Why all Major U.S. Corporations Should Move to China

...as well as their CEOs and board of directors. I hear the air in Beijing is lovely at this time of year.

If all the big major American corporations moved to China, they could pay China's tax rates and stop whining about paying U.S. taxes. And then maybe smaller and mid-size domestic businesses can grow and expand - - and hire domestic workers. Hedge funds and private equity firms like The Vanguard Group (with $1.2 trillion in assets) can invest in them.

It's either that, or the larger multi-nationals can just "un-incorporate", because I for one am tired of hearing them, their lobbyists, the Republicans, and their pundits complaining (such as those on Fox News and the Wall Street Journal)

Today the Huffington Post published a good article: Corporate Tax Dodgers Pay To Keep Loopholes Open. "How is it possible that more than two dozen major U.S. companies post enormous profits and pay no taxes? A report released Wednesday offers one possible explanation: In addition to spending nearly $500 million lobbying in a recent three-year period, those companies spread $41 million to the political campaigns of their friends in Congress."

Over a quarter century ago, in 1984, the Washington, D.C.based Citizens for Tax Justice released its first in-depth report on how much America’s top profitable corporations were actually paying in taxes. America’s top companies, this initial study found, were paying an average of only 14.1 percent of their profits in taxes, less than a third of the corporate tax rate then in effect. Read more...

In a Reuters article yesterday: IRS Forms 'SWAT Team' To Crack Down On Corporate Tax Dodgers: "The U.S. Internal Revenue Service is staffing up with high-powered talent to crack down on companies shifting profits from country to country to lower their tax bills." But the Republicans want to cut the IRS's budget, and then claims that high taxes causes tax evasion.

Currently the "statutory" corporate tax rate in 35%. Obama proposes lowering the top marginal corporate tax rate to 28 percent from the current 35 percent. The term “tax rate” can mean the average or "effective" tax rate that is actually paid — as a share of income, or by a broader measure, total federal revenues divided by the gross domestic product.

By this measure, federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of GDP. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.

Bruce Bartlett, who has served as an economic adviser in the White House, the Treasury Department and Congress, says of the current corporate taxes actually paid: "The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan’s administration; the lowest percentage during that administration was 17.3 percent of G.D.P. in 1984.

In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.

David Leonhardt pointed out "Of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate—both federal and otherwise—of less than 20 percent over the last five years... Thirty-nine of those companies paid a rate less than 10 percent."

Studies indicate that after tax breaks, the effective corporate tax rate is in fact closer to 25 percent, and one analysis found that nearly 300 major companies paid an average rate of just 18.5 percent between 2008 and 2010. Read more at the Economist.

Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again. Taxes, by all definitions, are actually historically low in ALL categories (top marginal rate for income taxes, capital gains taxes, corporate taxes, inheritance taxes, etc.) Read: How the 1% Bilks the 99%

In June 2011 The Hill reported that the Citizens for Tax Justice said that a dozen major companies had, between them, an average effective tax rate of roughly -1.5 percent between 2008 and 2010 — well below the top marginal corporate rate of 35 percent...and expected the broader analysis of all the Fortune 500 companies would still find an average effective rate of below 15 percent.

Based on "effective" tax rates, pro-big-business Bloomberg plays down these statistics by arguing that "the tax rate for the largest U.S. companies between 2006 and 2009 was 27.7 percent, compared with a non-U.S. average of 19.5 percent. (Note: It was NOT 35%, but more on this later.)

Business lobbying groups also want the U.S. to switch to a territorial tax system, which wouldn’t tax U.S. companies on profits they earn in other countries (the same corporations who lobby for "free trade agreements" and then outsource jobs overseas for cheaper labor).

American Enterprise Institute (a conservative pro-big-business lobbying group) gives a very detailed and comprehensive analysis of their own position, and adds "The Obama administration should lower effective tax rates so the United States can compete in the global economy."

One would not know from this Republican plan that corporate taxes are expected to raise just 1.3 percent of G.D.P. in revenue, about a third of what it was in the 1950s.

The American Enterprise Institute and the Republicans say global competitiveness requires the United States to reduce its corporate tax rate. But the United States actually has the lowest "effective" corporate tax burden of any of the member nations of the Organization for Economic Cooperation and Development.

