Close The Loophole That Lets Companies Avoid Paying Taxes

Big companies have discovered a loophole that lets them avoid paying their taxes. These tax-dodgers are holding $2 trillion-plus of taxable profits outside of the US, on which they could owe as much as $700 billion in taxes. What could our country do with this $700 billion it is owed? Why won’t Congress just make them pay what they owe?

These companies discovered that they can move jobs, factories, labs, call centers and profit centers out of the country and by doing that they can avoid paying U.S. corporate taxes. Instead of figuring out how to get these companies to pay the taxes they owe, Congress is considering proposals to reward them and encourage more companies to do this.

The Loophole That Lets Companies Avoid Paying Taxes

Current tax laws let companies defer paying the taxes they owe on profits made outside the country until they “bring the money back.” The reason for this is that some companies want to use this money to expand, leading to increased future profits. This is good for these companies and our country because they expand profits and the country gets additional tax revenue later.

But more and more companies have been cheating, using this “deferral” to avoid paying taxes at all. They are holding profits outside of the country simply to avoid taxes and not to invest and expand, even though this is not the intent of this tax rule. Some companies are even inventing ways to make it look like their US profits were made outside of the US so they can take advantage of this mistake in the tax laws. Other companies actually move jobs, factories, call centers and profit centers out of the country to take advantage of this loophole.

$2 Trillion!

It has gotten so bad that U.S. companies are holding as much as $2 trillion or more outside of the country. If this were taxed at the top tax rate of 35 percent, that would mean $700 billion in taxes is already owed, but is being kept away from being used to fix bridges, improve schools, pay judges and the other things We the People (government) do to make our lives better. Also those profits are being kept away from use investing in the US, as well as from shareholders.

Meanwhile companies that keep jobs and production inside the U.S. and don’t cheat on their taxes are at a clear disadvantage. They have to compete with companies that lay off U.S. workers and close U.S. factories, and get to not pay their taxes because they did that. And, of course, they have less money to use for bribes lobbying to get what they want.

Here are the proposals currently being discussed in Congress to address this:

  1. Make these companies just pay the taxes they owe and stop moving jobs and factories, etc. out of the country. (No one is actually suggesting this, these companies are very powerful and spread a lot of bribe lobbying and campaign money around.)
  2. Let them just keep doing what they have been doing, which encourages more companies to move jobs, factories, etc. out of the country. This is the current status quo.
  3. Let them off the hook and have a “tax holiday” that lets off the hook for some or all of the taxes they owe. There are proposals before the Congress to do this. (Too bad for those companies that actually paid their taxes.)
  4. Change the tax laws so companies that move jobs, factories, call centers and profit centers out of the country don’t have to pay taxes. This is called a “Territorial Tax System” and there are proposals before Congress to do this. (Too bad for companies that don’t want to move jobs, factories etc out of the country, they won’t be able to compete.)

Two of the proposal in front of the Congress include,

  • Republican Rep. Dave Camp’s House Ways & Means proposal gives a tax holiday to companies that owe taxes (#3), and then cuts taxes on profits made from moving jobs and production out of the U.S. by 90 percent (#4). Finally it would cut top U.S. corporate tax rates from 35 percent to 25 percent.
  • The Partnership to Build America Act (sponsored by Sen. Michael Bennet (D-Colo.) and Rep. John Delaney (D-Md.)) would let companies that owe taxes bring home offshore profits tax-free (#3) if they use some of the money to buy bonds in an “infrastructure bank.” This would be a loan, so the companies get even this money back, with interest.

Call your member of Congress and ask them to just make these companies bring those profits home and pay their taxes, period. Tell them no “tax holidays” and no “territorial tax.” Just make them pay their taxes.

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

FL-13 – Did Dems Have A Reason To Show Up And Vote?

Republicans won in Florida’s 13th district special congressional election on Tuesday. What does this mean?

