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Entries tagged "Taxes"

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Conservative Candidate Supports Wall Street Speculation Tax

April 5, 2012 ·

The conservative presidential candidate has decided he can't win unless he raises taxes on the financial sector. No, I'm not talking about Mitt Romney, but this isn't a belated April fool's joke either.

French President Nicolas Sarkozy. Credit: UMP photos.French President Nicolas Sarkozy has rushed through Parliament a new tax on securities trades, hoping it will give him a boost in what is expected to be a close election against Socialist Party candidate François Hollande on April 22. The French government will start collecting revenue from the 0.1 percent tax on stock trades in August.

This is the first clear win in a two-year campaign by labor unions, environmentalists, global health and other groups for taxes on financial speculation. The ultimate goal is to have broad-based taxes on trades of all financial instruments, including stocks, derivatives, and currency, in all of the world's major financial markets. Sarkozy described his new French tax, which applies only to stock trades, as a first step towards a more comprehensive levy at the European level.

Such taxes have garnered widespread popular support because they could generate massive revenue while discouraging short-term speculation that has no real social value and can undermine market stability. Hardest hit would be the computer-driven high frequency trading that makes up about 55 percent of all trading on U.S. stock markets. Such warp speed robot trading played a role in the May 2010 "flash crash" and there are growing concerns that it could cause the next "Big One." Since these guys make money through razor-thin profit margins on zillions of trades, a transaction tax of even a small fraction of a percent could throw a major wrench in their business model. For ordinary investors, the costs would be negligible.

European State of Play

Beyond France, the European debate on financial transactions taxes has moved forward in fits and starts. In a major reversal of their earlier opposition, the European Commission introduced draft legislation last fall for a tax of 0.1 percent on shares and 0.01 percent on derivatives. But momentum behind the proposal has slowed as Germany, a key supporter, has had its hands full with another not so small matter -- the euro debt crisis. As it has sought to win over other key economies to its position on that front, Germany has tried to lower the tension level with opponents of the transaction tax by floating various compromise ideas. But the most vocal opponent, Prime Minister David Cameron, whose party receives more than half of its donations from the financial sector, has shot them all down. John Major, a previous prime minister from Cameron's party, went so far as to conjure up painful World War II memories by comparing the proposed tax to a "heat-seeking missile" aimed at the City of London (the UK's Wall Street).

Nevertheless, Max Lawson of Oxfam GB says that "despite fierce opposition and lobbying by the financial sector, there is a good chance that a coalition of European countries could push ahead and implement a financial transaction tax in 2012." He points out that nine countries representing 90 percent of Eurozone GDP recently wrote to the Danish EU Presidency to ask them to fast-track the debate on the European Commission draft legislation. A minimum of nine countries is needed for an "enhanced cooperation" agreement -- EU-speak for a pact that involves less than the full 27 member countries.

This week Germany's main opposition party, the Social Democrats, increased the odds of a breakthrough by announcing they would block a new EU "fiscal pact" to contain the debt crisis unless the ruling party moved forward on a coordinated European financial transactions tax. They have the votes to back up the threat.

U.S. State of Play

The Obama administration shifted to a neutral stance on the European proposal last fall but they have not yet expressed support for taxing speculation here in the land of Wall Street. There is, however, growing support for the general concept in the halls of Congress, thanks in part to a big educational push coordinated by Americans for Financial Reform. Last week, the 76-member Congressional Progressive Caucus released a budget proposal that includes a tax on trades of stocks, derivatives, credit default swaps, foreign exchange, and other exotic financial products that could generate an estimated $378 billion over the period 2013-2017. A summary of the bill explains that "this is a tax levied directly against the types of opaque, complex trades that Wall Street manipulators used to inflate their profits and were a direct cause of the financial crisis."

On May 18, National Nurses United will spearhead a major demonstration in Chicago to call on President Obama to tax Wall Street. Scheduled to coincide with a G8 summit hosted by Obama, the event will kick off campaigning events and activity around the world as part of a global week of action for financial transactions taxes. The AFL-CIO and other labor, environmental, and health groups have endorsed the Chicago rally.

The G8 summit offers an opportunity to shine a global spotlight on President Obama during a key moment of the election campaign. Perhaps he will be inspired by the conservative European leaders who have shown more nerve in taking on the mighty financial sector.

