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The Great Corporate Tax Shift-Part 1

By Jack Rasmus | November 19, 2013

The great corporate myth-making machine has been hard at work of late, attempting to create the false impression that US corporations are increasingly uncompetitive with their foreign rivals due to the fact they pay much higher corporate taxes in the US and abroad than their capitalist counterparts. But that is one of the great myths perpetrated by corporate apologists, pundits and their politician friends. The myth is high in the pantheon of conscious falsifications their marketing machines feed the American public, right up there along with such other false notions that ‘business tax cuts create jobs’, ‘free trade benefits everyone’, ‘income inequality is due to a worker’s own low productivity contribution’, ‘overpaid public workers are the cause of states’ budget deficits’, or that ‘social security and medicare are going broke’.

If corporate America can create and sell the idea that they pay more taxes than their offshore capitalist cousins, then they are half way home to getting their paid politicians to provide them still more corporate tax cuts—a proposal by the way that both Republicans and Obama are on record for, in their joint proposal to reduce the top corporate tax rate from 35% to 28% (Obama) or 25% (Republicans).

The message of too high corporate taxes is appearing more frequently nowadays, since actual legislation for big corporate tax cuts is now working its way through Congress. Driving the legislation are Teaparty favorites in the House of Representatives, like David Camp, head of the Ways & Means Committee, and Max Baucus, Democrat in the Senate, who is set to retire in 2014 and wants to give his business buddies yet another big cash freebie (you know Max, the guy who rode herd on that Health Insurance Corporation subsidy bill called Obamacare?).

So it’s time to debunk the ‘US Corporations Pay Too Much Taxes’ (and thus need another tax cut) myth. What follows is the first segment of a longer essay—with tables and graphs—on the same topic that will appear shortly in the December issue of ‘Z’ magazine. More segments of that essay will follow.

US corporations don’t pay the nominal corporate tax rate of 35% today; they pay an effective (i.e. actual) rate of only 12%. The additional effective state-wide corporate income tax they pay amounts to only a 2% or so—not the 10% they claim. And the effective corporate tax on offshore earnings is only another 2.2% or so—not the 20% average they’ll complain. So the total US tax for US corporations is barely 16%–not the 35% plus 10% (state) plus 20% (offshore) nominal tax rate. And however you cut it, the story is the same: US corporations’ share of total federal tax revenues have been in freefall for decades. The share of corporate taxes as a percent of GDP and national income has halved over the decades. And corporations since 2008 have realized record level profits during the ‘Obama Recovery’—while their taxes as a percent of profits since 2008 is half that of the average paid as recently as 1987-2007. Okay, more detail on all that in parts 2 and 3 to follow.
For the moment, what all the corporate tax cutting to date has produced is a mountain of corporate cash.

US Corporations today in fact are sitting on more than $10 TRILLION in cash!

For example, even the US business press admits today that US multinational corporations have diverted more than $2 trillion to their offshore subsidiaries, to avoid paying the U.S. Corporate Income Tax. (watch for parts 2 and 3 of to follow for how they do this).

In addition to the $2 trillion now diverted by US multinational corporations offshore, after having paid federal taxes another $1 trillion is now held as cash on hand by the 1,000 largest nonfinancial companies based in the U.S. as of mid-2013, an increase of 61% in the past five years, according to a study by the REL Consulting Group.

For financial companies, deposits in US banks are currently at a record $10.6 trillion, while bank loans outstanding have been declining since 2008 and are now at a record low of $7.58 trillion—thus leaving US banks sitting on a cash hoard of nearly $3 trillion according to the Wall St. Journal. That’s a total approaching $7 trillion so far.

This record after-tax cash exists despite corporations having bought back their stock and paid dividends worth trillions more since 2008. Corporate buybacks of stock since 2009 passed the $1 trillion mark in 2012, according to a survey by Rosenblatt Securities—with projections to increase at an even faster rate of $400-$500 billion more in 2013. Corporate dividend payouts equaled another $282 billion in 2012 alone, perhaps at least that amount in years prior, and are today projected to exceed $300 billion in 2013. That’s another $2.5 trillion.

Include hundreds of thousands of US corporations and businesses that are not part of the largest 1000 or who don’t operate offshore—plus cash socked away in depreciation funds and other special funds for all the above—and that comes to at least another $500 billion.

