Why You Shouldn’t Be “Optimistic” About Corporate “Tax Reform”

Washington elites are “optimistic” about another “reform.” That’s never good.

According to an article in The Hill this week, “WH adviser ‘optimistic’ for corporate tax reform“:

A top economic official in the White House on Tuesday expressed confidence that the next Congress can pass corporate tax reform.

… Obama has proposed lowering the corporate statutory rate from 35 percent to the high-20s while eliminating many deductions. Camp also proposed to lower the rate, but down to the mid-20s.

Camp has proposed shielding most of the profits corporations make offshore from U.S. taxation, while Obama has called for a minimum tax on global earnings.

Why is it that any time you hear the word “reform” coming out of Washington, it always ends badly for about 99 percent of us? They talk about entitlement “reform” – meaning cutting Social Security and Medicare. They talk about regulation “reform” – meaning our food and workplaces are going to be less safe. They talk about spending “reform” – meaning doing less of the things that make We the People’s lives better. (They never “reform” the military budget. It is more than double what it was when ‘W’ Bush took office. Because we have to defend against the Soviet Union.)

“Reform” is lobbyist-speak for opening up the floodgates, hanging the flags out, lighting the savings accounts on fire, letting dozens of blackbirds fly out of the pie, letting the horses out of the barn and generally fleecing the citizenry.

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Reagan Set Up The Death Of The Middle Class, But China Was The Clincher

Campaign for America’s Future’s 2010 Reagan Revolution Home To Roost series, especially the post Reagan Revolution Home To Roost — In Charts described the beginning of the great decoupling of the American economy from the middle class.

The summary:

Conservative policies transformed the United States from the largest creditor nation to the largest debtor nation in just a few years, and it has only gotten worse since then.

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Who Gets Rich Harvesting Burger King and the American Economy?

As fast-food workers across the country strike for decent pay, Burger King is still preparing to abandon the U.S. as its home country. How does a burger company get flipped like this and who gets rich when it happens?

Burger King is a company whose products encourage obesity, heart disease and diabetes in its customers and pays its employees so little that they require food stamps and other government assistance just to be able to sustain themselves. Now Burger King is asking us to swallow something even unhealthier than their food and lower than their pay. They are asking us to let them off from paying many of the taxes that sustain the very infrastructure, courts, education system and food safety system that enables them to stay in business – even the trademark system that keeps others from using the name “Burger King” or calling their product a “Whopper®.”

The company has been stripped, financialized and any remaining value is ultimately being moved across the border. The story of what is happening with Burger King is the story of what American capitalism and its financial speculation has been and is doing to the American economy. It is being done to the company and to us by the financiers. In this case it is names like Goldman Sachs, TGP Capital, Bain Capital, 3G Capital – all playing games with Burger King, other companies the American economy and our lives. And the latest plunderer, Bill Ackman and his Pershing Square Capital Management, is a financial manipulator who when he sees a company’s carcass worth plundering, goes after it – even if it involves betting on a company’s stock going down and then working to drive the company into the ground.

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Full Employment Is More Than Possible – It Is Essential

Progressives have not only been able to beat back the D.C.-elite effort to cut Social Security, we put the idea of expanding Social Security on the table instead. We pushed LGBT rights and gay marriage and have won significant victories. Sunday’s Climate March will force climate onto the map.

We got the discussion of income inequality going. We have achieved minimum wage increases and paid sick days in several cities and states. The National Labor Relations Board is functioning and we even saw labor-movement gains in the South this week. We have held back (so far) the drumbeat for big cuts in corporate taxes they’re calling “tax reform.”

Now it’s time to put our demand for full employment policies on the table. And guess what – it’s a great way to win elections!

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Corporate Courts — A Big Red Flag On “Trade” Agreements

Think about everything you understood about our system of government here in the United States. We’re  governed under a document that starts with the words, “We the People.” Right? When We the People agree that something should done to make our lives better, it’s supposed to get done. Right?

You didn’t know it, but that whole system thing changed several years ago. Our government, in our name, signed a document that placed corporate profits above our own democracy. The “investor-state dispute settlements” chapter in NAFTA (and similar agreements) places corporate rights on above the rights of people and their governments.

As a result of “NAFTA-style” investor protections that are part of so-called “trade” agreements,  giant corporations can and do sue governments for trying to pass laws that protect their citizens from harmful chemicals, ban harmful products, and protect the rights of working people, among  other things. Corporations even sue governments for passing laws that might cause the investors in the corporations to make a bit less money — like raising the minimum wage.

