Wednesday, November 23, 2011

Record Profits + Record Bonuses = Zero Jobs

  • When Republicans cut our entitlements, they call that "a shared sacrifice".
  • When CEOs rip us off and dodge taxes, they call that "doing business".
  • When we speak up to complain, they call that "class warfare".

It doesn't take a genius to know that with such high unemployment, more and more people are losing their jobless benefits, and more and more people are being forced into taking what few low-paying jobs there are left.

We know that "demand" for goods and services will remain very low for a very long time, until such a time when the large corporations will decide whether or not they will hire people, and pay them a "living wage" - - - to make things that no one can afford - - - or until we can tax them.

Otherwise their overseas profits will continue to accumulate in off-shore bank accounts.

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

Corporations and government contractors in the defense industry have spent millions to lobby congress for all kinds of tax breaks and loopholes.

That's why, despite a severe recession in the U.S., they've still been earning record profits. And that's also why these same companies have also been able to pay their CEOs record salaries and bonuses year after year. If corporations can hoard an un-taxed $2.2 trillion overseas, they can also afford to pay their CEOs.

And the CEOs of these same companies are also paying historically low capital gains taxes, executive compensation that they are paid as stock options. So all around, the corporations are earning high profits and paying low taxes in the U.S., while paying for cheap labor overseas as they pay their CEOs huge salaries, who are also paying low income taxes too. What a sweet deal!!!

For ever dollar saved in corporate taxes, a dollar can go into the bonus pool for corporate executives, and they'll pay the same effective income tax rate as their secretaries. What Warren Buffett said is true. Read: Loopholes for hedge fund managers

Lowering corporate taxes, or capital gains taxes for their CEOs, won't create jobs. If history tells us anything, that's HIGHLY unlikely.

And as of 2011, they have the best of all what exactly have the Republicans been complaining about? The GOP already tried strangling the government with too few taxes when they passed the Bush tax cuts. Now they want LOWER taxes?

Oh, and did I mention that the cap on Social Security contributions is another benefit they enjoy?

Before the next presidential election I would like to warn the Republican voters what Albert Einstein once said: "Insanity is doing the same thing over and over again and expecting different results."

Please....tell all your friends: "Friends don't let friend vote Republican."

Low Corporate Taxes = Excessive CEO Salaries

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.

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  1. The tax brackets and income tax rates could remain the same, just tax all capital gains and dividends as regular income.

    For corporations, the tax bracket could be lower but only if ALL loopholes were eliminated, so they pay the ACTUAL tax rate, and not an "EFFECTIVE RATE".

  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.