero tax bill isn't likely to last. It's due to temporary factors, he said. Such as pension payments, and the costs of the development — but not yet any deliveries — of the 787 Dreamliner.

"Those same things that gave rise to low tax payments in the last three years will reverse in the next few years and result in considerable tax payments," Zrust predicted.

I asked McIntyre about that. Is he casting Boeing as a tax freeloader by looking at only a three-year window?

"Well, let's look at 10 years," he suggested. He tapped away at a database he keeps of financial statements.

"In the 10 years ending in 2010, Boeing had $29 billion in profits, and paid minus-$948 million in federal taxes."

McIntyre said if you include the past 11 years, Boeing's effective tax rate was positive, but only barely.

In other words, for the decade when the government launched two wars and ran up historic red ink, one of our largest companies — one that's a major beneficiary of military spending — contributed essentially zero to the ledger.

Now, Boeing pumps $1 billion a week into the U.S. economy. Its 160,000 employees have no doubt paid billions of income taxes in a decade. So it has great value beyond what the corporation itself pays to support the common good.

Boeing also didn't do anything wrong. As Zrust testified, the company is under ceaseless IRS audit, with 30 agents eyeballing it from offices located at Boeing. The zero tax bill isn't a sign it got away with something. It's just the way it is.

But should it be this way?

"I just think they ought to pay something," McIntyre says. "Like we all should. Every other time we've gone to war, the government has raised taxes to pay for it. In particular, it has asked the corporations to pay more.

"But nothing was asked this time. We're in two wars and we've cut their taxes, given them new loopholes, allowing them to pay, in some cases, nothing."

In my view, the most irresponsible thing we've done in my lifetime was to go to war while cutting taxes. That put war on a perpetual credit card, as if we were buying a sofa. Ten years in and still no one will say how we pay that bill.

Now Congress is going to political war over the deficit. Spending will be cut, as it should. But one side, the Republicans, insists that taxes not only cannot be raised, but are so high they must be cut still further.

As that one congressman wondered: lower than zero?

I'm not sure what the formula is for getting out of this mess. But somehow I doubt less than zero is going to pencil.

Patriot News (Pennsylvania): Bush era tax cuts fall short

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Sunday, July 3, 2011
by Marc Stier

Ten years ago last month, President George W. Bush signed a bill cutting taxes by $1.35 trillion over 10 years. It was the first of several Bush tax cuts that ended up costing two and a half trillion dollars over a decade.
Ten years later, what have we gotten for this tax cut? Where is the prosperity President Bush promised?

Pennsylvania’s official unemployment rate in June 2001 was 4.8 percent. Today, the seasonally adjusted rate is 7.4 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 pushed through an extension of the Bush tax cuts for another two years. Many 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 rich — are better off because of the Bush tax cuts. Their fortunes will continue to improve if those cuts are extended.

According to Citizens for Tax Justice, the wealthiest 1 percent of Pennsylvania residents, who will have an average income of $1.2 million in 2013, will save $65,480 in that year.

In contrast, the poorest 60 percent of the state’s residents, with an average income of $30,268, would save only $469 in 2013. Fair? Hardly.

Those 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.

In Harrisburg, Gov. Tom Corbett and the General Assembly enacted painful cuts in public services, including a massive $1 billion cut to education.

In Washington, Republicans also are proposing cuts. House Republicans have proposed ending Medicare as we know it and radically cutting back Medicaid.

By 2030, the vouchers proposed to replace Medicare will leave seniors paying 68 percent of the cost of health insurance up from 25 percent today.

The cutbacks made necessary by the Bush tax cuts have delayed our economic recovery.

While the private sector has created 1 million jobs since the recession officially ended in June 2009, our federal state and local governments, at the behest of Republicans who want to keep cutting taxes on the rich and corporations, have eliminated 1.1 million jobs.

No one wants to see government waste. But reductions needed to pay for the Bush tax cuts not only undermine our economy today, they threaten our future. How can we expect Pennsylvania and our children to prosper in the future if we undermine their education? How will seniors purchase private health insurance, especially when so many of them have pre-existing conditions?

Presently, Medicaid picks up the cost for 62 percent of Pennsylvanians who need long-term care. How will we take care of our aged parents when support from Medicaid is eliminated?

All these federal and state cutbacks can be traced back to the Bush tax cuts. So Congress should commemorate their 10th anniversary by ending them. And that is just the first step.

To put our nation on a path to real economic recovery, Congress needs to pass a budget that creates jobs. It can raise the money for that by passing Rep. Jan Schakowsky’s (D-Ill.) Fairness in Taxation Act, which taxes millionaires and billionaires. And it can close corporate loopholes that allow corporations to profit when they ship jobs and profits overseas.

What does a job creating federal budget look like?

First, instead of cutting Medicare and Medicaid, it would build on the Affordable Care Act to guarantee health care for all. Doing so would create 200,000 jobs in the next 10 years in Pennsylvania alone. Second, it would help cash-strapped states such as Pennsylvania avoid cuts in education and then invest in early childhood education and programs that make college more affordable.

Third, it would invest in the green jobs that are our future. Ten years after we sought prosperity by increasing the rewards to the wealthy, it’s time to change direction.

We must build an America that works for all of us by investing in all of us.

That will create an economy that rewards hard work with good American wages and benefits and affordable health care that gives low-income families the opportunity to move into the middle class.