Guess Who’s Upset with Our Growing Debt?

More than 80 CEO’s Call for “Deficit Action” with their endorsement of the “Fix the Debt” campaign.

They have joined together to pressure Congress to reduce the federal deficit with tax-revenue increases as well as spending cuts, so they say.  This non-partisan group, partnering with the  Committee for a Responsible Federal Budget, uses the mystical thirty-five percent corporate tax rate as the major reason why we need to reform our corporate tax laws.  Just proposing cutting corporate tax rates is like walking across a field of landmines, with a powerful army of defenders, lobbyists, lurking nearby.  You may remember last  year Congress and then the “Super Committee could not agree on a budget, causing our debt rating  downgrade.  Now these concerned CEO’s are worried about the  fiscal cliff – the roughly $600 billion in tax increases and spending cuts scheduled to take effect early next year if Congress cannot agree on an alternative plan.

Once again we have entered a reality distortion field,  where in their parallel universe the    Golden Rule is “do as I say, not as I do”.   In the real world, the majority of the companies who are a part of this  coalition are the most flagrant users and abusers of the corporate tax loopholes. Now they are telling us we need to tighten our belts. American corporations dodge Billions of in taxes every year. Now, I must admit, I have a bit of disbelief and incredulity about their sincerity since some of these CEO’s have made more money in salaries than their companies have paid in taxes. Maybe it’s their hypocrisy I can’t stomach. If our tax laws are to be changed, if they are serious about deficit reduction,  their companies would have to pay more taxes, and the individual CEO’s would pay more too. I wonder if they are the ones they are talking about in their “broaden the base” hype. Do you think they will agree to getting rid of the carried interest rule? What about the off shoring tax loop-hole the “Double Irish with a Dutch Sandwich? Do you think ATT & T will give up their use of “accelerated depreciation rules”? What about the tax subsidies many enjoy, particularly the oil and gas companies?

In  2009, 2010, 2011:

  • The highest corporate profits since World War II were recorded.  Corporate profits have been at record levels, (corporate profits have accounted for 67.8 percent of all economic growth since 2008) but unemployment has remained high, denying “free market logic”, and defying the mythical job creators.
  • And yet at the same time, we had the three lowest years for corporate tax receipts since World War II. The effective corporate tax rate  — total corporate income taxes paid as a percentage of corporate profits — is now hovering just over 20 percent. If you read this entire article in some cases corporations paid no taxes, or 2-3 percent.

Here are some of the reality issues (from Americans for Tax Justice):

  • They haven’t identified a single tax change they’d support, except to lower taxes. They do advocate broadening the tax  base. Does that mean their companies are included in that?
  • GE, in 2010 paid somewhere between zero and almost nothing (2-3 percent) in corporate taxes. Because of tax credits and deductions they have saved hundreds of millions,  possibly Billions of dollars in taxes each year. They have paid an extremely low tax rate, an average of just 1.8 percent for the last ten years.
  • Eight of the CEO’s who signed the Fix the Debt letter received a total of $11.8 million in tax breaks last year from the Bush tax cuts. They are among 57 CEO’s who each received more than $1 million in such tax breaks, collectively securing more than $100 million in tax cuts according to the Institute for Policy Studies.
  • Do corporations flush with cash need  a tax holiday? “Six corporations whose CEO’s signed the Fix the Debt letter were members of the WIN America Coalition, which lobbied Congress to pass legislation (S.1671) that would allow U.S. companies to dramatically reduce their tax rate on $1 trillion in foreign profits brought back (“repatriated”) to the United States. The measure would give corporations a substantial savings from 35 percent corporate tax rate to an 8.75 percent effective tax rate on the repatriated profits.The six corporations are: CA Technologies, Cisco, Loews Corporation, Microsoft, NASDAQ OMX Group, Inc., and Qualcomm Inc. Many of the corporations pushing for repatriation also want to permanently exempt offshore profits from U.S. taxation, by adopting a so-called “territorial” tax system, which would only increase the incentives to shift jobs and profits offshore.” I wrote about this last November,  “FINALLY! A Bill with Bi-partisan Support, but where’s our tax holiday?  Anticipating another handout from Congress, U.S. Corporations have been aggressively off-shoring money since 2006, now estimated to be over $1 Trillion. From 1994-2004 they had off shored $342 million. In 2004 the IRS said the money had to be used for jobs and research, but could not be given to shareholders, or salaries. Microsoft declared a special one time $3.00 share dividend from the cash they brought back, and Steve Ballmer collected an $1.5 Billion paycheck, paying only 15 percent tax.