But wait, there’s more.

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Ford C-Max Is Awesome

I bought a C-Max Hybrid in May. I have had it for a few months and I love this car, so I’m writing this review about it.

I had a 2000 Honda Accord and it was losing its reliability. I spent a lot of time researching cars. (My wife was finally saying “Jeeze, just buy a car already, I don’t care anymore, just buy any car and get it over with.”)

Before trying the C-Max I researched and drove (and rented when I could) Ford Focus & Fusion, Honda Accord, Chevy Malibu, Chevy Volt, Toyota Prius and Toyota Camry. My favorite of those was the Volt but it was more expensive and my wife wasn’t as enthusiastic. I also liked the Accord.

The Fusion was nice but oddly my wife could barely see out of the passenger window and there were no options for raising the seat. (She is not short.) After driving the Fusion the salesperson suggested trying a C-Max — otherwise I would not have thought of it and hadn’t really even heard of it. This is when I discovered the C-Max, and both my wife and I loved it.

Gas Mileage

Even though I liked the Accord, I finally decided to buy either a hybrid like the Prius or a plug-in like the Volt or Ford’s Energi. (Notes: 1) I vastly prefer the C-Max now that I have been driving it. 2) Honda’s Accord Hybrid and plug-in Hybrid weren’t readily available yet and more expensive than they should be.) I’m just sick of being so dependent on the oil companies, shelling out huge amounts of $$ every time I fill up and filling up so often. I didn’t want a pure EV like the Leaf because of range. I want the freedom to take longer trips without renting a car. But the plug-in Energi didn’t work for me for a few reasons. (I am starting to regret the decision to just go hybrid.)
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Why Fight For Unions? So We Can Fight An Economy Rigged Against Us

The other day I wrote about how FedEx has been pretending that their employees are not employees, which gets around labor standards for things like overtime, family leave and the rest.

This misclassification game is just one way that big companies have been rigging the rules to give themselves an edge, getting around what We the People set down for our democracy.

The result, of course, is even more people paid even less with even worse working conditions. And the bad players get an advantage that drives out the good ones.

Like misclassification, this game-rigging, cheating, edge-seeking, rule-bypassing stuff is everywhere you look. (Rigged trade deals, corporate tax “deferral” and inversions, corporate campaign donations, too-big-to-fail banks, Congressional obstruction, etc. and etc…) This rigging of the game in favor of the ultra-wealthy gets worse and worse.

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A Simple Plan To Balance Trade And Bring Back All Those Jobs

We have an enormous, humongous and ongoing trade deficit. This means we buy more from other countries than they buy from us and we do this every year.

Trade is supposed to be balanced. Instead we have been running continuing trade deficits since the late 1970s. A trade deficit drains our economy and forces consumers, businesses and government to borrow, just to keep going. This means that jobs, factories, entire industries and literal boatloads of money have been leaving the country – it really adds up because we do this every single year. We have to do something about this.

The “Buffett Plan”

In May’s post, Balancing Trade – Remember The “Buffett Plan” I described the 2003 “Buffett Plan” proposed by Warren Buffett, who was very concerned about the damage done to our economy and unemployment caused by our ongoing trade deficit.

The government could issue “Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports.” The number of import certificates determines the level of trade imbalance or balance that we allow.

A few years later Congress tried to address the problem with legislation designed to balance exports and imports.

Senators Russ Feingold and Byron Dorgan proposed the The Balanced Trade Restoration Act of 2006, similar to Buffett’s plan. The bill warned, “The surging trade deficits could soon create a balance of payments crisis for the United States, which could wreak havoc with the economy of the United States.” The bill didn’t go anywhere.

And then (from the same post) someone else brought up the Buffett Plan:

In a 2011 article, “What Would Buffett Do? — A Plan to Balance Trade, Create Jobs and Restore American Manufacturing,” Bill Parks goes into detail on a similar plan, and suggests a mix of private and public sale of the import certificates. He also suggests that the government could adjust the ratio of exports to imports as needed.

A New Stab At This Simple Plan

At the site Economy In Crisis, Kenneth N. Davis, Jr., Former U.S. Assistant Secretary of Commerce writes about the Balanced Trade Restoration Act of 2014. Davis notes that “imports have been the single most damaging blow to our domestic industrial base that we rely on for national security and income as well as for a strong economy and good jobs.”