Here is the key point about why the Republican candidate: More Republican voters went to the polls and voted than Democrat voters. The Republican won by about 3,400 votes out of about 183,000 votes cast. Turnout was 58 percent in precincts Romney won in 2012, and 48.5 percent in precincts Obama won in 2012. There were 49,000 fewer people who voted in this election than in the 2010 general mid-term election (down 21 percent), and 158,500 fewer than in the 2012 Presidential (down 46 percent). So it was the failure to get Democratic voters to show up that lost them the election.

The obvious conclusion is that the Democratic candidate did not give Democratic voters sufficient reason and motivation to show up and vote. If just a few more Democrats – 3,400 – had decided to show up and vote the election would have gone the other way.

Factors and Non-Factors

Obamacare? Maybe not. According to David Weigel at Slate, “both rejected the national “narrative” that the race was a clear referendum on Obamacare.”

It wasn’t spending. Outside groups showed up and helped the Democrat, balancing out the usually enormous Republican spending advantage.

Medicare counted. Republicans accused Democrats of “$716 in Medicare Cuts.” This was the same theme that shifted the 2010 election to Republicans, and it helped again.

)

The Democrats fell short in getting their absentee voters to mail in their ballots. According to Sean Sullivan at The Washington Post, the Democratic candidate “did not build a big enough lead in absentee voting to prevail on election day.”

It’s The Base

Republican strategy is to feed red meat to “the base” to whip them up and get them to show up, (and do what they can to suppress Democratic turnout). In this race the Republican candidate ran to the right. Kartik Krishnaiyer of The Florida Squeeze, in a great analysis of the election, wrote that “this is the furthest right a GOP candidate had run in the area” in 60 years.

The Republican appeared on and was promoted by FOX News.

Apparently the Democratic candidate tried to “appeal to the middle,” thinking this would bring in “moderate” and “independent” voters who are thought to be “between” the left and the right. Her website emphasized “breaking the gridlock in Congress,” and offers, “I’ve proven again and again that Republicans and Democrats can work together to get things done.”

The website also emphasizes “cutting wasteful government spending” and “introducing performance metrics to hold government accountable for waste and abuse and creating the right fiscal environment for businesses to create jobs.”

So the Democratic candidate decided not to appeal to base Democratic voters, instead hoping to “reach across the aisle” to bring in “centrist” and “moderate” voters instead. One way or another this “appeal to the middle” failed to bring enough “moderate” voters to the polls to overcome the left-leaning voters it repelled.

Democrats Let It Happen

Thomas Frank summed up the problem in “The matter with Kansas now: The Tea Party, the 1 percent and delusional Democrats” at Salon. The subhead is “Democrats believe demographics alone will defeat the Tea Party. It’s a smug fantasy: Economic populism’s the answer.”

Even more alarming for Democrats were the stark implications of “Kansas” for their grand strategy of “centrism.” As I tried to make plain back in 2004, the big political change of the last 40 years didn’t happen solely because conservatives invented catchy conspiracy theories, but also because Democrats let it happen. Democrats essentially did nothing while their pals in organized labor were clubbed to the ground; they leaped enthusiastically into action, however, when it was time to pass NAFTA and repeal Glass-Steagall. Working-class voters had nowhere else to go, they seem to have calculated, and — whoops! — they were wrong. The Kansas story represented all their decades of moderating and capitulating and triangulating coming back to haunt them.

If Democrats don’t give regular, working people – the Democratic base – a reason to vote, then they won’t. In Florida’s 13th District, 3,400 of them decided there was not enough reason to bother.

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

No Fast Track To TPP: Fix NAFTA First

The big corporations and the Obama administration are trying to push through a giant new trade treaty that gives corporations even more power, and which will send even more jobs, factories, industries and money out of the country. This is the Trans-Pacific Partnership (TPP) and they are pushing something called “fast track” in Congress to help push it through.

We have to stop this, and we should take the momentum we have generated in our push-back on this to demand Congress and President Obama instead fix NAFTA first. Then fix all of our trade relationships to help working people on all sides of our borders.