That $10 trillion corporate total, moreover, doesn’t include still further additional dollars that have been spent by US corporations abroad. While business investment in the US has been declining, total US corporate foreign direct investment is estimated at $4.4 trillion in 2012, up from $3 trillion in 2007 and from $1.3 trillion in 2000. So that’s another roughly $1.4 trillion in corporate income committed offshore since the official ‘end’ of the recession in June 2009.

Add all that up and its well more than $10 trillion in buybacks, payouts, and hoarded cash (onshore and offshore) by US corporations since 2009—i.e. during the sub-par economic recovery (for the rest of us) of the past four years. That’s corporate income and cash that has been diverted, hoarded, or otherwise not committed to US real investment, and therefore never contributing to jobs, income creation and consumption in the US. No wonder consumption (70% of the US economy) for the bottom 80% households in the US has been stagnating, stalling, or declining in the US in recent years. No wonder all the US economy can do is create low wage, contingent, service jobs, while more than 20 million are still unemployed and uncounted millions more have left the US labor force altogether. No consumption recovery follows declining US investment, while tens of trillions of dollars go elsewhere or sit on the sidelines.

To summarize, at least as much as $10 trillion—and perhaps approaching $12 trillion—has been taken out, redirected, diverted, or otherwise hoarded by US corporations since the 2008 crash. Keep all that in mind when you next hear politicians from the two wings of the one party system in America—Republicans and Democrats—and their friends in mainstream media trying to justify proposals for still more corporate tax cuts.

Jack is the author of the 2012 book, ‘Obama’s Economy: Recovery for the Few’ (Pluto press), and host of the weekly radio show, Alternative Visions, on the Progressive Radio Network. His website is http://www.kyklosproductions and blog, jackrasmus.com. His twitter handle, @drjackrasmus.

November 20, 2013 Posted by | Deception, Economics, Timeless or most popular | , , , , | Leave a comment

The People Can Defeat the Trans-Pacific Partnership

Time to end the failed experiment with rigged corporate trade and put in place fair trade for the people and planet before profits

By Kevin Zeese and Margaret Flowers | The People’s Voice | November 14, 2013

Momentum is growing in the campaign to stop the Trans-Pacific Partnership (TPP).  Yesterday, the TPP was dealt two blows. Each could be lethal but the TPP, and its Atlantic counterpart, called TAFTA, are not dead yet. It is time for the movement of movements that formed to oppose the TPP to stand in solidarity, defeat these agreements and end the era of rigged corporate trade.

Yesterday’s first blow came from Wikileaks, showing once again that when government works in secret with big corporations, exposure by whistle blowers is critical to changing the corrupt direction of government and the economy.  Wikileaks published the full text of the intellectual property chapter; the leaked document included the positions of all the parties.  It will take time for all the corporate rigging in this lengthy document to be understood, but already it is evident that Internet freedom will be curtailed, access to health care will become more expensive and access to information will be undermined.

This is not the first leak of TPP text. Previous leaks are consistent with the Wikileaks leak – enhanced corporate power that puts profits before the needs of the people and the protection of the planet.  The Wikileaks release shows that the United States is by far the most aggressive advocate for trans-national corporate interests, often isolated in pushing for harmful policies.

The second blow came from members of the U.S. House of Representatives.  In recent days, several letters were sent to President Obama opposing Fast Track Trade Promotion Authority.  Fast Track undermines Congress’ responsibility under the Commerce Clause to regulate trade between nations by allowing the president to sign the agreement before Congress even sees it. The letters made public on November 13th demonstrate broad bi-partisan opposition to Fast Track with 179 Members signing at least one of the three letters.

A letter spearheaded by Rep. Rosa DeLauro (D-CT) and Rep. George Miller (D-CA) garnered the support of three-quarters of House Democrats with 151 Members telling President Obama they oppose Fast Track, writing:

We will oppose ‘Fast Track’ Trade Promotion Authority or any other mechanism delegating Congress’ constitutional authority over trade policy that continues to exclude us from having a meaningful role in the formative stages of trade agreements and throughout negotiating and approval processes.

Important leaders of the Democratic Party signed the letter including 18 out of 21 Ranking Members who would chair committees if the Democrats were in the majority.  This means that to pursue Fast Track authority, President Obama will need to challenge three-quarters of his own party.

But, that is not all. In another letter, organized by Mike Thompson (D-CA) and Earl Blumenauer (D-OR) and signed by 12 of the 16 Democratic Party members of the Ways and Means Committee, which is primarily responsible for Fast Track legislation, members expressed opposition to Fast Track unless it was radically different from previous grants of authority. The letter says it “cannot just be an extension of earlier trade promotion authorities. Any new proposed TPA must . . . ensure Congress plays a more meaningful role in the negotiating process.”

