Holly Sklar: Repatriation con games
Lobbyists are storming Capitol Hill, pushing a tax holiday that would give billions of dollars in tax breaks to less than 1 percent of American businesses – and stick the other 99 percent with the bill. But of course, they can’t say that. So tax holiday advocates are using a high-powered version of the email con known as the “Nigerian scam.”
You’re probably familiar with it: a prince, business executive or government official promises rich rewards for your urgently needed assistance to move “funds which are presently trapped in Nigeria” or some other country into the United States. “The con works by blinding the victim with promises of an unimaginable fortune,” the myth-busting Snopes.com explains. “He fails to realize during the sting that he’s never going to get the promised fortune.” He’s going to lose his shirt.
“Currently, there is over $1 trillion earned by American businesses trapped overseas that could be brought back and invested here at home,” the WIN America campaign for a tax holiday on “repatriated” corporate profits says in its mission statement. “There is no time to waste, our economy needs all the help it can get.”
Never mind that the money “trapped” overseas was moved by U.S. corporations to their subsidiaries in the Cayman Islands, Switzerland and other tax-haven countries in order to avoid taxes. As former Treasury Department economist Martin Sullivan told Bloomberg, “A lot of what companies report as foreign profit is really U.S. profit that should be subject to U.S. tax.”
For example, “Cisco transfers a portion of the patent rights to technology developed in the U.S. to a Dutch unit, which sells some of the resulting products back to its parent for eventual distribution in the U.S.,” Bloomberg reported. “Cisco credits about $5 billion in U.S. sales annually to the Netherlands.”
Cisco, Google, Pfizer and other big businesses in the WIN America campaign have deployed more than 160 lobbyists to convince Congress to let U.S. multinationals pay a “repatriation” tax rate as low as 5.25 percent. It would tilt the playing field even further against small businesses hiring, investing and paying taxes in America.
Most tax holiday legislation co-sponsors have received campaign donations from WIN America-affiliated companies, reports the Center for Public Integrity.
Congress already fell for this scam with a “one-time” tax holiday passed in 2004. Companies didn’t create the jobs or investment they promised – layoffs actually increased.
Instead, they boosted CEO pay, stock buybacks and shareholder dividends, and stockpiled even more money offshore to avoid taxes, according to reports by the Senate Permanent Subcommittee on Investigations, Congressional Research Service, National Bureau of Economic Research and others. Since 2004, the amount of earnings by U.S. corporations held offshore has more than tripled.
“Another temporary holiday may condition US multinationals to never routinely repatriate any foreign profits because, eventually, Congress can be expected to pass another ‘temporary’ tax holiday,” said a Goldman Sachs report.
As more people understand that another tax holiday would be bad for the U.S. economy, advocates are pitching a variation on the “I’ve got a bridge to sell you” scam that notorious con men like George C. Parker foisted on gullible buyers.
You can use our tax holiday to fund an infrastructure bank to buy bridges, roads and other public works, the hucksters pitch. In this crazy math, a tax holiday that the congressional Joint Committee on Taxation says will cost the U.S. Treasury $42 billion to $79 billion is supposed to finance an infrastructure bank.
If you believe that, I’ve got a bridge to sell you.
Here’s a real way to fund an infrastructure bank with a tax haven link: enact the Stop Tax Haven Abuse Act. That would put $100 billion a year into the U.S. Treasury that is now being lost to tax dodging through tax havens.
That would mean real money for rebuilding our infrastructure and other national priorities, which would strengthen Main Street business, job creation and our economy.
“We can’t afford the waste of another massive corporate tax break that rewards those who have made an art form of avoiding their tax responsibility through tax havens and other accounting manipulation,” says Dean Cycon, owner of Dean’s Beans coffee company.
America has suffered enough from corporate con artists.
Holly Sklar is director of Business for Shared Prosperity (www.businessforsharedprosperity.org). She can be reached at hsklar.writer@gmail.com. An earlier version was distributed by McClatchy-Tribune News Service. Copyright 2011 Holly Sklar.
Scott Klinger and Holly Sklar: Real patriots pay taxes
Some of our nation’s biggest corporations are planning a tax holiday and they want you to pick up the tab.
Actually, you already pay for their routine tax avoidance through the use of tax havens in Bermuda, the Cayman Islands and elsewhere. These accounting acrobatics cost the U.S. Treasury $100 billion a year. Now they want Congress to pass a special tax holiday for money they “repatriate” back to the United States.