Tax-Haven Abuse Film Hits the Fast Lane

January 26, 2012 ·

(Park City, Utah) — "We're Not Broke," a lively documentary about the ways that wealthy individuals and global corporations dodge taxes, had its world premiere on Sunday at the Sundance Film Festival.

We Are Not Broke film stillThe timing couldn't have been more extraordinary. Just two days earlier, the Associated Press reported that Republican presidential candidate Mitt Romney has up to $32 million in offshore bank accounts, mostly in the Cayman Islands. Two days after the film's debut, Romney bowed to mounting pressure and released his damning 2010 and 2011 tax returns, and President Barack Obama called for a new mandatory 30 percent tax rate on Americans earning $1 million or more each year.

Directed by Karin Hayes and Victoria Bruce, "We're Not Broke" visually and expertly explains how "offshore "banking enables the richest 1 percent and several thousand transnational corporations to avoid regulation, taxes, and accountability.  

Unlike other documentaries about corporate abuses, "We’re Not Broke" inspires viewers to see themselves as agents of change. The film stands out in is its portrayal of ordinary people learning about the offshore system and taking action. It profiles the emergence of US Uncut, and follows how its activists engage in direct action at Bank of America, Verizon, Apple, and other tax dodgers.

There are an estimated 60 tax havens — formally called "secrecy jurisdictions" — around the globe. The countries have loose incorporation rules, bank reporting standards, and financial transparency requirements. People in the U.S. are more aware of Caribbean tax havens such the Cayman Islands, Bermuda, and the Bahamas. But technology and pharmacy companies often create subsidiaries in countries like Ireland and the Netherlands to hold patents and intellectual property to reduce their U.S. tax bills.

The offshore system has spawned a gigantic tax avoidance industry, with teams of lawyers and accountants who add nothing to the efficiency of markets or products. In 2011, reports about General Electric's storied tax dodging dramatized the ways that modern multinationals view their tax accounting departments as profit centers.

At a time when federal and state lawmakers are grappling with huge budget deficits, the impact of corporate tax dodging is getting new attention. Tax havens are costing us more than an estimated $100 billion of lost revenue each year. And a coalition of over 20 U.S. companies have launched their "WIN America" campaign to lobby for a "tax holiday" on $1.2 trillion in overseas profits they want to bring back to the U.S. without paying the back taxes they owe.

"We're Not Broke" portrays the "business case" for closing down the off shore system with profiles of several small business people who are at a competitive disadvantage with global corporate tax dodgers.

The documentary will probably figure into the election debate, given how Obama used his State of the Union address to highlight the tax system's deep inequities in the. If Mitt Romney nails the GOP nomination, the abuses of the offshore system will draw plenty of attention.

Romney's spokespeople argued the candidate was pursuing normal tax reduction schemes. But the offshore system is a rigged game, benefiting a small handful in the 1 percent of wealth holders and a few thousand global corporations. "It may be legal, but these are loopholes that show problems in our tax code," said Nicole Tichon, executive director of Tax Justice Network USA, an organization that promotes tax transparency. "The bottom line is, they're taking advantage of a system that's flawed."

Stay tuned for more information about how you can see, "We're Not Broke." In the meantime, visit the documentary's web site. werenotbrokemovie.com

Chuck Collins, co-author of the Institute for Policy Studies report, America Loses: Corporations that Take Tax Holidays Slash Jobs, is a featured expert in "We're Not Broke." www.ips-dc.org

If the Super-Committee Fails, America Wins

November 18, 2011 ·

The deal passed this summer in order to get Republican support for the necessary raising of our national debt ceiling was a bad deal. The creation of the 12-member bi-partisan “Super-Committee” charged with enacting that deal’s mandate of removing $1.2 trillion from our national debt over the next ten years was a bad idea. And, any agreement which might emerge from this bad idea born of a bad deal is destined to be a bad agreement.  The cuts resulting from the trigger to be pulled in the absence of a Super-Committee agreement is the best of bad options for the American people.

We all stand to lose if the Super-Committee reaches a deal. Photo by sunlightfoundation.

Called a “sequestration,” this process would protect earned benefits such as Social Security, Medicare, Medicaid, thus protecting the vast majority of Americans who rely on them.  Further, the Pentagon budget, which has doubled in the past ten years, would see a small reduction which would bring it back to 2007 funding level. Draconian and painful cuts in the order of a devastating $600 Billion to already slashed and strained social programs would begin to be enacted, but not until 2013. All of the sequestration-required cuts could potentially be refigured and re-legislated, and at a later time when the economy may have rebounded enough to better stand the ravage.

