This fiscal cliff deal saw Third Way corporate democrats institutionalize wealth inequity, allowing the one stick in raising revenue from the rich pass. The $14 trillion debt will now be paid by public spending cuts and cuts to social programs like entitlements/SS/ poverty programs. Those who follow politics knew that Maryland's Third Way democrats were in line to do this, but corporate media fights hard to make sure the electorate does not know what these corporate pols are up to.
The next big loss for 95% of the American people will take the form of corporate tax cuts as dems pretend there is yet another 'crisis' that makes them do it. The 14th amendment makes the debt ceiling unconstitutional so it is not a crisis. They will tell you and me they must lower corporate taxes but cut loopholes and tax breaks making this corporate tax reform revenue neutral. They do not tell you is that all of these loopholes and tax breaks come right back every time! Our public services and social programs never do.
Watch as Maryland's pols including that ex-pat Nancy Pelosi tell us that these cuts are necessary to save the programs. What they are really saying is that with ever falling revenue from the rich and corporations, with workers falling into poverty, and with trillions of dollars in corporate fraud yet to be recovered..there is no money for social programs and public services!
VOTE YOUR INCUMBENT OUT OF OFFICE!!!!
THIS IS WHAT THE CORPORATIONS RECEIVED IN THE FISCAL CLIFF DEBT REDUCTION.....MORE CORPORATE TAX BREAKS!!
Eight Corporate Subsidies in the Fiscal Cliff Bill, From Goldman Sachs to Disney to NASCAR Wednesday, 02 January 2013 08:57 By Matt Stoller, Naked Capitalism | News Analysis
President Barack Obama is flanked by Vice President Joe Biden as he speaks at a news conference following the House vote, at the White House, in Washington, January 1, 2013. (Photo: Luke Sharrett / The New York Times) Throughout the months of November and December, a steady stream of corporate CEOs flowed in and out of the White House to discuss the impending fiscal cliff. Many of them, such as Lloyd Blankfein of Goldman Sachs, would then publicly come out and talk about how modest increases of tax rates on the wealthy were reasonable in order to deal with the deficit problem. What wasn’t mentioned is what these leaders wanted, which is what’s known as “tax extenders”, or roughly $205B of tax breaks for corporations. With such a banal name, and boring and difficult to read line items in the bill, few political operatives have bothered to pay attention to this part of the bill. But it is critical to understanding what is going on.
The negotiations over the fiscal cliff involve more than the Democrats, Republicans, the middle class and the wealthy. The corporate sector is here in force as well. One of the core shifts in the Reagan era was the convergence of wealthy individuals who wanted to pay less in taxes – many from the growing South – with corporations that wanted tax breaks. Previously, these groups fought over the pie, because the idea of endless deficits did not make sense. Once Reagan figured out how to finance yawning deficits, the GOP was able to wield the corporate sector and the new sun state wealthy into one force, epitomized today by Grover Norquist. What Obama is (sort of) trying to do is split this coalition, and the extenders are the carrot he’s dangling in front of the corporate sector to do it.
Most tax credits drop straight to the bottom line – it’s why companies like Enron considered its tax compliance section a “profit center”. A few hundred billion dollars of tax expenditures is a major carrot to offer. Surely, a modest hike in income taxes for people who make more than $400k in income and stupid enough not to take that money in capital gain would be worth trading off for the few hundred billion dollars in corporate pork. This is what the fiscal cliff is about – who gets the money. And by leaving out the corporate sector, nearly anyone who talks about this debate is leaving out a key negotiating partner.
So without further ado, here are eight corporate subsidies in the fiscal cliff bill that you haven’t heard of.
1) Help out NASCAR - Sec 312 extends the “seven year recovery period for motorsports entertainment complex property”, which is to say it allows anyone who builds a racetrack and associated facilities to get tax breaks on it. This one was projected to cost $43 million over two years.
2) A hundred million or so for Railroads - Sec. 306 provides tax credits to certain railroads for maintaining their tracks. It’s unclear why private businesses should be compensated for their costs of doing business. This is worth roughly $165 million a year.
3) Disney’s Gotta Eat - Sec. 317 is “Extension of special expensing rules for certain film and television productions”. It’s a relatively straightforward subsidy to Hollywood studios, and according to the Joint Tax Committee, was projected to cost $150m for 2010 and 2011.
4) Help a brother mining company out – Sec. 307 and Sec. 316 offer tax incentives for miners to buy safety equipment and train their employees on mine safety. Taxpayers shouldn’t have to bribe mining companies to not kill their workers.