There’s nothing patriotic about this repatriation being pushed by Google, Cisco, Pfizer and other companies in the Win America campaign. To sell the tax holiday, they claim it will produce a burst of jobs and investment. In fact, Congress passed a “one-time-only” tax holiday in 2004 with similar promises. Instead, it produced a burst of shareholder dividends and stock buybacks, which goosed the pay of CEOs.
Corporations laid off workers and shifted even more income and investment to offshore tax havens in the wake of the 2004 tax holiday.
“Why should we reward firms for successfully gaming the tax system when we in turn are called on to make up the missing tax revenues?” Edward Kleinbard, former chief of staff of Congress’s Joint Committee on Taxation, told Bloomberg. “Much of these earnings overseas are reaped from an enormous shell game: Firms move their taxable income from the U.S. and other major economies – where their customers and key employees are in reality located – to tax havens.”
A favorite accounting trick is transferring a patent from the U.S. parent company to a subsidiary – often a shell company – in a tax haven. Profits from the patent go largely untaxed offshore while the costs of development, marketing and management remain in the U.S. where they are taken as tax deductions.
Pfizer was the largest beneficiary of the last tax holiday, bringing $37 billion back to the United States and paying just $1.7 billion in federal corporate income taxes. It laid off 10,000 American workers in the following months. The U.S. is the world’s most profitable drug market and yet over the last three years, Pfizer – maker of Lipitor, Viagra and much more – has reported $7.9 billion in U.S. losses while claiming $37.8 billion in profits in the rest of the world. Pfizer, like the rest of Big Pharma, is heavily subsidized by taxpayer-funded research at the National Institutes of Health and elsewhere. It should not be rewarded with another tax holiday.
Bloomberg reported that Win America member “Google reduced its income taxes by $3.1 billion over three years by shifting income to Ireland, then the Netherlands, and ultimately to Bermuda.” What a corporate ingrate. Google would not exist without the Internet, and the Internet grew out of U.S. government research beginning in the 1960s. In the 1990s, the U.S. National Science Foundation (NSF) funded the Digital Library Initiative research at Stanford University that Larry Page and Sergey Brin, now billionaires, developed into Google. Brin was also supported by an NSF Graduate Student Fellowship.
Increasingly, U.S. multinational corporations want to benefit from government spending on education, infrastructure, research, health care and so on without paying for it. Today, large corporations pay, on average, 18 percent of their profits in federal income taxes and as a group contribute just 9 percent toward federal government bills – down from 32 percent in 1952. The Congressional Joint Committee on Taxation says a new tax holiday would cost $79 billion.
A dozen national and state business organizations led by Business for Shared Prosperity recently wrote members of Congress urging them to oppose the tax holiday. The letter said, “When powerful large U.S. corporations avoid their fair share of taxes, they undermine U.S. competitiveness, contribute to the national debt and shift more of the tax burden to domestic businesses, especially small businesses that create most of the new jobs.”
There is no excuse for repeating a policy that’s a proven failure. It would be even worse this time around, as corporations would redouble their efforts to shift profits overseas in anticipation of the next tax holiday. Congress should close the tax loopholes that reward companies for transferring U.S. profits, jobs and investment abroad – not encourage them.
Real patriots pay their fair share of taxes. They don’t run out on the bill.
Scott Klinger is Director of Tax Policy and Holly Sklar is Executive Director of Business for Shared Prosperity. Mr. Klinger is a Chartered Financial Analyst (CFA) charterholder. Readers can write to them at info@businessforsharedprosperity.org.
Sally Jones: Taxes and Thanksgiving
“Cut My Taxes!” Americans have heard this cry for years – and we’ve heard it shouted angrily in recent months. We hear that we pay too much in taxes, that government makes poor use of our money, and that our prosperity would rise if only taxes would fall.
But in reality our taxes have fallen steadily in recent years. In 2001 and 2003 Congress passed temporary tax cuts which will expire at the end of 2010. We must now decide what good or bad has come of that experiment and what tax law we want for the future.
Most of us recognize that one size doesn’t really fit all – and this holds true for income tax rates. Maintaining a lower level of taxation for the vast majority of Americans makes sense in today’s hard times. But why should we do the same for the tiny percentage of citizens – a minority to which I gratefully belong – whose annual earnings exceed $250,000? The American people borrowed $700 billion to give people like me a tax cut over the last decade. Why should they borrow an additional $700 billion to extend the tax breaks?
Congress should let our tax cuts expire for the sake of the country, especially in this economy. Who would lose by this step toward tax fairness? Only those among us who can afford such a loss. Who would gain? All Americans – including those few of us who would pay more taxes.