Revenue Statistics from the O.E.C.D. Member Countries, 2010

If taxes are already historically low, and in comparison with our global competitors, how are Republicans able to maintain that taxes are excessively high? They do so by ignoring the "effective" tax rate and concentrating solely on the "statutory" tax rate, which is often manipulated to make it appear that rates are much higher than they really are.

Stephen Moore (of the Wall Street Journal and a regular guest on Fox News and CNN's Ali Velshi) asserted that Democrats were trying to raise the top income tax rate to 62 percent from 35 percent. But in a Columbia Journalism Review, a commentary called Moore's analysis “deeply disingenuous.” (I have personally caught Stephen Moore in lies and even posted about it.)

But what they and everybody else keeps ignoring is the fact of "cheap labor". Foreign companies paying a lower tax rate AND for cheaper labor have the best of both worlds if they can export their products to the U.S. to maximize their profits. American companies want it both ways.

It's always been a perpetuated lie that regulation and high taxes prevents domestic job creation. It's always been about cheap labor. Apple pays $1 an hour for factory workers and $8 an hour for engineers. Americans can't live on those wages in the U.S. And American companies have been busy for the last 30 years driving down domestic wages. (Read: "Low Wages Kill Jobs, Not High Taxes")

If American corporations kept jobs in America, maybe they could justifiably negotiate for lower corporate tax rates if they weren't paying their CEOs and board-of-directors an average of $11 million every year (the highest in the world), while only paying a 15% tax rate on capital gains* (the lowest in the world) that they earn with their stock-options. (Read: "Are CEOs Ashamed of their Excessive Pay?")

* According to the Center on Budget and Policy Priorities, under a recent, but hypothetical model, regarding the Simpson-Bowles Commission and the Rivlin-Domenici plan that the commission presented in its report, many of the tax code's perks for wealthy individuals would be eliminated. The proposal would end the lower-tax treatment for income from stock dividends and capital gains, which are taxed at a rate of 15 percent instead of rates that can reach 35 percent for ordinary income. More here: "Corporate CEOs Embrace Tax Hike Plans Rejected By Paul Ryan"

Even small business owners are demanding a repeal of the Bush Tax Cuts for the rich. "It’s a common complaint from small business owners. While congressional Republicans and entrenched corporate lobbying groups like the U.S. Chamber of Commerce and the National Federation of Independent Business have been pushing hard to preserve the Bush tax cuts for the wealthy by touting the interests of small firms, much of the small business community is demanding that those very tax cuts be repealed. The tax breaks for the wealthy will add $700 billion to the debt over the next 10 years, according to the White House's Office of Management and Budget. And many small firms say that money would be better spent on direct aid to the middle class.

On Fox News Eric Bolling had said that 96% of the U.S. Chamber of Commerce's members are small businesses. But what he also deliberately failed to mention was that only 11% of all small American businesses actually belongs to the U.S. Chamber of Commerce. More here...

The actual number of business owners who would be affected by Obama's "millionaire tax" turns out to be well under a million, and the number of actual "employers" (those that hire people) would be even less.

But in the mean time, what have these multi-national conglomerates done for American citizens lately, besides just continually raise prices on their goods and services here at home -- year after year -- and sucking up every dollar they can out of American consumers?

They've already shrunk the middle-class by driving wages down. Now we have 50% of all U.S. workers who earn less than $26,364 a year - - and the government says the poverty level for a family of four is $22,350. It was American multi-national corporations (by way of their Republican lapdogs) that created "Obama's Welfare State". Millions of hard-working Americans didn't just wake up one day and decided to go on welfare to live in poverty.

And with so many mergers and acquisitions (monopolies), American consumers are left with fewer and fewer choices to promote competition. Just look at the telecommunications and the cable industry as two of many examples.

These big corporate businesses want to pay next to nothing for taxes and wages, but they also want an arm and a leg for their products and services; and then they reward themselves with massive salaries for their efforts in gouging their customers. Is this the "shared sacrifice" that the American people have heard so much about?

Last year in May 2011 the New York Times reported "By taking advantage of myriad breaks and loopholes that other countries generally do not offer, United States corporations pay only slightly more on average than their counterparts in other industrial countries. And some American corporations use aggressive strategies to pay less — often far less — than their competitors abroad and at home. A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied.