5) Subsidies for Goldman Sachs Headquarters – Sec. 328 extends “tax exempt financing for York Liberty Zone,” which was a program to provide post-9/11 recovery funds. Rather than going to small businesses affected, however, this was, according to Bloomberg, “little more than a subsidy for fancy Manhattan apartments and office towers for Goldman Sachs and Bank of America Corp.” Michael Bloomberg himself actually thought the program was excessive, so that’s saying something. According to David Cay Johnston’s The Fine Print, Goldman got $1.6 billion in tax free financing for its new massive headquarters through Liberty Bonds.
6) $9B Off-shore financing loophole for banks – Sec. 322 is an “Extension of the Active Financing Exception to Subpart F.” Very few tax loopholes have a trade association, but this one does. This strangely worded provision basically allows American corporations such as banks and manufactures to engage in certain lending practices and not pay taxes on income earned from it. According to this Washington Post piece, supporters of the bill include GE, Caterpillar, and JP Morgan. Steve Elmendorf, super-lobbyist, has been paid $80,000 in 2012 alone to lobby on the “Active Financing Working Group.”
7) Tax credits for foreign subsidiaries – Sec. 323 is an extension of the “Look-through treatment of payments between related CFCs under foreign personal holding company income rules.” This gibberish sounding provision cost $1.5 billion from 2010 and 2011, and the US Chamber loves it. It’s a provision that allows US multinationals to not pay taxes on income earned by companies they own abroad.
8) Bonus Depreciation, R&D Tax Credit – These are well-known corporate boondoggles. The tax credit was projected to cost $8B for 2010 and 2011, and the depreciation provisions were projected to cost about $110B for those two years, with some of that made up in later years.
Conveniently, the Joint Committee on Taxation in 2010 did an analysis of what many of these extenders cost. You can find that report here.
One of the issues that will come with the corporate tax reform in a few months will be the repatriation tax. This law placing taxes on overseas profits was meant to discourage taking jobs overseas and so far has been forgiven, letting corporate profits from overseas come in to US as low as 5.25%. This is for what these global corporations are waiting for now as trillions of dollars are sitting in overseas shelters.
Obama has said he favors strengthening laws like this repatriation tax again he says to deter taking jobs overseas. He does not have a good record in these promises! GIVEN THAT MOST OF US CORPORATE PROFIT WILL COME FROM OVERSEAS GROWTH FOR DECADES TO COME....IF THEY ALLOW THIS 5.25% TO TAKE HOLD......THEY ALWAYS SAY THIS LOW RATE IS A JOB CREATOR......IT WILL DRAIN OUR JOBS GROWTH AND GOVERNMENT COFFERS. Please shout loudly to stop the push towards the 5.25% repatriation!!!!
September 29 2006 | Filed Under » What is the purpose of a "repatriated tax break", and why is it so controversial? In 2004, Congress passed the American Jobs Creation Act to create new jobs in an effort to boost the economy. One of the results of the act was the implementation of a repatriated tax break, which gave U.S. multinational corporations a one-time tax break on money earned in foreign countries.
The tax break allows foreign earnings to be taxed at a rate of 5.25%, which is significantly lower than the usual corporate tax rate of 35%. Previously, much of the earnings derived from foreign countries were not transferred back to the U.S. because multinationals can defer paying taxes on foreign earnings until they decided to send the earnings back in the form of a dividend.
Ultimately, the government's rationale is that the tax break would act as a good incentive for American multinationals to send their foreign earnings back to the U.S., and then use the earnings to create more American jobs and/or expand operations in the U.S.
Critics of the idea believe that because the companies aren't required to use the repatriated earnings for the sole purpose of American job creation (but the bill does prevent companies from using the money for executive compensation, dividends and stock investments)
OVER DECADES THESE POLS ALWAYS PRETEND TO DO A REVENUE NEUTRAL REFORM OF CORPORATE TAXES. EACH TIME WHAT THEY DO IS LOWER THE CORPORATE RATES WITH CUTTING LOOPHOLES AND TAX BREAKS AND CALL IT REVENUE NEUTRAL. WHAT THEY ALWAYS DO AS WELL IS SIMPLY BRING ALL OF THE LOOPHOLES AND TAX BREAKS BACK AGAIN-----IT IS NOT REVENUE NEUTRAL.....IT IS NOT A JOB CREATOR.....THEY ARE MISLEADING YOU!
VOTE YOUR INCUMBENT OUT OF OFFICE!!!