TPP, Fast Track And NAFTA

There has been a lot of news about the upcoming TPP trade agreement. The agreement is being negotiated in extreme secrecy in a corporate-dominated process that appears to be leading to an agreement that would give corporations even more power than they already have. Now there is a push to pass a process called fast track through Congress in order to enable the large corporations to strong-arm TPP into law mobilized organizations around the country to sound the alarm.

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Senate Democrats: Change Filibuster Rules, Make Them Talk

Republicans filibustered the extension of unemployment benefits on the Senate floor Tuesday. Why? Because they can get away with it. Look at how the press reported what happened.

If the public doesn’t know that filibusters are occurring, how can democracy hold Republicans accountable for doing it? Instead they hear from the corporate media that the bill is “stalled,” “the Senate failed” or “the Senate deadlocks” due to “finger-pointing” or “partisan squabbling.” What message does the public get from that? Probably that they shouldn’t bother to vote.

The New York Times: “Unemployment Extension Is Stalled, With 2 Proposals Defeated in the Senate“: “Unemployment benefits for 1.3 million of the long-term unemployed — and millions more in the future — were imperiled on Tuesday after Senate efforts to reach accord on legislation to revive them collapsed in partisan finger-pointing.”

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GOP Economic Sabotage Continues With Filibuster of Jobless Benefits

Republicans are engaged in yet more hostage-taking obstruction. (Whatever gave them the idea that hostage-taking can work?) They are engaged in a filibuster of the effort to extend unemployment insurance, using it as a hostage to try to get even more cuts to the things government does to make our lives better. Their “pay-for” demand is really a demand for Democrats to agree to even more economic sabotage.

Senate Republicans Monday continued to fight Democratic efforts to pass an extension of federal unemployment insurance benefits for people who have been out of work longer than 26 weeks. Traditionally our government has provided this assistance to unemployed workers at times of high unemployment. This is an “automatic stabilizer,” meaning that this assistance helps stop the downward spirals that occur when business hit recession. Unemployed workers aren’t forced to pull back from paying mortgages or rent, or buying food and other basic needs, which then causes even more unemployment.

Many feel this economic stabilization effect is the reason Republican oppose the extension. They suspect Republicans want the loss of this assistance to cause more layoffs, foreclosures and economic hardship. This way the economy looks worse as the 2014 elections approach, and voters will turn on what they perceive as the “party in charge” – namely the Democrats.

By requiring “pay-fors” – cuts somewhere else – in exchange for allowing this assistance to the unemployed, they are removing the economic boost that the program provides, causing damage to the economy. In other words: they are engaged in economic sabotage.

One such proposal from Republicans is to stop working people with disabilities from claiming both Social Security Disability Insurance and federal unemployment benefits. Cutting this really means preventing people with disabilities from taking the risk of going out and working to see if they can get off of disability. Michael Hiltzik writes about this at the Los Angeles Times in “An awful idea: Hammer the disabled to pay for unemployment benefits”:

It uniquely burdens the disabled among all workers, and it sets a terrible precedent of raiding Social Security to pay for other social programs.

… The idea that disabled persons are “double-dipping” by collecting wages or other compensation while also getting a disability check is enshrined in conservative attacks on disability. But it’s untrue. The Social Security disability program is designed as a bridge to full employment. Its benefits aren’t intended as a substitute for wages, but a supplement.

Michael Tomasky writes about the hostage-taking involved here in “The Fight Over Unemployment Benefits Underscores the Right’s Extremism” at The Daily Beast:

Republicans are insisting on cuts from elsewhere in the federal budget to pay for the benefits’ $6.4 billion cost. And Democrats are talking with them. But there’s no progress yet. In fact, it seems today that even the six Republicans who voted in the Senate last week to allow debate to proceed would not vote to extend the benefits just yet.

[. . .] if Democrats win, great. But it looks like they’ll only win by agreeing to the pay-for demand, which means that there’ll be new demands next time. There’s no end to how far right these people will go.