By most estimates "creative accounting" costs the federal government at least $50 billion a year in lost revenue.

The paradox of the United States tax code — high rates with a bounty of subsidies, shelters and special breaks — has made American multinationals “world leaders in tax avoidance,” according to Edward D. Kleinbard, a professor at the University of Southern California who was head of the Congressional joint committee on taxes. This has profound implications for businesses, the economy and the federal budget.

According to another study, at the high end (what's left of manufacturers) paid 26 percent, financial services companies paid an average of 20 percent, real estate paid 19 percent and mining paid 6 percent. (Currently there is a petition underway in Nevada to raise taxes on silver and gold miners. Gaming taxes in Las Vegas are also one of the lowest in the world.)

The average federal income tax rate on the 400 richest people in America (see the Forbes 400 List) was only 18.11 percent in 2008, according to the Internal Revenue Service, down from 26.38 percent when this data was first calculated in 1992. Among the top 400, 7.5 percent had an average tax rate of less than 10 percent, 25 percent paid between 10 and 15 percent, and 28 percent paid between 15 and 20 percent.

The truth of the matter is that federal taxes in the United States are very low. There is no reason to believe that reducing them further will do anything to raise growth or reduce unemployment.

Obama's tax plan is to cut the highest official tax rate for all corporations to 28 percent from 35 percent (25 percent for manufacturing companies) — without reducing federal revenue. A wide range of economists, and policy makers in both parties, say such a change would distribute the burden of taxation more fairly and reduce the warping influence of the tax code on investment decisions. (Wall Street Journal Debunked on Obama Tax Plan)

The government estimates that corporations spend $40 billion each year figuring out how much they owe in taxes, and considerably more figuring out how to reduce that number, such as hiring an army of tax attorneys, hiring lobbyists, and contributing to political campaigns to influence our elections (see the top all-time donors).

The biggest U.S.-based multi-national corporations will stop at nothing. They are insatiable, they will continue to:

1. Have lobbyists push congress for lower taxes (even lower than 1% if they could)
2. Continue to outsource jobs for cheaper labor (even if it means 99% unemployment in the U.S.)
3. and/or pay ever lower domestic wages (even lower than $1 an hour if it was possible)
4. Lobby for reduced regulations for greater profits (so they have NO restrictions)
5. Keep pushing for more "tort reform" (so if they break laws, can't be punished or sued)
6. Raise costs to their consumers, but giving ever inferior service (even if dog food is all one can afford)
7. Monopolize markets to reduce competition (eventually being one big super-corp and ruling the world)
8. Pay themselves excessively well, year after year (until the top 1% has 99% of all the wealth)

And they will continue to do these things, no matter at what the cost to the human condition, society as a whole, the environment, or at the expense of the country. These companies are now more powerful than countries, and U.S. corporations are moving beyond the national interest.

And so are the jobs. "The top companies seem to exist in a world apart — they are booming, and their executives are prospering. If there is a meta-theme to this year’s World Economic Forum in Davos, it is that the world’s largest companies are moving on and moving ahead of governments and countries that they perceive to be inept and anemic. They are flying above them, operating in a space that is increasingly disconnected from local concerns, and the problems of their home markets. And if the conversations here are any indication, they may soon take over much of what government itself does."

Multi-national corporations are never about "country first" and never will be unless it benefits their bottom line. They don’t perceive the global marketplace and labor force in terms of borders or along political party lines. Their business models and strategies are based on a global economy and has been for many years. Multi-national corporations have adapted to a new paradigm, in fact they created the paradigm.

Read my post: "Paul Ryan's 'New and Improved' Path to Austerity" (There's also a video I made that was dedicated to Paul Ryan and his Republican friends in congress. Read what Robert Reich says about Paul Ryan's plan.)

These huge corporations are sitting on over $3.6 trillion, and they want more tax breaks!!! Does that make any sense? So if their CEOs won't do anything for God and country (our country), or for our citizens, we might as well tax them and their soul-less businesses...it's either that or they and their businesses can just move their greedy asses to the communist People's Republic of China. Who needs them? We get all our TVs and cell phones from China anyway.

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• Historical Tax Rates on the Rich (1862 to 2011)
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