In the Balanced Trade Restoration Act, Davis has put together a proposal that, while inspired by the original Buffett plan, offers an updated and more specific legislative plan for making it work. Davis writes,

My group, Balanced Trade Associates, believes we have a bold, realistic plan to deal with the import problem. It could eliminate our 700+ billion dollar annual trade deficits within 3 years. Our law would also require 3 years of modest 10% annual reductions in our imports that now run at 2.1 trillion dollars. The answer is our proposed new legislation: “The Balanced Trade Restoration Act.”

With it, the U.S. would restore our practice of maintaining modest annual trade surpluses with the rest of the world. Unlike most competitor nations, we abandoned that sound policy to emphasize globalization in the late 1960’s.

The text of the Balanced Trade Restoration Act of 2014 is included in his post at Economy in Crisis, but put simply, import certificates are issued based on exports, you need a certificate to import:

  • The government would create “a Balanced Trade Import Certificate Program.”
  • The program would issue “import certificates” that act as a license to import “a good with an appraised value that is equal to or less than the face value of the certificate.”
  • Goods cannot be shipped into the country without a certificate issued equal to their import value.
  • The certificates would be issued based on exports. The Commissioner of the program would determine how many such certificates to issue, starting at the current level of imports and tapering down by 10 percent a year for three years.
  • After three years we enter a “Continuous Maintenance of Balanced Trade Period” where certificates are issued equal to the amount we export.
  • Bob’s your uncle; trade is balanced.

It might sound like a lot of paperwork, but actually it’s just an IT/computer problem – setting up a data center with a database of exports, the resulting certificates and issuing certificates for incoming shipments by importers.

Does This Proposal Violate Trade Agreements?

While trade agreements contain measures against import restrictions they also call for balanced trade. This is not an import restriction, it is a balancing measure. The General Agreement on Tariffs and Trade (GATT) allows import restrictions in situations of balance-of-payments. Trade not only should be balanced, it must eventually be balanced because the damage done by unbalanced trade to the economies of countries and ultimately to the world’s economy.

A Cap-And-Trade System To Incentivize Exports?

Davis’ plan calls for issuing certificates to “qualified” importers on a fair basis to prevent giants like Walmart from cornering the market. From the proposal: “Certificates shall be issued by the United States Customs and Border Protection to any qualified importer, as determined by the Commissioner. Certificates are non-transferable. The Commissioner shall determine the fee for Certificates such that all costs of administering the Program are paid by the fees.”

My own thinking is that a regulated (to prevent cornering the market) cap-and-trade (transferable certificate) system that allows exporters to sell those certificates to importers for a market price would still be beneficial. Because we import more than we export the certificates would have an added value, creating an incentive to export. It would also subsidize those exports. Corporations respond to incentives and this would create an incentive to export, which would create jobs. Once trade is balanced, those incentives are reduced, so it is self-correcting.

But either way, this can be worked out as the system is set up. Hopefully experts would provide testimony and a consensus decision would be made based on the best way to proceed to help our economy and fight the enormous, humongous trade deficits.

And So, In Conclusion

I end this post as I ended the May post. The Buffett Plan was just one idea for balancing trade. But balance we must. As Buffett warns, these huge trade deficits cannot be sustained. They are draining our economy. There has to be a reckoning. We have not faced that reckoning yet, but it is inescapable. It has to happen. We have to tackle this as a country, with a national plan.

Petition

While we’re talking about balancing trade, the Coalition for a Prosperous America has petition to Congress: Congress should direct the President to pursue Balanced Trade now as the principal trade policy objective.

We, the undersigned individuals and organizations, request that Congress adopt balanced trade as the primary national trade goal by adding the following language to future trade-related bills:

“The principal national objective for trade in goods, services and agriculture is to achieve an overall balance of payments over a reasonable period of time, eliminate persistent trade deficits and reverse the accumulation of foreign debt.”

Click through to add you name, please.

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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 and/or for the Progress Breakfast.

Are American Corporations Really Less Competitive Because Of Taxes?

Corporate tax rates used to top out at 52.8 percent. Later rates were lowered to 48 percent and then 46 percent. Then in 1986 corporations complained that this (lowered) rate made them “uncompetitive” and demanded “corporate tax reform.” Because job creators. So the rate was lowered to 35 percent.

Now in 2014 corporations are complaining that this (lowered) rate makes them “uncompetitive” and are demanding “corporate tax reform.” Because job creators – or something. This time they threaten to – or do – renounce their U.S. citizenship, saying it is because of too-high tax rates.

So, here we are again. They want rates lowered even more. But are corporate tax rates really “uncompetitive?” And what does that even mean?