We cannot sustain our nation – not its defense; not its essential infrastructure such as roads, rails, bridges, dams and communications; not its economic place in the world; not the health and education of its people; not its ability to respond to natural disasters such as earthquake, flood or hurricane; not the protections we expect it to provide against man-made disasters, toxins (domestic and imported), buccaneering corporations or hazardous products – without securing for our government the funding it must have to accomplish all of these things.
Recognizing our shared responsibility – in the present instance by payment of taxes – we might live up to the example of earlier generations who left for us a remarkable system of institutions and infrastructure. By abandoning that responsibility, we would betray both our predecessors and our descendants, and we would gain nothing but a temporary self-indulgence, at a price that will impose itself on present and future generations.
Do we bear any collective responsibility? I think so. Consider the example of the season.
On Thanksgiving Day most of us will gather with family or friends or both. We will sit down to tables crowded with the various dishes that speak to us of this special occasion, and indulge ourselves more than we usually do. However much or little else we feel thankful for on that day, we will heartily thank the one or more cooks who toiled in the kitchen to prepare this dinner for us.
We thank the cooks because we have seen their effort first hand. But how many others have contributed to make our feasts possible – others whom we never think about or credit? Who taught our cooks their skills or created our recipes? Who grew, harvested, preserved or transported the foods? Who built our ovens, plumbed our kitchens, and made our utensils, dishes and tables?
Those of us with high incomes ought to ask similar questions about the plenty we enjoy daily. We could hardly enjoy our success without assistance we hardly notice: the infrastructure that allows businesses to grow and prosper, the law enforcement that protect patents and copyrights, and the productiveness and purchasing power of publicly-educated fellow citizens. Without national investments – supported by our taxes – no wealth would be sustained in this country and those at the top would not have the extraordinary lives they have today. Let us remember to be grateful.
Let’s make sure those outside of the top two percent of Americans can live and thrive. Unless we foster prosperity for our country and for every citizen, all of us will suffer the consequences of living in a society of the ailing, the untrained and inefficient, and the unruly. Let’s pay the taxes – those of us who can afford them – to sustain the America that has offered opportunity since its founding. Unless we restore strength to its economy, institutions, and structures, our country will decline – and everyone’s prospects with it.
Sally Jones is a member of a high-income household in Minneapolis who supports Wealth For The Common Good and its goal of promoting shared prosperity and fair taxation.
Ken Becker: The Fair Tax
Column by Ken Becker
Submit guest columns: freepress2@ntelos.net
I want to introduce to the public a new concept for funding the federal government. A new efficient tax system that is completely voluntary. This tax plan has been introduced to the United States Congress as the Fair Tax Act (H.R. 25/S. 296).
Imagine keeping every dime of your paycheck. No federal income tax taken out, no social security or Medicare tax taken out, no taxes on business and no taxes on investment income. In addition you would get a monthly payment to cover taxes on all necessities up to the poverty level. All of this replaced with a consumption tax of 23 percent on new purchases only.
No, the cost of everything you buy will not necessarily go up 23 percent under this plan. While the cost of new products would go up, many of the costs to produce products would be eliminated which would reduce retail prices. How could this be? All taxes and tax compliance costs like tax preparation and accounting fees on production of a product are passed on through each process and then eventually passed on to you the consumer. These are called embedded costs. Economists estimate that there is roughly a 22 percent increase in the cost of merchandise due to embedded costs. The Fair Tax would remove these costs. Continue reading “Ken Becker: The Fair Tax” »
Ken Plum: To tell the truth
Column by Ken Plum
www.kenplum.com
We did not have a television in our home until I was 16 years old. When Dad finally made some extra money raising broiler chickens in addition to his full-time job doing maintenance work on the Norfolk and Western Railroad, he took the extra hundred dollars and bought us a black and white television as color was not yet available. Reception where we lived was limited to one channel, WSVA-TV, Harrisonburg. On Saturday night it was Lawrence Welk whether you liked him or not. Funny how his re-runs seem a lot better than the originals did.
Game shows were popular in those days, including “To Tell the Truth” where an individual and two impostors tried to fool a panel of Kitty Carlisle and other celebrities as to who was the authentic person.
Much of political debate reminds me of an effort to find out who is telling the truth. There are television talking-head commentators, instant “experts,” blogs, etc., all spinning their versions of the truth. Any wonder that the public gets confused or becomes cynical! One issue subject to a lot of spin is government spending and taxing. Continue reading “Ken Plum: To tell the truth” »
Not as bad as next year
Column by David Reynolds
Columns, letters: freepress2@ntelos.net
Last time we painted a bleak budget picture, saying that this year’s public budgets are worse than last year’s, but not as bad as next year’s. In my old Washington Bureau of the Budget days it allowed us to put away the usual governmental garbage that we have never traveled down this road before.