Richard Eskow (who really should have a column in the New York Times) writes about the economic sabotage of “pay for” in “No, Congress, You Shouldn’t “Pay For” Extending Unemployment Insurance”:

The simple truth is, Democrats are still being outmaneuvered by Republicans on economic policy. They’re letting the GOP call the shots, rhetorically, even though Republicans lost two out of three seats of federal government (the Senate and White House). They even lost the total popular vote for the House of Representatives.

… Here’s a better idea: Don’t try to pay for extended unemployment benefits. Don’t boast, as Reid did last week, that the extension is “entirely paid for.” Sure, Democrats will eventually need to make a deal – if they can – in order to extend unemployment insurance benefits. But why aren’t they first making the case against “paying for” those benefits on the Republicans’ terms?

Why aren’t Democrats instead speaking up against the “pay for” logic that gives a free pass to the wealthy and corporations – especially when the total cost is a blip, a rounding error, on a $1 trillion 2014 federal budget?

Economically, “pay for” is a Catch-22: It means every job-creating proposal must be offset with job-killing cuts elsewhere.

5 Reasons To Extend Unemployment Insurance

The AFL-CIO Now blog offers “5 Reasons Congress Must Extend Unemployment Insurance.” (Click through for details, charts and links.)

1. The long-term unemployment rate is higher than ever before.
2. The typical unemployed worker has been out of work longer than ever before.
3. More unemployed workers are running out of benefits than ever before.
4. The unemployment rate remains unacceptably high.
5. There are still three job seekers for every job opening.

Call To Action

The Coalition on Human Needs wants us to “tell your senators to renew federal unemployment insurance now, before the next recess, and don’t tie renewal to harmful amendments like denying the Child Tax Credit to low-income immigrant families or denying aid to unemployed workers with disabilities.”

If you haven’t called your senators yet (or even if you have!) please call 1-877-267-2485 (Toll Free). (Thanks to AFSCME for making this toll-free number available.)

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

Who Will Fight To Help The Unemployed?

At the beginning of November, the poor went over the “Hunger Cliff” as Food Stamps were cut. Now long-term unemployment assistance will run out at the end of December. Regular people think the government has given up on them. They have been hit by one blow after another, with little or no help in sight. They see shutdowns and budget cuts at the very time the government needs to spend more to help Americans.

This is part of the Republican effort to turn Americans against government, because the public will blame Democrats. Democrats have to stop letting Republicans get away with it, and return to being seen as trying to help the unemployed and poor.

Long-Term Unemployment Assistance Running Out

In a few days, long-term unemployment benefits run out in spite of a “budget deal.” This cutoff of long-term aid means that in most states aid will end after a person is unemployed for 26 weeks, and in other states even less – some dramatically less. It occurs at a time when the average length of unemployment is 37 weeks, and there is still only one job for every three people still bothering to look for work.

1.3 million people will lose this assistance immediately, just after Christmas. By mid-2014 another 2 million will lose this aid as well.

“If my wife loses her benefit before she finds a job, we lose our house.” – Philadelphia resident.

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Budget Deal Is More “Awesomely Destructive,” Economy-Killing Austerity

Austerity is holding back our economy — and that’s the plan. There is simply no other way to explain it. Republicans know voters blame (or credit) the party of the President for the economy, and they are doing everything they can to make things as bad as can be. This new “budget deal,” for example, holds the country in full austerity, with spending lower than even the original “Ryan budget” that shocked everyone.

Austerity kills economies and jobs, and they know it. We know it, they know it, everyone knows it. It is obvious in front of our faces, and Republicans continue to force cuts — with many Democrats going along.

Spending

Since the financial collapse government spending has been cut and the results have been terrible for the economy. Under every previous President government spending and hiring propped up the economy until recovery was underway. Republicans as well as Democrats understood this is how it has to be done. Until now.

In Charts: What if Obama spent like Reagan? Ezra Klein explains, “It’s simply a fact that real government spending fell in three of President Obama’s first four years.” Klein compares government spending to Reagan and ‘W’ Bush:

Under Reagan and ‘W’ spending went up. This helped the economy get out of recessions. Under Obama, with a much worse recession, Republicans forced spending to go down.