The myth of corporate tax reform
By Robert Pozen,September 28, 2011
House Speaker John Boehner recently joined the chorus of notables calling for corporate tax reform in any deficit-reduction package. Both Democrats and Republicans want to reduce the corporate tax rate from 35 percent to 25 percent, in return for eliminating the tax credits and deductions available primarily to U.S. corporations.
The rationale behind the proposal is sound in theory — a lower tax rate would help all profitable corporations. By contrast, Congress often bestows tax benefits on industries that are perceived as potential winners or those wielding political clout.
In theory, this proposal would also be revenue-neutral. The rate reduction would decrease U.S. tax revenue by approximately $600 billion during the next five years, but this would be offset by the additional tax revenue gained with the elimination of corporate tax “loopholes.”
But the chances of this proposal passing Congress on a revenue-neutral basis are slim. Most of the corporate tax benefits that would need to be repealed have both a significant positive effect on economic growth and deep political support among powerful constituencies. Moreover, repeal would hurt many non-corporate entities, such as local governments and partnerships running operating businesses, that would gain nothing from a lower corporate tax rate.
The biggest portion of tax benefits to be eliminated, more than $200 billion over five years, encourages U.S. companies to expand their activities in the United States — just what we need in these slow economic times. Examples include:
●$109 billion for accelerated depreciation that encourages U.S. corporations to buy machinery or equipment.
●$62.4 billion for U.S. corporations that locate their manufacturing facilities here, rather than abroad.
●$43.4 billion for U.S. corporations that increase their research activities and expense their experiments.
A second large chunk of corporate tax benefits, almost $100 billion over five years, supports the issuance of state and local bonds. Of this total, $73 billion is for the interest exemption on bonds for “public purposes” — which reduces the borrowing costs of cash-strapped states and cities. The rest is for the interest exemption on “special purpose” bonds — used to construct airports, docks and hospitals as well as water and sewage facilities. Such construction generates jobs and lays the foundation for future economic growth.
A third category, worth $54 billion over five years, provides tax benefits to specific industries. Some of these might seem vulnerable because they support industries under political attack, such as oil and gas, coal and other minerals. However, the total value of tax benefits to these industries that focus on extraction is less than $12 billion over five years — a minute portion of the $600 billion needed to finance the proposed reduction in corporate tax rates. Most industry-specific benefits go to less controversial businesses, such as $18 billion for non-taxed earnings by credit unions, mutual savings banks, nonprofit health insurers and other types of cooperatives.
A fourth category of tax benefits, worth about $50 billion over five years, promotes various social causes. The two largest in this category are tax credits for low-income housing ($34 billion) and tax deductions for corporate charitable contributions ($13.4 billion). Both of these tax benefits have a well-developed rationale and a well-organized group of political supporters.
The final category is the most complex — $213 billion for taxes deferred over the next five years on foreign profits of U.S. corporations. Although such corporate profits are officially subject to a 35 percent U.S. tax rate, this tax can be avoided as long as those profits are held by U.S. corporations in foreign bank accounts.
In other words, corporate tax reform can be achieved on a revenue-neutral basis only if Congress decides to raise $213 billion by repealing the current ability of U.S. corporations to defer indefinitely the 35 percent U.S. tax on their foreign profits. Instead, Congress is considering a proposal that would temporarily allow U.S. corporations to repatriate their foreign profits at a tax rate below 6 percent.
Of course, a compromise could be reached by lowering the corporate tax rate to 30 percent and retaining half of the current tax benefits for U.S. corporations. In a recent Grant Thornton survey, however, most corporate executives said that they would be unwilling to give up their tax credits and deductions unless Congress reduced the corporate tax rate to 25 percent or lower.
In short, corporate tax reform on a revenue-neutral basis would be politically unrealistic. Quick action to achieve this end is also likely, without careful management, to have an adverse impact on our fragile economy. Congress should focus its tax reform efforts on other dysfunctional aspects of the U.S. tax system.
Robert Pozen is a senior lecturer at Harvard Business School and a senior fellow at the Brookings Institution. His latest book is “The Fund Industry: How Your Money Is Managed.” He can be followed on Twitter: @pozen.
HAVING GOTTEN ABSOLUTELY THE LEAST HE COULD IN REVENUE FROM THE RICH IN THIS FISCAL CLIFF DEAL AND KNOWING HE WILL BACK A PLAN TO LOWER CORPORATE RATES, WE KNOW THAT THESE THIRD WAY CORPORATE DEMOCRATS WILL CUT ENTITLEMENTS AND SOCIAL PROGRAMS TO PAY FOR IT AND HAVE THE PUBLIC PAYING THE ENTIRE $14 TRILLION IN NATIONAL DEBT!!