And, the opposition is bi-partisan. Rep. Walter Jones (R-NC) and Rep. Michelle Bachmann (R-MN) drafted a letter signed by 23 Republicans.  The Republican letter emphasized that Congress has the “exclusive authority to set the terms of trade.” Further, “The Founders established this clear check and balance to prevent the president from unilaterally negotiating with foreign nations and imposing trade policies that Congress would deem to be against the national interest.” They write that they refuse to “cede our constitutional authority to the executive” through Fast Track.

These are just the latest problems in the quest for Fast Track, indeed a bill has yet to be introduced.  The previous US Trade Representative, Ron Kirk,  said in 2012: “We’ve got to have it.” He wanted the authority by the end of 2012.  In April, Sen. Max Baucus (D-MT) promised Obama Fast Track by June of 2013.  The broad bi-partisan opposition announced this week shows that winning Fast Track has very little support in Congress.  In fact, the letters may be the death knell for such legislation.

The Wikileaks documents show there is a lot of division among the negotiating nations with important disagreements on key aspects of the text. Without Fast Track to guarantee passage of the TPP, these nations will be even less likely to agree to demands by the U.S.  Further, Asian countries are negotiating their own competing agreement, which does not include the United States but, unlike the TPP, does include China.

Latin American countries are also speaking out against the TPP. Earlier this year, Rodrigo Contreras, Chile’s lead TPP negotiator quit to warn people of the dangers of the TPP – highlighting how big financial institutions will dominate their governments and how the TPP “will become a threat for our countries: It will restrict our development options in health and education, in biological and cultural diversity, and in the design of public policies and the transformation of our economies. It will also generate pressures from increasingly active social movements, who are not willing to grant a pass to governments that accept an outcome of the TPP negotiations that limits possibilities to increase the prosperity and well-being of our countries.” And, recently the Parliament of Peru passed a resolution “requesting that the government open a ‘public, political, and technical debate’ on the binding rules being negotiated in the TPP.”

In the United States, cities and counties are beginning to pass TPP Free Zones, saying they will not obey the TPP if it becomes law.  These local governments are concerned with provisions that would not allow them to give preference to buying local, buying U.S. made goods or other provisions that undermine their sovereignty.

In addition to opposition in the U.S. government and foreign governments, a mass citizen uprising is developing against the TPP.  There have been large protests in many of the countries involved in the negotiations as well as in the United States. The night before the Wikileaks documents were released, 13 cities did visibility protests opposing the TPP in light shows.  In September we joined with activists in Washington, DC in a series of protests, including covering the office building of the US Trade Representative in banners to expose their secret trade agreement. Protests are scheduled for Salt Lake City, UT on November 19th where lead negotiators from 12 countries will hold meetings. A global day of protest is planned for December 3 against not only the TPP but also the WTO and all toxic trade agreements.

The TPP is running into resistance in Congress, local governments and among Pacific nations in Asia and Latin America; and by people who oppose the agreement all over the world. This is part of a growing movement of movements – all of the movements impacted by corporate trade; e.g. labor, environmental, Internet freedom, health care, food sovereignty, immigrants’ rights, banking regulation – are joining together to defeat it.

The people are winning. Fourteen trade agreements have been stopped in the last 14 years and as Tom Donohue of the US Chamber of Commerce wrote this week “the WTO has not concluded a single new multilateral trade agreement since it was created in 1995.” Mass protest against rigged corporate trade agreements can end the experiment in trade that puts profits ahead of the people and planet.

We are on the verge of defeating Fast Track. It is important that we keep the pressure on Congress. Neither the TPP nor TAFTA will become law if people learn what is in them and Congress fulfills its constitutional responsibility to review their impact. Denying the President Fast Track is the essential step to defeat both of these agreements.

Once we defeat Fast Track and prevent TPP and TAFTA from becoming law, we need to remain in solidarity and work to transform trade so it becomes “fair” trade that puts the necessities of the people and the protection of the planet first. The people will have firmly established that they will not tolerate rigged corporate trade deals. If corporations want to see trade between nations, they need a new approach – transparent, participatory and fair – with new goals of serving the people and planet.

To get involved in the campaign to stop the Trans-Pacific Partnership visit Flush the TPP.

Kevin Zeese, JD and Margaret Flowers, MD co-host Clearing the FOG on We Act Radio 1480 AM Washington, DC, co-direct Its Our Economy and are organizers of the Occupation of Washington, DC.Their twitters are @KBZeese and MFlowers8.

