This will be a brief teaser for labor day… Why, is the middle class (labor) suffering so much today…..
US Corporations get around the US’s high tax rate of 35% by stashing money offshore. The average corporation pays 12.6% according to the GAO in 2010…. This means that half of America’s corporations pay higher, and half of America’s corporations pay lower… HALF OF AMERICA’S CORPORATIONS PAY LOWER THAN 12.6%? REALLY?
During America’s boom times, when the middle class was almost guaranteed a job for life with a pension plan and a gold watch, corporate taxes were set as high as 52.8 percent. Later rates were lowered to 48 percent and then 46 percent. It was only after 1986 when they were lowered to 35% that the middle class problem begin to emerge….
Across history there is a direct relationship between higher taxes and higher wages… When tax rates are high, wage rates are high. When tax rates are low, wage rates are low. (As an additional benefit, the higher the taxes, the higher the employment level goes as well.) In fact there is such public good in charging the wealthy higher taxes with no downside, that is is literally amazing we aren’t doing it. Everyone benefits out the gazoo!)
The way America’s corporations get around this 35% rate, is by stashing cash abroad. There is $2 trillion of America’s money kept overseas, and not brought home to keep it from being taxed… You pay taxes. I pay taxes, yet corporations think they shouldn’t… How fair is that?
Keep in mind. This is by their own volition. They are not forced to keep that money offshore. They could bring it back anytime they wished. They choose not to do so… And that money is what funds campaigns for cutting taxes. That money is what buys both Democrat and Republican allegiance to no-tax pledges. I would bet that some of that foreign money is in Tom Carper’s, Chris Coons’, and John Carney’s campaign slush funds right now..
$2 trillion at 35% is $700 billion that should have already been in our treasury… That is money we borrowed unnecessarily to cover our expenses which if a proper administration had been in the executive branch would have already been there, from corporations… The balance, $1.3 trillion would have then been available here and could have been invested in our nation in the form of jobs…
There was some discussion, primarily from Michelle Bachmann, as to give a blanket amnesty on these taxes to get this money back, But that is like saying you won’t prosecute a bank robber if he comes back and spends his money in your home town… What bank will he rob next? And what about all those people who had their money stolen from them? Michelle and her Republican cohorts seem not to care.
So why are corporations really renouncing their “citizenship?” Simple answer, is they are doing this so they can pocket hoards of “deferred” offshore profits without ever paying the taxes they owe on these profits….
A (different) tax loophole called “deferral” allows companies to avoid being taxed on their non-U.S. profits until they “bring the money home.” Because of this loophole, corporations have been taking steps to make it look as if their profits are made outside of the U.S., and have piled up about $2 trillion in cash that they are keeping out of the country.
Dave Johnson explains. “Here is how the deferral scam works. An American company sets up a non-U.S. “subsidiary” in a tax haven. That non-U.S. company gets or produces goods, services, patents, whatever, at a low price. (This often involves shifting paper (and copyrights, patents) around to make it look like profits are not made in the U.S., but in too many cases this means the U.S. company actually moves U.S. jobs, factories, production, call centers and other assets out of the country.) The subsidiary sells to the U.S. company at a high price. Most or all of the profit is therefore made by the non-U.S. subsidiary, so the profits are considered to be non-U.S. and taxes on those profits are “deferred.” This still counts as profits for the U.S. owner of that subsidiary, but the U.S. company does not have to pay taxes (they are “deferred”) until they “bring the profit home.””
These corporations see that if they renounce their citizenship before the U.S. fixes this loophole, they can just keep the money….
But does this money REALLY stay offshore??? As you would certainly expect, of course not…. The non-U.S. subsidiary company “loans” money to the U.S. parent. So all of the non-U.S. cash actually is available to the U.S. parent. But wait, there’s more. The U.S. parent pays interest to the subsidiary, which is deducted from taxes and reduces the U.S. tax bill even more. ..
If complicated, it isn’t. I hire you as my buddy in crime. I give you all my money… I say, look, I’m broke, I can’t pay any taxes! You lend me my money back to me… I spend it tax free and the money I do make, I write off as interest I give back to you… So I keep everything I make here … No taxes…
Ways to fight this… very important on this Labor Day…
A. Hold Democrats accountable. Don’t let them (Tom Carper, Chris Coons, John Carney) get away with helping corporations rob the American workers, who do pay all their taxes and who are subsidizing these corporations money-making schemes.
B. Support proposals by President Obama to use executive action to stop “income stripping” and to keep “inverted” companies from getting government contracts
C. Support the Stop Corporate Inversions Act of 2014 in the Congress… Obviously obstructed by Republicans.
D. Support a proposal to tax companies based on their percentage of sales that occur in the U.S.,..
One must wonder, why is this even in the tax code? The reason is so U.S. companies can use “offshore” profits to invest in growth. This is a win-win because we want U.S. companies to do well, and because the U.S. is supposed to benefit when profits are brought home and taxes are paid….
A very simple way to fight abuse of deferral is to charge a fee of, say, 7 percent a year on all deferred profits. The full amount of taxes is to still be paid when profits are finally brought home, but we collect an additional 7 percent a year until they are….
So enjoy your Labor Day. We’ve got some real work to begin tomorrow…..