THERE WILL BE NO REVENUE GENERATED FROM THIS CORPORATE TAX REFORM!
Obama's Tax Threshold Concession Bodes Ill for Debt Ceiling Talks
Wednesday, 02 January 2013 11:40 By Dean Baker, The Guardian | Op-Ed
President Barack Obama speaks about the fiscal cliff during a news conference at the Eisenhower Executive Office Building in Washington, December 31, 2012. (Photo: Luke Sharrett / The New York Times)The president won re-election promising to raise taxes on those earning more than $250,000. Now he's already capitulating.
There are three points that people should recognize about the fiscal cliff deal that appears to have been agreed by President Obama and the Republicans in Congress. The first is the simple and obvious point that we have gone over the cliff. There was no deal approved by Congress and signed by President Obama before the 1 January deadline.
This is important because the budget reporting on the "fiscal cliff" repeatedly asserted that the country and the economy faced dire consequences from not having a deal reached by this deadline. They repeatedly asserted that we risked a recession, grossly misrepresenting forecasts from the Congressional Budget Office, and others predicted the consequences of leaving higher tax rates and large spending cuts in place for the whole year.
There was also the prediction that the financial markets would melt down if there was no deal approved by the deadline. While the markets are not yet open, they actually rallied on the last day of 2012 on the news that the outlines of a deal had been agreed, even though the deadline would almost surely be missed.
In other words, the financial markets responded as many of us non-insiders predicted. As long as it was clear that a deal would be forthcoming, they didn't give a damn about the fiscal "cliff" deadline. Chalk this one up as yet another example of the experts – the people who report on the budget and the economy for the Washington Post and other major news outlets – not having a clue.
The second point has to do with the substance of the deal. For those who wanted to see key programs like social security and Medicare protected, this deal is pretty good news. The hare-brained idea of raising the age of Medicare eligibility to 67 seems to be off the table.
The plan to cut social security benefits by an average of 3% by changing the indexation formula for the cost of living adjustment is also, at least temporarily, off the table. The deal also continues the period of extended unemployment benefits, ensuring that 2 million unemployed workers will continue to receive checks.
On the revenue side, President Obama gave in to some extent, raising the threshold for applying the Clinton era tax rates to $450,000, compared to the $250,000 level he had touted during his campaign. This is a gift of roughly $6,000 to very rich households, since it means even the wealthiest people will have the lower tax rate applied to $200,000 of their income. Perhaps more importantly, it continues the special low tax rate for dividend income, with the richest of the rich paying a tax rate of just 20% on their dividend income.
The resulting loss of revenue from these concessions is roughly $200bn over ten years, or about 0.5% of projected spending during this period. By itself, this revenue loss would not be of much consequence; what matters much more is the dynamics that this deal sets in place.
This is the third point. President Obama insisted that he was going to stick to the $250,000 cut-off requiring that the top 2% of households, the big winners in the economy, go back to paying the Clinton era tax rates. He backed away from this commitment even in a context where he held most of the cards. We are now entering a new round of negotiations over extending the debt ceiling where the Republicans would appear to hold many of the cards.
While the consequences may not be as dire as the pundits claim, no one could think it would be a good idea to allow the debt ceiling to be reached and force the government into default. The Republicans intend to use this threat, however, to coerce further concessions from President Obama. The president insists that there will be no negotiations over the debt ceiling: no further concessions to protect the country's financial standing.
At this point, though, is there any reason for people to believe him?
This is a president who encouraged members of Congress to vote for the Troubled Asset Relief Program (Tarp) in 2008 with a promise that he would put bankruptcy cramdown for mortgage debt (allowing restructuring of housing loans for people with distressed mortgages) at the top of his agenda once he took office. This is a president whose top aids boasted about "hippie punching" when they ditched the public option in the Affordable Care Act. This is a president who has explicitly put cuts to social security on the agenda, while keeping taxes on Wall Street speculation off the agenda.
And this is a president who decided to put deficit reduction, rather than job creation, at the center of the national agenda – even though he knows the large deficits are entirely the result of the collapse of the economy. And, of course, he is the president who appointed former Senator Alan Simpson and Morgan Stanley director Erskine Bowles to head his deficit commission, enormously elevating the stature of these two foes of social security and Medicare.
Given his track record, there is little doubt that President Obama can be trusted to make further concessions, possibly involving social security and Medicare, in negotiations on the debt ceiling. Oh well, at least we can laugh at the experts being wrong about the fiscal cliff "Mayan apocalypse".