Both the Democratic and Republican proposals to the Super-Committee contain not only drastic cuts to crucial anti-poverty entitlement programs, they also lower taxes on the super-rich, or raise too little to matter much. These cuts would begin to go into effect immediately upon passage at a time when our economy is far too weak to do anything but spiral downward in the face of such austerity measures.

It is increasingly looking as though there will, mercifully, be no Super-Committee deal. This is not failure. This is hope for the American people, for our suffering and shrinking middle class, for our unemployed suffering the ravages of poverty, for 99% of us. The failure of the Super-Committee is a victory for the American people.

Lawmakers, and the public, need to understand this. Democrats on the Super-Committee need to understand this. Super-Committee Democrat John Kerry of Massachusetts needs to see the error and danger of his alarmist proclamation that the markets will react badly to the absence of a deal from the SuperCommittee. As John Irons of The Economic Policy Institute explains:

Does the market believe that Democrats and Republicans will come together in a Kumbaya moment to pass $3 trillion in tax increases and/or cuts to spending? I wouldn’t bet on it. Goldman Sachs noted in a recent Q&A on the supercommittee that, “a ‘grand bargain’ to resolve this imbalance appears to be a low probability this year. Instead, the politically realistic outcomes range from no agreement to a deal reaching $1.2 trillion in deficit reduction over 10 years.” They also note that just “32% of economists polled in the November Blue Chip financial survey expected a super committee agreement to become law.” Thus a failure would merely confirm market expectations, and there should be little reaction in the markets.

We will see backpedaling on both sides. We will see the Republicans trying to “lockbox” defense spending. We will hear cries that the sky is falling for all kinds of reasons.  Don’t listen. Stand firm.

Undertand: No Deal is better than a Bad Deal; and a Bad Deal is all we would get from the Super-Committee.

For the Corporate 1 Percenters, a 50 Percent Tax Discount

November 7, 2011 ·

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 only 14.1 percent of their profits in taxes, less than a third of the corporate tax rate then in effect.

That startling report left a bit of an uproar in its wake. Corporate tax loopholes would go on to figure prominently in the 1986 tax reform debate. The tax legislation eventually enacted would plug a host of them.

But the 1986 tax reform legislation also slashed tax rates on high personal incomes. Corporate earnings now faced a higher tax rate than the income wealthy Americans reported on their personal tax returns.

What happened next should have been predictable: Businesses that could easily change their tax status, to take advantage of the new lower personal tax rates, reorganized into "sole proprietorships" and the like. Income that had been taxed at corporate rates now began showing up on individual tax returns.

This tax-status shifting would not be an option for America's biggest corporate powerhouses. GE couldn't become a "sole proprietorship." So execs at these corporate giants did the next best thing. They invested heavily in politics and had their lobbyist legions carve out huge new loopholes in the tax code.

The latest Citizens for Tax Justice corporate tax report, just released, details the result: America's top corporations are now getting what essentially amounts to a 50 percent discount off their tax bills.

By current statute, corporations are supposed to face a basic 35 percent income tax on their corporate profits. Over the last three years, the new Citizens for Tax Justice report documents, top U.S. corporations have actually been paying only 18.5 percent of their profits to Uncle Sam.

Corporations, in effect, have achieved total tax loophole parity with America's individual super rich.

The nation's top 400 income-earners, the latest IRS stats show, are supposed to be paying taxes on their top-tax bracket income at a rate of 35 percent, the same as the corporate rate. These 400 mega millionaires and billionaires are actually paying taxes at an effective rate of only 18.1 percent.

How are corporations getting away with what amounts to a 50 percent tax discount? The new Citizens for Tax Justice research walks us through all the major loopholes.

Corporate executives, the group's new report explains, are shifting and stashing their corporate profits overseas. They're taking huge "accelerated depreciation" write-offs on suspect investments. They're even turning their own stock option windfalls, incredibly enough, into super corporate tax savings.

This infuriating stock option loophole works by a simple formula: Corporations grant their top execs "options" to buy millions of shares of company stock at a cost below the going market rate. The companies then deduct off their corporate taxes the difference between the price executives pay to get the shares and the higher marketplace price they get when they sell them.

Two-thirds of the 280 corporations Citizens for Tax Justice examines in the group's new corporate tax report claimed these option deductions over the 2008-2010 period. These deductions saved the 185 corporations involved $12.3 billion.

