Friday, November 25, 2011

It's not Class Warfare - it's just "Business"

It doesn't matter what a corporation pays in taxes as compared to GDP, or how it's compared to any other index of measure (to skew the numbers), it's what they actually pay to the U.S. Treasury after loopholes (aka "deductions") that matters most. And for the last 25 years corporations have actually paid historically low taxes.

While today some corporations may have paid the maximum rate of 35% (when it was over 50% in the 1950s), many others paid ZERO, with the average being only 18%.

The same can be said for their CEOs and other high-income earners. While although the top bracket is also almost historically low (at 35%, when it was once over 90%), what they actually pay is nearer to 15% because the majority of their income is earned through capital gains

And because corporations have been paying a low effective corporate tax rate for decades, that didn't keep them from outsourcing jobs overseas for cheap labor, but rather, it did enable them to pay very excessive CEO salaries...who only mostly pay 15% in federal income taxes on their capital gains.

What makes a grown man cry?

When Congress voted earlier this year on whether or not to end taxpayer-paid entitlements for big oil companies, ConocoPhillips CEO James Mulva (a Republican) cried, saying ending the tax breaks for the big oil companies would be "un-American", then he refused to apologize to the American people.

Republicans (who represent CEOs of large corporations) cry all the time too. When we asked large profitable corporations to pay their fair share of taxes, they cried, "You can't tax us, we're the job creators!" When we asked Fox News millionaires like Bill O'Reilly for a little more, they cried, "If you raise my taxes, I'll have to quit my job!" When we asked that the Bush tax cuts be allowed to expire so that we could balance the national budget, they cried, "That's class warfare!" or "Why do you want to punish the rich for their success?"

When a CEO (or Republican or Fox News commentator) cries about paying too much taxes, they're usually lying. It's almost as though they were all suffering horribly! They're like big cry babies! They're like sniveling rich spoiled brats, the privileged ones, who always feel entitled!

Does taxing these supposed "job creators" really cause unemployment? It seems more likely that by NOT taxing them has caused 30 million people to lose jobs since the Bush tax cuts from 2001 to the present.

America's middle-class peaked in 1979. As of 2010 50% of all American workers earned less than $27,000 a year when the poverty line for a family of four was $22,314. Of the total work force, 16% are unemployed and earned ZERO dollars last year (of those, 50% collected unemployment benefits at some time). The top 1% earns $1 million or more a year.

Because of the many loopholes in the U.S. tax code, on average, for the past 25 years the largest U.S. multi-national corporations and banks have paid a lower effective tax rate in corporate taxes (14% to 18%) than they would have in China (25%).

High taxes is not why U.S. companies outsource jobs, it's because China has very few (if any) environmental regulations and they offer very cheap labor. (Read: America's Race to the Bottom and Apple Inc. is Rotten to the Core)

The effective corporate tax rate has been steadily declining for decades. Corporations paid more than 50% of their profits in federal taxes in the 1950s, 38% in the 1960s, 33% in the 1970s and 25% in the 1980s. All the while, U.S. wages have been stagnant for years - - even as worker productivity has risen.

U.S. corporations are sitting on a huge and growing pile of cash. It just crossed the $2 trillion threshold, according to new Fed data. The Federal Reserve figures don't even include the substantial amount of cash held at many U.S. companies' foreign subsidiaries, which would be subject to taxation if the companies repatriated it.

And they're still bringing up the same old tired argument about "double taxation".

Double taxation is defined as the systematic imposition of two or more taxes on the same income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes)

The IRS states: "The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation."

Those who argue that capital gains taxes are a "double tax" are just full of crap.

If you work for a corporation and they pay you an hourly wage, is that a tax to them? If a corporation issues stock options to their CEOs in lieu of a cash salary, and after those stocks are sold and taxed as capital gains, is that a "double tax" on the corporation, or just another form of a wage that's paid to an employee from the corporate treasury?

When I get a paycheck, it has federal taxes and FICA deducted. Shouldn't the CEOs also have to pay their share of federal income taxes and FICA from their personal incomes?

Their argument of "double taxation" would be the same as if I took my paycheck and went to buy tires for my car and was charged a federal excise tax; wouldn't that also be a "double tax"? After all, the corporation that paid me an hourly wage also paid corporate taxes and I already paid federal income taxes before I received my paycheck

If I had earned $16.59 an hour ($35,501 a year) in that CEO's factory, I'd be in the 25% tax bracket. The CEO who pays me from the corporate treasury, and also pays himself with stocks options, would only pay 15% in capital gains taxes (and have their Social Security taxes capped).

Corporations have already been paying a declining "effective" corporate tax rate for decades (peaking in the 1950s), just as the CEOs have also been paying a declining capital gains tax rate too...hence, the record profits and record bonuses we've been hearing so much about.

