IPS Blog

Republicans seem to have something against tax increases. I get that. But it's still not crazy to think we can win some important revenue battles during Obama 2.0. And given this country's pressing needs – from repairing our infrastructure to rehiring teachers – it would be crazy not to try.

A big question, of course, is how to peel off the 17 House Republicans needed to win anything (assuming all Dems and President Obama are in favor). Openings will come, though, when Republicans need votes from across the aisle on something or other. The even more important challenge is to push progressive reforms into the center of the debate so they get plucked when the stars are aligned.

Here are four that are not only solidly progressive but also have bipartisan potential:

1. Close the carried interest loophole

OK, people, if we can't fix this one during the second Obama administration, I'm giving up on Washington once and for all and becoming a goatherder. How can we continue to allow gazillionaires to pay only a 15 percent tax rate on the profit share ("carried interest") they get paid to manage hedge and private equity funds?

Ray Dalio of Bridgewater Associates, for example, was the highest-earning hedge fund manager in 2011, raking in $3 billion. Forbes calculates that if Dalio had paid ordinary income tax rates, he would have contributed an extra $450 million to the Treasury.

The loophole is so off-the-charts absurd even some hedge fund managers are ready to give it up. Bill Ackman, of Pershing Square Capital, has said he expects the loophole to disappear and thinks his peers won't even mind that much.

Formerly problematic Dems have also changed their tune. Back in 2007, a fix passed the House but never made it through the Democratic-controlled Senate because of obstructionism from Senator Chuck Schumer (D-NY). Thankfully the Senator from Wall Street land has had a rethink.

2. Cap the deductibility of executive pay

The more corporations pay their CEO, the less they owe in taxes. A 1993 law aimed to fix this perverse incentive by capping executive pay deductions at $1 million. The problem is it left a huge loophole for "performance-based" pay. Oracle CEO Larry Ellison, for example hauled in $76 million in stock options and other so-called "performance-based" pay in 2011 – all of it fully deductible. And contrary to Clinton era thinking, stock options do not improve performance. This became abundantly clear after the dot-com crash and the 2008 crisis, when boards helped CEOs recoup their losses by handing out boatloads of new options.

As for bipartisan, "purple" potential, Senator John McCain (R-AZ) co-sponsored a bill in 2009 that would've tightened up the loophole and former Senate Finance Chairman Charles Grassley (R-IA) has made supportive comments. There are also two recent precedents. Both the bank bailout and the health care reform legislation included $500,000 caps on pay deductibility with no performance pay exemptions for financial and health insurance executives. Guess what? The world didn't end.

3. Adopt a financial transaction tax

This is the idea of putting a very small tax on each trade of stocks, bonds, and derivatives. Tax the Wall Street casino? Fat chance, you might say. But there's actually huge momentum on this, both at the grassroots and the policy level.

About a dozen European governments have committed to coordinate such a tax. The details still need to be hammered out, but the proposal on the table is for a tax of 0.1 percent on stock and bond trades and 0.01 percent on derivatives.

Sure, you might say, but have Europeans ever met a tax they didn't like? How are you going to sell this in the land of the "free"?

One major selling point is that by taxing each trade, this tax would discourage the controversial high-speed trading that now dominates markets. The chief economist at the Commodity Futures Trading Commission, the nation's top derivatives regulator, recently found that this automated speed trading is sucking significant profits from traditional investors. And a growing number of these traditional investors are coming out in support of financial transaction taxes.

Even for tea partiers, if forced to pick from a menu of options for raising massive revenue, what do you think they'd go for? One of the numerous proposals (e.g., value added taxes) that would hit the middle class? Or one targeted at the bigtime gamblers on Wall Street who benefited the most from the bailout so hated by the tea party?

4. Close offshore tax havens loopholes

The rampant use of tax havens to stiff Uncle Sam has sparked outrage across the political spectrum. In a nationwide poll, nine out of ten small business owners said it was a problem when big businesses used offshore loopholes to avoid paying their taxes. In the same poll, in which Republicans outnumbered Democrats 2-to-1, two-thirds of small business owners said big business did not pay their fair share of taxes. Even Rush Limbaugh has acknowledged that something is wrong when General Electric pays no taxes despite earning tens of billions in profits.

Closing tax haven loopholes could raise at least $100 billion a year. To move in this direction, Congress could increase reporting requirements. Under the Dodd-Frank financial reform legislation, energy corporations will now have to report on their profits, taxes and other government payments, by nation. This should be extended to cover all corporations. The intent of the Dodd-Frank disclosure is to combat corruption, but it could also help combat tax avoidance. A recent survey of chief financial officers of multinational corporations found 75 percent worry about the reputational impact of their company's tax disclosures.

Let's not be intimidated by Grover Norquist and his irrational tax-hating minions. Obama's legacy — and our nation's economic future — will be determined by our ability to build a solid and progressive revenue base. 

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies in Washington, DC and is a co-author of the Institute's yearly Executive Excess reports on CEO pay. www.ips-dc.org Distributed via OtherWords (OtherWords.org)

In poll after poll, the American people say they are far more concerned about the jobs crisis than the “debt crisis.” A powerful coalition of CEOs says they have an answer for both problems.

Give us more tax breaks, they say, and we’ll use the money to invest and create jobs. The national economic pie will expand and Uncle Sam will get plenty of the frothy meringue without having to raise tax rates.