Overall, the 280 profitable companies that the new Citizens for Tax Justice study focuses in on grabbed a combined $1.4 trillion in profits over the three-year 2008-2010 time span. These 280 corporations could have paid, under the tax code, over $473 billion in federal corporate incomes taxes. They actually paid only $250.8 billion, a tax discount of $222.7 billion.

The tax subsidy "discount" for 2010 alone: $85.1 billion. Over a decade, that annual tax avoidance savings adds up to well over three-quarters of a trillion dollars, enough to fill all sorts of holes in the federal budget — and "avoid" massive cuts in public services.

Another perspective on the new Citizens for Tax Justice numbers: In the 1950s tax dollars from corporations offset about a quarter of federal outlays. Last year, corporate tax dollars covered only 6 percent of federal expenditures.

Shutting off corporate tax loopholes, concludes Citizens for Tax Justice, would bring "real benefits" for Americans, everything from "reduced federal budget deficits" to "more resources to improve our roads, bridges, and schools — things that are really important for economic development here in the United States."

But closing off corporate tax loopholes would not bring "real benefits" to everybody. The power suits who run America's top corporations are doing just fine under current tax arrangements.

In 2010, Institute for Policy Studies researchers revealed earlier this year, CEOs at 25 of America's largest corporations — major firms that range from Boeing to Verizon — took home more in personal compensation than the companies they run paid in federal income tax. These top execs averaged $16.7 million each.

Rewards this impressive give top corporate executives a powerful incentive to continue their tax avoidance ways.

In the 1950s, by contrast, this incentive didn't exist. CEOs back then had a distinctly limited income upside. A powerful trade union presence in America's workplaces and tax rates as high as 91 percent on personal income over $400,000 served to keep huge corporate executive windfalls off the table.

Labor journalist Sam Pizzigati edits Too Much, the weekly Institute for Policy Studies newsletter on excess and inequality. www.toomuchonline.org

The 99 Percent Have Found Our Voice

November 4, 2011 ·

Could any of us have imagined that in six short weeks, the people of this country would have found our voice? Most of you reading this have likely participated in Occupy activities in your town or city. IPS board member Barbara Ehrenreich worked with IPS interns to create a massive list of phone numbers of mayors of Occupied towns. They came up with over 400 places where people are standing up to be heard.

Doctors for the 99 Percent march from Zuccotti Park to St. Vincent's Hospital to demand its reopening and health care for all. Photo by Sunset Parkerpix.These are days of action. I've just returned with a group of IPS colleagues from the U.S. Treasury Department where National Nurses United led thousands of us in a protest for a measure that IPS has been advocating for years: a Wall Street tax that would curb financial speculation and generate tens of billions of dollars that can be used to create jobs and help the environment. Tomorrow night, IPS and the Other 98% and thousands more will march from Occupy DC to protest a gala dinner backed by the Koch brothers

On Saturday, tens of thousands will join in a "move your money" day that uses our power to defund Wall Street banks and build up Main Street banks. And, on Sunday, thousands more will create a human chain to surround the White House to demand an end to an oil pipeline that would despoil land and water from Western Canada to the Gulf of Mexico. 

The 99 percent have found our voice and at IPS we are devoting every ounce of our energy to filling this new public space with the true picture of the obscene inequality that our corporations and U.S. policy have created over the past three decades. We have a team at IPS, led by Chuck Collins, that is both putting out daily facts and figures on inequality and is steering people toward creative action. Chuck himself is now working on a book to trace the gap between the 99 percent and the 1 percent (help us decide on a title for the new book).

And, working with allies at YES! Magazine and elsewhere, we have built up a New Economy Working Group that is illuminating the path from this failed Wall Street economy to a green Main Street economy – an economy that is ecology balanced, that eliminates extreme inequality, and that nurtures the democratic expression that is blossoming across this country. IPS is producing fact sheets, leading workshops at Occupy sites, sending op-eds to papers all over the country, and giving voice to the rising tide of moral outrage.

The Occupy outpouring is changing the entire debate in this country. Newspapers are reporting on inequality. Politicians are being forced to respond to the charge that their policies lavish favor on the 1 percent. Banks are canceling outrageous fees on consumers. Conservative officials in Ohio and Wisconsin are feeling more heat to maintain protections on workers and communities. As we change the national conversation, we can dismantle the barriers to change.

This is your moment and IPS is proud to walk down this path with you. Sign up to receive our Unconventional Newsletter every two weeks.

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