Tax Rates Are Plenty Competitive

At the New York Times’ Dealbook Andrew Ross Sorkin looks at this issue in “Tax Burden in U.S. Not as Heavy as It Looks, Report Says.” Sorkin looks at a paper, “‘Competitiveness’ Has Nothing To Do With it,” by Edward D. Kleinbard. Kleinbard is a professor at the University of Southern California and used to be chief of staff to the Congressional Joint Committee on Taxation. Sorkin quotes Kleinbard:

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Backed By China? House Republicans Block Critical ‘Make It In America’ Bill

Last week one more example of Republican obstruction occurred – blockage of an important “Make It In America” bill – and one more time not a single corporate media outlet reported it.

The House Republican leadership last Tuesday blocked a bill to secure for American companies critical minerals used in the production of energy-efficient products, renewable energy systems, electronics and other technologies. The result is companies – and the Defense Department – continue to be forced to turn to China to make or obtain critical electronics components.

The China Problem

Put simply, China undermined most of the world’s other sources of these strategic minerals by such practices as underpricing, putting them out of business. Once an industry leaves a country it becomes enormously difficult to start it up again. The supply chain is gone. The expertise is gone. The educators are gone – and so on. And, of course, with the industry goes the jobs and the ability for a country to make a living in the world. A huge investment is required to rebuild all of this.

Now China is the main source (90 percent) for many critical minerals used in electronics manufacturing. China is using that 90 percent advantage to force other industries to come to China. China has been using export controls and other restrictions to drive up the price of manufacturing outside of China. If you simply cannot make or obtain certain critical electronics products anywhere else you either get them from China or go out of business. And yes, that includes our military.

The Bill

The Securing Energy Critical Elements and American Jobs Act of 2014 (H.R. 1022) from Rep. Eric Swalwell, (D-Calif.) was written “to assure the long-term, secure, and sustainable supply of energy-critical elements to satisfy the national security, economic well-being, and industrial production needs of the United States.” It would have increased exploration, research and development, and other national means to secure these critical minerals by coordinating the actions of federal agencies to:

  1. promote an adequate and stable supply of energy critical elements,
  2. identify energy-critical elements and establish early warning systems for supply problems,
  3. establish a mechanism for the coordination and evaluation of federal programs with energy-critical element needs, and
  4. encourage private enterprise in the development of an economically sound and stable domestic energy-critical elements supply chain.

This bill is one part of the overall Make It In America series of bills from House and Senate Democrats.

The Vote

A majority of the House voted for the bill, but House leadership set it up for failure by requiring a two-thirds vote to pass. It was voted on “under suspension of the rules” requiring the two-thirds instead of the normal majority.

The reason? Heritage Foundation and Club for Growth objected to our government helping American companies compete with China. They said that the American government securing necessary materials for American companies to manufacture is “interference with the free market.”

To some there apparently is no national interest, only “market” interests.

Of course, it is not a “free market” because China subsidizes its companies and uses strategic chokepoints like this to take over entire industries. China sees itself as a country with a national interest. Conservatives say we should not.

Heritage argued that government “interference in a functioning market is self-defeating.” In other words, let China have the business.

It really is time to find out if Heritage Action and Club for Growth receive funding from China as part of China’s national strategy to capture the world’s strategic industries. China would be foolish not to. But, on the other hand, maybe China doesn’t have to.

This is important stuff. Really important. You should help spread the word that this happened.

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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 and/or for the Progress Breakfast.

Sen. Elizabeth Warren Tells Netroots: “Push Back And Fight Hard”

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Senator Elizabeth Warren took her fight against a rigged system to the Netroots Nation gathering in Detroit Friday morning, saying that she is fighting back, and if We the People “push back and fight hard, we can win.”

Outside the hall, people were passing out “Ready for Warren” hats and signs. Inside the hall, the hats and signs were everywhere.

Fighting back against a rigged system was the theme of Warren’s rousing speech to Netroots. She began by briefly telling the story of how the about Consumer Financial Protection Bureau (CFPB) came to be. She had the idea for the agency, started talking about it, people told her it was a great idea and badly needed, but said to her, “Don’t do it because the biggest banks in the country will hate it and you will lose.”

She said they had that half right. “They spent more than a million dollars a day for more than a year lobbying against financial reforms. But we fought back and we won. We won because you and a zillion other people across the country got in the fight. We said we the people will have this agency and we won.”

And now we have the CFPB and it has already returned $5 billion to people that the big financial firms tried to steal, she said.