The picture is bad everywhere, for some places worse than others. Revenues will continue to be down and our budget pains will remain. Continue reading “Not as bad as next year” »
Danger zone
Looks like Frank Lucente has cornered himself back into being the minority again. “If we don’t get ourselves under control with spending, we are going to pay our price, and I am saddened that we are going to raise your taxes,” the singularly focused vice mayor said after Tuesday’s 3-2 City Council vote to maintain the current 70-cent property-tax rate in Waynesboro. Continue reading “Danger zone” »
Targeted tax relief for the unemployed
I noticed that Waynesboro City Council has added to its agenda for its staff briefing tonight an item to discuss tax relief for the elderly and disabled. I’ve been talking up behind the scenes an idea springing from that senior-focused tax-relief effort that I think could gain some traction given the economic times. And the idea, local property-tax relief for the unemployed, seems to be meeting with support from the people I’ve broached the topic with to date. Continue reading “Targeted tax relief for the unemployed” »
Business and Economy: Another economics myth
Column by Chris Graham
freepress2@ntelos.net
Just got forwarded by the McCain campaign an editorial from the Las Vegas Review Journal that incredulously pleads poverty for the superwealthy.
The takeoff point was the line from Joe Biden in a Sept. 18 interview on “Good Morning America” in which the Dem VP nominee said it is time for wealthy Americans “to be patriotic” in picking up more of the tab for the operations of the federal government that is itself about to pick up the tab to the tune of up to a trillion dollars for the failings of wealthy Americans on Wall Street. “Time to jump in, time to be part of the deal, time to help get America out of the rut,” Biden said.
The editorial slammed Biden: “(W)e now know the Democratic ticket believes this nation’s economic malaise can be corrected by confiscating even more wealth from its most productive citizens.” No doubt many Americans who we can call wealthy are quite productive, but then that would make the years of debate over estate taxes moot, wouldn’t it? “Already, the wealthiest 1 percent of filers pay 39 percent of all income taxes. The richest 40 percent of American households cover 99 percent of the income tax burden. These are the taxpayers who invest in companies, create jobs and spread wealth across a wider spectrum than any welfare program,” the editorial reads on. And we can also say misleads on.
Because, one, the insinuation there is that because the richest 40 percent cover 99 percent of the tax burden then they’re already paying almost all the freight. Which they aren’t. According to the nonpartisan Tax Policy Center, income taxes account for about 45 percent of all federal-government revenues. Which ain’t nuthin’ to sneeze at, sure, but the next-biggest share, at 35 percent, come in the form of payroll taxes, which is to say, from us.
Factor in what us little guys pay in sales taxes – which account for roughly 20 percent of state-government revenues in Virginia – and you start to get a bit of a more complete picture of how things work in our country.
The second mislead is evident in a quick review of economic history. Think back to the Roaring ’20s, which were fueled by tax cuts on the wealthy who turned their money not as much into investments into development and innovation as in more visceral forays into gambling in the stock market, which in the laissez-faire mood of the times was a sort of Wild, Wild West. Remember how those Roaring ’20s ended? With a Wall Street implosion that launched a Great Depression? Remember what got us out of the Great Depression? The New Deal of FDR, which focused on rebuilding the economy by putting money not in the hands of the wealthy, but in the hands of the working and middle classes who who would spend it and spur economic activity?
Where we are now is not much different than where we were back at the end of the Roaring ’20s. History tells us that we can’t afford, literally, to make the same mistake that we made back then, by continuing with failed economic policies that were supposed to but never did trickle down.
That the McCain campaign sent me this e-mail this morning tells me where they are on this. They want to play the class-warfare game that benefits their benefactors at the expense of not only the rest of us, but as the data would suggest, themselves and their own selfish economic interests as well.
Funny how it actually works out, isn’t it, that the best tax policy is not trickle-down, but trickle-up?
It’s time that we call an end to the failed social experiment that was Reaganomics and reinject some common sense into the way we run our government.
Business and Economy: Comparing the Obama and McCain tax plans
Story by Chris Graham
freepress2@ntelos.net
(First in a series.)
John McCain and his surrogates are right. Barack Obama is going to raise your taxes – if you’re among the top 1 percent of wage earners.
An analysis of the McCain and Obama tax plans done by the nonpartisan Tax Policy Center shows that both of the presidential candidates would slash taxes on average, McCain by 2 percent for the average taxpayer and Obama by 0.3 percent. Those numbers are a bit deceiving, though, considering that the bulk of the McCain tax cuts go to individuals and families making $2.87 million a year or more, while the Obama tax cuts are focused on lower- and middle-class wage earners.
