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Entries tagged "corporate tax rate"Page 1 • 2 Next
January 18, 2013 · By Sarah Anderson
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)
August 30, 2011 · By Sam Pizzigati
A landmark historical anniversary passed by almost totally unnoticed last week. No front-page retrospective in a major daily newspaper. No ceremony in the White House Rose Garden. Not even a new postage stamp.
A postage stamp, to be sure, might have been a bit of a stretch. You can’t, after all, put a memo on a postage stamp. Not even a memo that helped change, 40 years ago this month, the course of modern U.S. history.
The writer of this memorable memo, Richmond attorney Lewis Powell, would later go on to national prominence as a U.S. Supreme Court justice. But Lewis Powell, back in August 1971, had no national general public presence.
Powell did have widespread respect within elite corporate circles. A former American Bar Association president, he served on top corporate boards — and had friends in pivotal places, like Eugene Sydnor, a mover and shaker at the U.S. Chamber of Commerce.
Powell and Sydnor, notes corporate watchdog Charlie Cray, shared a sense of impending doom. The American “free enterprise system,” they feared, faced an existential crisis. The enemies of that system would surely triumph — unless business mobilized, as never before, to meet the threat.
The Chamber’s Sydnor asked Powell for a memo that outlined what the Chamber could do to jumpstart a crusade to save free enterprise. Powell's confidential August 23, 1971 response did just that.
Powell’s memo, reread today, can come across as wildly overheated and even, at times, laugh-out-loud paranoid.
Business confronts, Powell contends in the memo, critics “seeking insidiously” to “sabotage” free enterprise. “Extremists on the left,” he declares, have become “far more numerous, better financed, and increasingly are more welcomed and encouraged by other elements of society, than ever before in our history.”
With “extremists” and “social reformers” working ever more closely in concert, Powell's memo laments, “individual freedom” itself may stand at risk.
In truth, “free enterprise” in America had faced significantly more threatening — and better organized — challenges before World War I and then again during the Great Depression. In 1971, those Powell labeled “extremists” had no significant political parties, as they had in earlier eras. And the social reformers of 1971, unlike their predecessors, rarely questioned any “free enterprise” basics.
But corporate leaders, Powell correctly understood, did face a hostile political environment in 1971. Progressives were making headway against tax breaks that benefit “only the rich, the owners of big companies,” as one Washington Post columnist put it. “Populist” tracts in mainstream magazines like New York were arguing that “the root need in our country is ‘to redistribute wealth.’”
“This setting of the ‘rich’ against the ‘poor,’ of business against the people,” Powell’s memo seethes, “is the cheapest and most dangerous kind of politics.”
Corporate America, Powell goes on to exhort, must respond with more than “appeasement, ineptitude, and ignoring the problem.” Business leaders must show more “stomach for hard-nose contest with their critics.” CEOs need to consider counterattacking “a primary responsibility of corporate management.”
Yet individual corporate leaders, Powell would acknowledge, can only do so much. An individual corporation, he understood, might be reluctant “to get too far out in front and to make itself too visible a target.” The answer?
“Strength lies in organization,” Powell's would explain, “in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.”
The rest of Powell’s memo would detail the sorts of steps Corporate America could take — on campuses, with the media, in politics — to sweep away what Powell considered “inequitable” taxes on men of means and tame regulatory agencies “with large authority over the business system they do not believe in.”
The memo would remain confidential until syndicated national columnist Jack Anderson did an exposé in 1973. That publicity only served to whet corporate interest in Powell’s exhortations. By year’s end, a Chamber of Commerce task force — with executives from corporate giants ranging from G.E. to General Motors — had translated the Powell memo into action plan specifics.
Powell’s 1971 musings,historian Kim Phillips-Fein reflects, “crystallized a set of concerns shared by business conservatives in the early 1970s” — and gave “inspiration” to corporate leaders who would later become familiar names and powerful forces, men like arch Colorado right-winger Joseph Coors.
Together, these newly energized corporate leaders would unleash upon America what political scientists Jacob Hacker and Paul Pierson have called “a domestic version of Shock and Awe.”