What was the effect of these cuts? This next chart shows how this is a drag on GDP:

So yes, the spending cuts are obviously hurting the economy.

Paul Krugman’s blog post, Unprecedented Austerity comments on this. He starts with a chart showing what has happened to government spending since Obama took office, writing, “Look at total government spending — federal, state, and local — and correct it for inflation …”

Krugman writes, “You can see that there was a brief, modest spurt in spending associated with the Obama stimulus — but it has long since been outweighed and swamped by a collapse in spending without precedent in the past half century.” He calls this, combined with private-sector deleveraging, “awesomely destructive.”

“Awesomely destructive.” And you can see it.

That “modest spurt in spending associated with the Obama stimulus”? This is the effect the stimulus spending had on jobs:

The stimulus took us from losing more than 800,000 jobs each month to gaining jobs every month since. It completely turned the situation around. But then it stopped and Republicans were able to force austerity and kill off the recovery.

This Budget Deal

So that’s the story of what has happened to government spending as Republicans impose austerity. Down down down. Now we have a “budget deal” (that even leaves out help for the long-term unemployed and doesn’t replace the “Hunger Cliff” $5 billion Thanksgiving Food Stamp cut, etc…) This next chart shows where this budget deal fits with earlier budgets proposals.

This is what is missing from the explanations of this budget “deal:” spending will still go way down. This is not a spending increase, it is less of a destructive, devastating cut than the full “sequester” would be next year. But it is still a cut, and it will still cost us jobs and economic growth. It will still be “awesomely destructive.”

And that is their plan. It will still let them campaign on “Obama’s terrible economy.”

Jobs

This chart from Calculated Risk shows how government hiring pulled us out of previous recessions, which government firing is holding us in this one.

Key point, Presidents Reagan, GHW Bush, Clinton and ‘W’ all increased public hiring to help get us out of recessions. But under Obama and austerity the public sector has lost 703,000 jobs.

The public sector grew during Mr. Reagan’s terms (up 1,414,000), during Mr. G.H.W. Bush’s term (up 1,127,000), during Mr. Clinton’s terms (up 1,934,000), and during Mr. G.W. Bush’s terms (up 1,748,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 703,000 jobs). These job losses have mostly been at the state and local level, but more recently at the Federal level. This has been a significant drag on overall employment.

The 2014 Election

So let’s take bets: do you disagree that Republicans are planning to campaign in 2014 by saying that the terrible economy is Obama’s fault?

PS: Some of these charts are from Three Charts That Show That Republicans Have Won The Budget War by Danny Vinik, who writes that “the fact of the matter is that the GOP has won the budget wars.” Let’s see if they take credit for the economy and terrible human pain they are causing.

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

Food Stamps Cut Just In Time For Thanksgiving

This is that time of year when newspapers bother to write about how there are hungry people in America. But this year is special. As the recession drags on for the non-1%, cuts in Food Stamps have completely swamped the capacity of food banks and other non-government assistance. Meanwhile pending cuts in unemployment compensation and even more cuts in Food Stamps and other assistance programs mean things will get much worse for millions of invisible Americans.

Hunger Cliff

Have you heard about the Nov. 1 “Hunger Cliff?” On November 1 the Food Stamp program was cut. Millions of Americans are out of work, unemployment benefits have run out (and been cut), winter is arriving in force, but Congress allowed a temporary, recession-boosted increase in the Food Stamp program to run out! $5 billion in urgently-needed assistance just went away.

Terrance Heath told the story in 47 Million Americans Are Going Over the “Hunger Cliff”, writing “Millions of Americans will plunge over the “Hunger Cliff” tomorrow, when $5 billion in cut to food stamps go into effect tomorrow. While Congress negotiates even more cuts, millions of Americans will face negotiating where their next meal will come from.”

Food Banks Swamped

The “Hunger Cliff” has hit people hard. The cuts mean people just can’t get enough to eat. Hungry people are swamping the food banks.

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