These people NEVER think they earn money, because the greed for wealth is an addiction..."Wealth is like sea water; the more we drink, the thirstier we become." - Schopenhauer

The CEOs are already earning record profits and their corporations have been earning record profits. They've already over-worked us, under-paid us, over-charged us, and out-sourced us while under-paying us in tax revenues. It's time to tax.

A corporation by it's very nature won't go away and die if we tax them and their CEOs more. No matter what we do, they'll always over-work us, under-pay us, over-charge us, and out-source us more in their ever-ending quest for more profits...but at least we can keep them from under-paying their taxes.

Most of the corporate monsters we have today started out small when tax rates were much higher. That didn't inhibit their growth; they grew and grew, gobbling up smaller ones along the way, until they became giants (or "too big to fail"). They almost become an entity onto themselves. CEOs are expendable, and if you chopped off the head of a corporation, another one will grow back to take its place.

But I can sympathize with the people who run these multi-billion-dollar multi-national corporate conglomerates....about as much as they do for me. I'm tired of feeling sorry for the ultra-rich.

And I just hate to see a grown man (or woman) cry. Especially millionaires like Bill O'Reilly, Paul Ryan, Sean Hannity, Eric Cantor, Glenn Beck, Rick Santorum, Rupert Murdoch, the Koch bothers, Paul Rand, Karl Rove, Grover Norquist, Rush Limbaugh, Newt Gingrich, Herman Cain, Mitt Romney, and all the big bankers and CEOs. 

But while they were crying all the way to the bank, I was standing in line waiting for food stamps. So we need to tax them, because if they won't hire and pay people, they can a least pay for their food stamps.

"Class warfare" by ass, it's just "business".

Ronald Reagan

Ronald Reagan's first tax bill was enacted in August 1981. It included a sweeping cut in marginal income tax rates, lowering the top rate from 70% to 50% (a whopping 20 percentage points) - and lowered the lowest rate to 11% from 14% (only a stingy 3 percentage points).

The House vote was 238 to 195, with 48 Democrats on the winning side and only one Republican with the losers. The Senate vote was 89 to 11, with 37 Democrats voting aye and only one Republican voting nay. Reaganomics had officially begun.

Wisconsin Republican Rep. Bill Steiger and Wyoming Republican Sen. Clifford Hansen, were two main sponsors of an important capital gains tax cut in 1978.

The highest tax rate on "unearned" (i.e., non-wage or capital gains and dividends) income dropped from 70% to 28%. The corporate tax rate also fell to 34% from 46%. And tax brackets were pushed out, so that taxpayers wouldn't cross the threshold until their incomes were far higher ($379,000).

The Wall Street Journal claimed that the highest 1% of income earners paid more in taxes as a share of GDP in 1988 at lower tax rates than they had in 1980 at higher tax rates.

To Ronald Reagan, what's been called the Laffer Curve was pure common sense. (There was no increase in the minimum wage over his full eight years in office).

Reagan also repealed the excess profits tax on oil companies (Windfall Profits Tax) who are today earning record profits, and like ExxonMobil, are dodging taxes as well.

The negotiations for what would become the North American Free Trade Agreement began in Reagan's second term, but it was President Clinton who pushed the agreement through Congress in 1993 over the objections of the unions and many in his own party. (New data now reports that 56,000 factories closed and 8.2 million jobs were lost from 2000 to 2010 due to outsourcing.)

President Clinton also signed into law a capital gains tax cut with the Taxpayer Relief Act of 1997 which lowered the top capital gains rate further, from 28% to 20%.

Conservatives claim that nothing other than Reaganomics created over 21 million jobs during Reagan's 8-year- term as President. The stock market went through the roof (as though "bubbles" were a good thing), and that low capital gains taxes drove the economy.

But little is said about starving the government of necessary revenues are needed to fund Social Security, Medicare, and infrastructure. Only defense spending is considered a priority by the Republicans and corporate America, because "defense" generates profits.

Then we had the Bush tax cuts which lowered capital gains taxes further to an historically low 15%, not seen since before 1921 when capital gains were taxed as regular income.

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2 comments:

  1. Today in the New York Times:

    "In the eight decades before the recent recession, there was never a period when as much as 9 percent of American gross domestic product went to companies in the form of after-tax profits. Now the figure is over 10 percent. For companies, these are boom times. For workers, the opposite is true."

    http://www.nytimes.com/2011/11/26/business/for-companies-the-good-old-days-are-now.html

    ReplyDelete
  2. Almost 70% of all capital gains taxes are paid by the top 1%

    A week after hinting he may raise the capital gains tax, Jon Huntsman proposed eliminating it altogether.

    http://thinkprogress.org/economy/2011/08/31/308914/a-week-after-hinting-he-may-raise-capital-gains-tax-huntsman-proposes-eliminati
    ng-it-altogether/

    ReplyDelete