The number of corporate public affairs offices in Washington, D.C. would quintuple between 1968 and 1978, from 100 to over 500. In 1971, Hacker and Pierson relate, only 175 U.S. corporations had registered lobbyists in Washington. The 1982 total: almost 2,500.
Corporate leaders also joined together in new national organizations, most notably with the 1972 founding of the Business Roundtable, and bankrolled a series of new militantly “free market” think tanks and action centers: the Heritage Foundation and American Legislative Exchange Council in 1973, the Cato Institute in 1977, the Manhattan Institute in 1978, among many others.
Between the late 1970s and late 1980s, add analysts Hacker and Pierson, corporate PACs increased their outlays for congressional races “nearly fivefold.” The U.S. Chamber of Commerce, for its part, would double its membership between 1974 and 1980 and triple its budget.
The end result of this all this political activity? Four decades of corporate pressure have transformed America. Tax rates on corporations and the wealthy have nosedived. Lawmakers have “deregulated” corporations in one sector after another. Unions, across wide swatches of the private sector, have disappeared.
The United States has become, with all these changes, a far more unequal place. In 1971, the year Powell penned his influential memo, America’s most affluent 0.1 percent reported average incomes — in 2008 dollars — of $1,263,485, and America’s bottom 90 percent averaged, again in 2008 dollars, $31,324.
By 2008, America's top tenth of 1 percent was averaging over four times as much, $5,648,768, and the average income of America’s bottom 90 percent had actually dropped, to $31,244.
The irony here? These numbers would likely trouble Lewis Powell, who died in 1998. Powell saw business as a champion for prosperity for all. He considered unions and collective bargaining “essential” to the freedom Americans enjoy.
Today’s U.S. Chamber of Commerce, by contrast, acts as the lobbying ringleader against any and all legislation that seeks to help workers organize and bargain.
Who knows? Lewis Powell might have come to feel, if he had lived a little longer, that his memo really needed a rewrite.
April 14, 2011 · By Chuck Collins
President Obama has broken through the silence about revenue in Washington's dominant budget and deficit debate.
"At a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more," Obama said in a speech at Georgetown University on Wednesday. "I don't need another tax cut. Warren Buffett doesn't need another tax cut."
He lambasted the GOP budget proposal put forward by House Budget Chairman Paul Ryan. "There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires," he said.
In addition to reversing tax hikes on the wealthy, Obama made vague recommendations about closing loopholes, especially for high-income households. Unfortunately, he avoided the important issue of corporate tax dodging through off shore tax havens.
"Unnecessary Austerity," the IPS report I recently co-authored , questions the assumption that budget cuts are the only path to fiscal health. Instead, we argue, Congress should focus on reversing tax cuts for millionaires and billionaires — and closing tax loopholes and overseas tax havens that enable corporations to shrink their tax bills.
The United States is far from broke. The problem is that wealth and income have become concentrated in the hands of the richest 1 percent of Americans and our largest multinational corporations. Yet over the last generation, we've greatly reduced taxes on the wealthy and global corporations.
For example, if the federal government taxed households with incomes over $1 million and big corporations at 1961 levels, the Treasury would collect an additional $716 billion a year, or $7 trillion over a decade. We've reduced the actual tax levy on millionaires by almost half during the past 50 years. In 1961, families with more than a million dollars of annual income paid 43 percent of their income in federal income taxes. This year, they will pay just 23 percent.
"I believe that most wealthy Americans would agree with me," Obama said. "They want to give back to their country, a country that's done so much for them. It's just Washington hasn't asked them to." His argument in favor of increasing tax rates for the wealthy is reinforced by a new call to action by Wealth for the Common Good and Patriotic Millionaires for Fiscal Strength. Those groups encompass more than 100 millionaires calling on Congress to raise their taxes.
Obama has public opinion on his side. Polls show that the majority of voters would rather hike taxes on millionaires than slash spending. But some of his proposals — like reducing charitable and home mortgage interest deductions for millionaires — may encounter tough sledding. Those proposals will mobilize opposition from not only corporate lobbyist and a segment of the wealthy. They'll face the wrath of the second-home real estate lobby and charity advocates.
But one way or another, taxes on the top are going to rise in the coming two years.