Warren’s message was that we should “never miss the central point of this story. The CFPB is proof of how democracy can work in the 21st century. It is proof that if we push back against the biggest, strongest, most ruthless lobbying effort in the country, if we push back and fight hard we can win. We can’t win every time and we are still trying to figure out how to make it all work. We don’t win every time but we’re learning to win. We will keep at it; we will fight and we will win that’s my message today.”

A Rigged System

Warren moved from there to what is happening in the country today. She said companies naturally look for profits. “But many of them have another plan – they use their money and their connections to try to capture Washington and rig the rules in their favor … That’s what we’re up against that’s what democracy is up against.”

She compared what happens to regular people with what happens to wealthy elites at the top, saying, “A kid gets caught with a few ounces of pot and goes to jail but a big bank launders drug money and no one gets arrested.”

Not Just Big Banks

Warren said, “But it’s not just the big banks.” She called on the audience to look at the choices the federal government makes, such as piling debt on students. Then she went straight after Republicans as the enablers of the rigging and corruption. “Instead of building a future, this country is bleeding tax loopholes. Billion-dollar corporations squeeze out deals with foreign countries, renounce their citizenship and pay no taxes. How does this happen? They all have lobbyists and Republican friends in Congress to protect every loophole and every privilege. The game is rigged and it isn’t right.”

Rigged Trade Deals

“Take a look at what happens with trade deals. Trade negotiations are like Christmas morning for the biggest corporations,” she said.

Warren described how corporations can bypass pollution and wage laws. “The corporations can get special gifts through trade negotiations they would never get from Congress,” she said, because trade negotiations are secret, held behind closed doors. The corporations are “all smacking their lips at the possibility of rigging the upcoming trade deals.”

“Stop and ask yourself, why are trade negotiations secret? I have had people involved in the process actually tell me, If people knew what was going on they would be opposed. My view is if people would be opposed then we shouldn’t have those trade deals.”

It’s Everywhere

Warren said the tilt in the playing field is everywhere. “When conservatives talk about opportunity, they mean opportunity for the rich to get richer and the powerful to get more powerful. They don’t mean do something about student loan debt or help someone unemployed to get back on their feet.”

The Fight

“Deep down, this is a fight over values. Conservatives and their powerful friends will continue to be guided by their internal motto ‘I got mine and the rest are on your own.’ ”

“My motto we all do better when we work together and invest in future. The country gets stronger when we invest in helping people succeed. … These are progressive values and these are the values we are willing to fight for.”

She then went into a refrain:

We believe that Wall Street needs stronger rules and tougher enforcement.
And we’re willing to fight for it.

We believe in science and that means that we have a responsibility to protect the planet.
And we will fight for it.

We believe the Internet shouldn’t be rigged to benefit big corporations.
And we will fight for it.

We believe no one should work full time and still live in poverty. That means raising the minimum wage.
And we will fight for it.

We believe that fast-food workers deserve a livable wage.
That means we will fight alongside them.

We believe students are entitled to get a good education without being crushed by debt.
And we will fight for it.

We believe after a lifetime of work people are entitled to retire with dignity. That means protect Social Security and Medicare.
And we will fight for it.

We believe – I can’t believe I have to say this in 2014 – in equal pay for equal work.
And we will fight for it.

We believe equal means equal and that true in the workplace and at home and everywhere.
And we will fight for it.

We believe immigration has made country strong and vibrant.
And we will fight for it.

And we believe that corporations are not people. (The crowd was on its feet making a lot of noise so I don’t know what she said next.)
And we will fight for it.

Right here in this room this is where it happens. This is 21st-century democracy. This is the future of America. This is where we decide that We the People will fight together and do that, we will fight together and we are going to win.

And the crowd went nuts.

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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 and/or for the Progress Breakfast.

A Simplified Way To Tax Multinational Corporations

You’ve been hearing a lot about corporations “renouncing their U.S. citizenship” through “tax inversions.” This is when a company buys or merges with a non-U.S. company and claims to no longer be based in the U.S. to get out of paying certain taxes. The company does, however, keep the same employees, executives, buildings, sales channels and customers it had inside the U.S. before the switch.

The epidemic of tax inversions represents just one of many ways corporations are dodging their taxes by taking advantage of our outdated and rigged corporate tax system. It is time for a serious debate about corporate taxes, and on Monday a new report by District Economics Group economist Michael Udell offered a bold new alternative that is so radically simple that even the most clever corporate tax accountant would have a hard time finding a way around its fair and universal proposition: If a company sells products or services in the U.S., it must pay taxes on the U.S. proportion of its worldwide sales.

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