This chart shows companies all supporting the “Fix the Debt” campaign that paid NO Federal Income Taxes, using tax loopholes, off shoring, and special depreciation rules. Do you think they will give up their lucrative tax subsidies?:

Corporation Federal Income Taxes 2008-2011 Profit
$ Billions Tax Subsidies 2008-2011
$ Billions
Boeing $0 $14.8 $6.0
Corning $0 $2.9 $1.0
General Electric $0 $19.6 $10.6
Honeywell International *$0 *$4.9 $1.7
Verizon Communications $0 $19.8 $7.7
TOTAL $0 $62 billion

According to Americans for Tax Fairness, “While Corporate America’s profits have soared in recent years, its contribution to federal revenue has plummeted by 60 percent in the  last 50 years, according to the Office of Management and Budget. Corporate taxes have declined from 22.2 percent of federal revenue in 1961 to just 7.9 percent in 2011.”

Here’s  what not being talked about:

  • The full economic impact of our U.S. trade policy. It is an absolute fact that U.S. trade policy has been the single largest factor accounting for income inequality in the United States.
  • 15 percent capital gains tax, the major driver of the shift of wealth to the very wealthy.
  • The effective corporate tax rate  — total corporate income taxes paid as a percentage of corporate profits — is now hovering just over 20 percent.

It’s imperative to address our national debt and balance our budget. But the I hope you will understand why I doubt the sincerity of so many of the CEO’s who signed this petition. The phrase’ banality of evil’ kept coming into my mind last night as I was writing this. Many of these folks have profited immensely from the financial meltdown, and the tax loop holes they have lobbied for.  Like Romney they think paying more taxes than they should is not in the best interest of their shareholders. Their chief complaint is the runaway spending of our government, and the need to curb it.

When they start talking about SPECIFIC tax cuts, like mentioned above, I might believe they actually have the best interests of the United States at the core of their efforts.  Otherwise, it’s just another PR job.

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One Response to Guess Who’s Upset with Our Growing Debt?

  1. HorrorVice says:

    We all should be concerned with the deficit. It’s too bad that it’s being politicized and used to deepen the partisan divide. Especially when there is no disagreement about the need to lessen it.
    I can’t quite wrap my head around the fact that the disagreement surrounds the question of raising taxes. Less spending = less deficit. Less spending + more taxes = Even lower deficit. Is there a way to explain that to someone without talking to them like they just stepped off a little yellow bus?

    Romney’s equation:
    Less spending + (less taxes for the rich so they can create jobs which in turn create income that will then lead to more spending which leads to a better economy) = Lower deficit

    HUH??? Okay, you could make the argument that it would work. It’s economics. Not a good argument, but one that could be made. BUT two important issues remain:
    1) It’s PRESUMPTIVE!
    2) It is not a better alternative to raising taxes (BTW lets not forget that it’s not raising taxes per say, it’s letting Bush era tax cuts come to an end).

    It’s frustrating that nobody talks about the obvious and sad that Americans are drinking their respective kool-aides. We are not elephants or donkeys. Elephants and donkeys think for themselves.

    Americans need to get off the little yellow bus and get informed. Does that really need to be said???

    Don’t be a pawn!

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