November 14, 2013 Posted by | Corruption, Deception, Economics | , , , , , | Leave a comment

Health Insurance is Not Healthcare

By JP Sottile | January 18, 2013

Insurance companies make a simple wager with you each time you sign a policy. They are betting that, over the life of the policy, they will pay out less to you and your beneficiaries than you will pay them.

Insurance companies of all kinds make tidy profits on this simple wager. If they don’t, sometimes the government will bail them out.

Either way, insurance is still just a bet. And in America, we do not have a healthcare system. We have a health insurance industry.

That industry has been one of the most profitable sectors of the economy for well over a decade. But costs skyrocketed and care suffered. We heard horror stories about rationed care, denied procedures and corporate bureaucracies run amok. Ironically, these were the horror stories we were supposed to hear if the government took the reigns of the “best healthcare system in the world.”

So, instead of a single-payer healthcare system, we got The Affordable Care Act—aka Obamacare. Instead of retiring the health insurance industry and its actuarial tables and profit margins and wagers, Obama “saved” the health insurance industry and enshrined it in perpetuity as the “Health Insurance-Industrial Complex.”

As the Affordable Care Act’s provisions begin to take effect, the folks in the Complex are wasting no time doing what they can to keep their profits tidy. Leading insurers in California are seeking increases in premiums ranging from 20% to 26%. Regulators in Florida and Ohio have already approved increasing premiums as much as 20%, and, since the ACA doesn’t set federal standards, insurance companies are moving in a number of states to force these spikes in premiums.

Remember, if you can “afford” health insurance, you have to buy it. If you refuse, you’ll pay a penalty to the government at tax time. Some are exempt from this mandate. But, in effect, the ACA has guaranteed the health insurance industry a captive market.

Meanwhile, they continue to change the terms of all those bets they’ve placed against millions of Americans and the cost of the “best healthcare in the world” continues to rise. When compared to other nations with some form of single-payer system, the difference is so stark that it’s almost obscene. It’s not just the $800 difference between an MRI in France versus the U.S., it’s almost every part of a system that has at its heart the relentless desire to turn a profit.

Even worse, a much-ballyhooed part of the promised “21st Century transformation” into greater “affordability” has turned out be little more than a profiteering scheme.

Remember the “streamlining” and “cost savings” guaranteed from the conversion to electronic medical records? Well, it hasn’t quite panned out. In fact, the only real beneficiaries of the conversion are companies like General Electric that sell electronic medical records systems. Not coincidentally, GE and other interested parties funded the key RAND study in 2005 that both predicted $81 billion in savings for America’s health care system and also became the driving rationale for the profitable conversion.

This type of closed system is par for the course in Washington, D.C.

Every door revolves in the nation’s only recession-proof city. Is it any surprise that the woman who wrote the Affordable Care Act is now leaving the White House for a job with health care giant Johnson & Johnson? Liz Fowler worked for Senator Max Baucus (D-MT) during the drafting of the ACA and had the primary responsibility for authoring the legislation. After its passage, she migrated to the White House to help with implementation. Seems reasonable enough. However, it is important to note where she was before joining the staff of Senator Baucus. Yup, you guessed it…she was a bigwig at WellPoint, the nation’s second leading health insurance company with nearly 54 million policyholders.

All of this makes you wonder who knew whom in the breast milk-pump industry, which is seeing a huge spike in its profits thanks to a new coverage requirement written into the ACA.

It may be too early to render judgment on a law that hasn’t yet been fully implemented, but it is not too early to determine that the profit motive might simply be incompatible with the equitable delivery of healthcare. As matter of course, businesses try to lower costs and increase revenue. That may be okay when they sell scissors or candlesticks, but it seems ill-suited to deliver labor-intensive care for those who are most vulnerable.

And as far as the health of the insurance industry, it’s a safe bet that they’ll keep coming out on top as the Affordable Care Act is fully implemented.

JP Sottile is a freelance journalist, published historian, radio co-host and documentary filmmaker (The Warning, 2008). His credits include a stint on the Newshour news desk, C-SPAN, and as newsmagazine producer for ABC affiliate WJLA in Washington. His weekly show, Inside the Headlines w/ The Newsvandal, co-hosted by James Moore, airs every Friday on KRUU-FM in Fairfield, Iowa. He blogs under the pseudonym “the Newsvandal.”

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January 19, 2013 Posted by | Corruption, Economics, Progressive Hypocrite | , , , , , , , | 5 Comments