(See chart.)
People making between $18,982 and $37,595 a year will get a $113 tax cut under the McCain plan and an $892 tax cut under the Obama plan. Those making between $37,596 and $66,354 will get a $319 tax cut under McCain and a $1,042 tax cut under Obama. For those making between $66,355 and $111,645, the tax cut is $1,009 with McCain and $1,290 with Obama.
The cuts for those making between $111,646 and $160,972 are $2,614 with McCain and $2,204 with Obama. At the $160,973 to $226,981 level, the cuts are $4,380 under McCain and $2,789 with Obama.
The focus shifts from there under McCain to big decreases for those making $226,982 to $603,402 ($7,871 tax cut compared to a $12 tax cut under Obama), those making between $603,403 and $2.87 million (a $45,361 tax cut under McCain compared to a $115,974 tax increase under Obama) and those making more than $2.87 million (a $269,364 tax decrease under McCain and a $701,885 tax increase under Obama).
Highlights of the Two Plans
- Provide a Tax Cut for Working Families: Obama will restore fairness to the tax code and provide 150 million workers the tax relief they need. Obama will create a new “Making Work Pay” tax credit of up to $500 per person, or $1,000 per working family. The “Making Work Pay” tax credit will completely eliminate income taxes for 10 million Americans.
- Eliminate Income Taxes for Seniors Making Less than $50,000: Barack Obama will eliminate all income taxation of seniors making less than $50,000 per year. This proposal will eliminate income taxes for 7 million seniors and provide these seniors with an average savings of $1,400 each year. Under the Obama plan, 27 million American seniors will also not need to file an income tax return.
- Simplify Tax Filings for Middle Class Americans: Obama will dramatically simplify tax filings so that millions of Americans will be able to do their taxes in less than five minutes. Obama will ensure that the IRS uses the information it already gets from banks and employers to give taxpayers the option of pre-filled tax forms to verify, sign and return. Experts estimate that the Obama proposal will save Americans up to 200 million total hours of work and aggravation and up to $2 billion in tax preparer fees.
- Provide Tax Relief for Small Businesses and Start Up Companies: Barack Obama will eliminate all capital gains taxes on start-up and small businesses to encourage innovation and job creation. Obama will also support small business owners by providing a $500 “Making Work Pay” tax credit to almost every worker in America. Self-employed small business owners pay both the employee and the employer side of the payroll tax, and this measure will reduce the burdens of this double taxation.
- Keep Tax Rates Low: Entrepreneurs are at the heart of American innovation, growth and prosperity. Entrepreneurs create the ultimate job security – a new, better opportunity if your current job goes away. Entrepreneurs should not be taxed into submission. John McCain will keep the top tax rate at 35 percent, maintain the 15 percent rates on dividends and capital gains, and phase-out the Alternative Minimum Tax. Small businesses are the heart of job growth; raising taxes on them hurts every worker.
- Cut The Corporate Tax Rate From 35 To 25 Percent: A lower corporate tax rate is essential to keeping good jobs in the United States. America was once a low-tax business environment, but as our trade partners lowered their rates, America failed to keep pace. We now have the second highest corporate tax rate in the world, making America a less attractive place for companies to do business. American workers deserve the chance to make fine products here and sell them around the globe.
- Allow First-Year Deduction, Or “Expensing”, Of Equipment And Technology Investments: American workers need the finest technologies to compete. Expensing of equipment and technology will provide an immediate boost to capital expenditures and reward investments in cutting-edge technologies.
- Establish Permanent Tax Credit Equal To 10 Percent Of Wages Spent On R&D: This reform will simplify the tax code, reward activity in the United States, and make us more competitive with other countries. A permanent credit will provide an incentive to innovate and remove uncertainty. At a time when our companies need to be more competitive, we need to provide a permanent incentive to innovate, and remove the uncertainty now hanging over businesses as they make R&D investment decisions.
Margot Dorfman: Big business tax holidays are bad for small business, bad for America
Posted by afp on December 12, 2011 · Leave a Comment
The U.S. Women’s Chamber of Commerce strongly opposes legislation in Congress that would reward U.S. multinational corporations with massive, unwarranted tax discounts to bring back hundreds of billions in U.S. profits they shifted offshore to avoid paying taxes in the first place.
So called “Repatriation Tax Holidays” are nothing more than unfair, anti-American giveaways to big businesses that have lobbying and political donor clout in Washington, D.C. Continue reading “Margot Dorfman: Big business tax holidays are bad for small business, bad for America” »
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