That’s the line of the Fix the Debt campaign. Led by more than 90 CEOs, this turbo-charged PR/lobbying machine is blasting the message that such “pro-growth tax reform” should be a pillar of any deficit deal (along with cuts to benefit programs like Social Security and Medicare).

And it might be a good line — if not for some pesky real-world facts. You see the same corporations peddling this line have already been paying next to nothing in taxes. And instead of creating jobs, they’ve been destroying them. Here are five examples of job-cutting, tax-dodging CEOs who are leading Fix the Debt.

1. Randall Stephenson, AT&T
U.S. jobs destroyed since 2007: 54,000
Average effective federal corporate income tax rate, 2009-2011: 6.3%

Randall Stephenson presides over the biggest job destroyer among the Fix the Debt corporate supporters, having eliminated 54,000 jobs since 2007. The company also has one of the largest deficits in its worker pension fund — a gaping hole of $10 billion.

Can Stephenson blame all this belt-tightening on the Tax Man? Not exactly. Over the last three years, AT&T’s tax bills have been miniscule. According to the firm’s own financial reports, they’ve paid Uncle Sam only 6.3 percent on more than $43 billion in profits. If the telecom giant had paid the standard 35 percent corporate tax rate over the last three years, the federal deficit would be $12.5 billion lower.

So where have AT&T’s profits gone? A huge chunk has landed in Stephenson’s own pension fund. His $47 million AT&T retirement account is the third-largest among Fix the Debt CEOs. If converted to an annuity when he hits age 65, it would net him a retirement check of more than a quarter million dollars every month for the rest of his life.

While his economic future is more than secure, Stephenson emerged from a meeting with President Obama on November 28 “optimistic” about the chances of reforming (i.e., cutting) Social Security as part of a deal to avoid the so-called “fiscal cliff.”

2. Lowell McAdam, Verizon
U.S. jobs destroyed since 2007: 30,000
Average effective federal corporate income tax rate, 2009-2011: -3.3%

Another telecommunications giant, Verizon, is close behind AT&T in the layoff leader race, with 30,000 job cuts since 2007. Like its industry peer AT&T, Verizon also has a big deficit in its pension accounts. It would need to cough up $6 billion to meet its promised pension benefits to employees and another $24 billion to meet promised post-retirement health care benefits.

Did the blood-sucking IRS leave Verizon no choice but to slash jobs and underfund worker pensions? Far from it. The company actually got money back from Uncle Sam, despite reporting $34 billion in U.S. profits over the last three years. If Verizon had paid the full corporate tax rate of 35 percent, last year’s national deficit would have been $13.1 billion less. Had that amount been used for public education, it could have covered the cost of employing more than 190,000 elementary teachers for a year.

Verizon’s new CEO, Lowell McAdam, already has $8.7 million in Verizon pension assets, enough to set him up for a $47,834 monthly retirement check. McAdam’s predecessor, Ivan Seidenberg, who has also signed up as a Fix the Debt supporter, retired with more than $70 million in his Verizon retirement package.

Wanna see who is rounding up the worst five? Read the rest at Alternet.

This Occupy Wall Street business is getting out of hand. You just know that’s what America's deepest pockets must now be thinking. Indeed, the editor at a Web site where corporate lawyers hang out recently warned his fellow attorneys to ready their CEOs for confrontations that could pop up just about anywhere.

“Are you planning for protests at your annual meeting?” the stern warning asked. “Your CEO's house? Your CEO's golf game?”

Golf game? Yes, the warning went on to note, “Occupy Wall Street-type” protestors had disguised themselves as duffers and invaded a golf resort in California’s Newport Beach. Is nothing sacred anymore?

In our top 1 percent's upper reaches, the mega rich are taking warnings like these to heart. Some bankers, news reports note, have even started “going to work in jeans” to make themselves unidentifiable. But the rich and their handlers are doing a good deal more than rethink security. They’re recalibrating their ideological defenses.

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President Obama last week proposed a tax increase on America’s wealthy to finance the $447 billion jobs plan he advanced the week before. Representative Eric Cantor, the GOP House majority leader, responded almost immediately.

“I sure hope that the president is not suggesting,” Representative Cantor pronounced, “that we pay for his proposals with a massive tax increase at the end of 2012 on job creators.”

Interesting. Does this mean that Cantor now welcomes tax hikes for job “destroyers”? Like Richard Clark, the chair of drugmaker Merck. Clark took home $17.9 million last year. His company earlier this year announced plans to shed 13,000 workers. Or how about Bank of America CEO Brian Moynihan? He pulled in $10 million last year. B of A has just announced 30,000 new job cuts.

We suspect that majority leader Cantor misspoke. He really doesn’t support tax increases on rich people period, whatever their job record may be. Cantor’s perspective has, of course, dominated Congress for the last three decades.

Read more at Too Much Online.

Verizon
Phone customers paid more to Uncle Sam than the telecom giant

CEO compensation: $18.1 million
U.S. federal income taxes: $705 million refund

Verizon received a massive tax refund last year – despite earning $11.9 billion in pre-tax U.S. profits – the highest among the 25 firms highlighted in this report.

Quite a feat for then Verizon CEO Ivan Seidenberg. In effect, every Verizon phone customer paid more in federal telephone excise taxes than Verizon paid in federal income taxes.

Verizon also has a heavy political presence in Washington. Last year alone, the telecom giant spent $16.7 million on lobbying — and deducted these outlays off its taxes.

Despite its hefty profits, Verizon last year announced 13,000 job cuts, the year’s third-highest corporate layoff total.

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