April 11, 2011 · By Noel Ortega
Thanks commenter @margsview for your very insightful comment:
“I appreciate knowing these facts and that they have been available to those who wished to know but I am now waiting to see ideas as to how to affect the actual tax changes. Simply voting for parties that strive for the current status is futile. Protesting is rather dubious as far as results, as media create their own spin and the authorities vilify the protesters thus nullifying their message for change. That leaves creating new strategies, such as a possible tax movement similar to the longstanding one in California. Comments please.”
I agree with you – historically, “protesting,” in and of itself, has not garnered any significant transformative change for the reasons you’ve listed and many more.
With that said, I also want to emphasize that protesting in the form of creative direct action can be very effective when combined with a well planned strategy. Direct action is needed in social movements, and it plays an integral role in creating transformative change.
|Creative Commons photo by Peace Education Center|
One group that understands this paradox well is US Uncut. This social movement is attracting the attention from not only progressives, but also from middle of the road folks, and from the mainstream media. The folks who are behind US Uncut took the lead from UK Uncut to get giant corporate tax cheats like Bank of America, Verizon, FedEx, and GE to pay their fair share in taxes so we won’t have to shutdown our schools, close our libraries, or stop paying law enforcement officers and firefighters.
US Uncut has developed a very simple website that encourages ordinary citizens to take creative direct action on corporate tax cheats, which has led to their success in attracting the attention of the mainstream media (even right wing FOX), from policy makers, and tax policy experts.
It can very well be that this tax movement you’re calling for is already in formation and is becoming a global movement!
February 23, 2011 · By Chuck Collins
This article was originally posted on Common Dreams.
The protests in Wisconsin could easily spread. While not every governor will recklessly attack collective bargaining, all states are facing major budget constraints.
This is the strategic moment to dramatically juxtapose the pain of local budget cuts with the scandal of corporate tax dodging. This April 15th Tax Day, let’s make our national focus be on stopping tax haven abuse and closing corporate tax loopholes.
States must close combined budget gaps of over $102 billion –and most are choosing deep budget cuts. Meanwhile, thanks to ways that U.S. corporations game the system to reduce their taxes, overseas tax havens cost the U.S. treasury over $100 billion a year.
In England, the movement UK UNCUT, has galvanized street protests, media investigations and legislative action. They have dramatized the scandal of billions lost thanks to overseas tax havens and corporate loopholes with the human face of federal and state budget cuts.
In every U.S. state, we should be doing the same. Every time a politician complains that “there is no money” or “we must make these cuts,” we should be pointing to the corporate tax dodging that could immediately close our budget gaps.
We should name names and show up at their branches. First there are the banks that wrecked our economy and accepted billions in taxpayer funded TARP funds. These include Wells Fargo, Goldman Sachs and Bank of America. Our message: Pay up!
Pay up! General Electric, Carnival Cruise lines, Boeing, FedEx, News Corp, ExxonMobil, Pfizer, Proctor and Gamble. They pretend their profits are earned in tax havens like the Grand Cayman Islands and their losses are earned in the U.S., lowering their tax bills.
These US companies use our shared infrastructure, but don’t pay their fair share. They enjoy our roads, national defense, emergency services, and federally-funded research. They are profitable but don’t pay their full freight. They undercut local businesses that pay their taxes while struggling to compete on an unlevel playing field.
“There’s a direct connection between corporate tax dodging and what’s happening in people’s lives,” said Carl Gibson one of the founders of US UNCUT Mississippi. “If we close those loopholes, we wouldn’t have to be cutting back on firefighters, library hours and student loans.”
Gibson started a web site after being inspired by the movements in England. “I work three jobs and can barely cover my $450 per-month rent,” said the 23-year old Gibson. “But I still pay my taxes. All I’m asking is that the wealthiest corporations pay what they owe, too.”
US UNCUT is launching the first wave of protests this Saturday, February 26th with a focus on Bank of America. There are actions planned in over 20 states. Bank of America has launched a glitzy PR campaign about how charitable and community-minded they are. But we should remind them the only way back into our good graces is to “Pay up!”
The Tax Justice Network and Business and Investors Against Tax Havens have been pressing over the last year to keep these issues in the public spotlight. With US UNCUT teaming up with the Other 98 and other coalitions focused on corporate tax dodging, we can anticipate a lively April 15th Tax Day.