Taibbi on point again

I've written about America's corporations and their aggressive avoidance of paying U.S. taxes before, and I've certainly excerpted the work of Rolling Stone's Matt Taibbi plenty of times as well. Today, those two items came together in a beautiful way, as Taibbi tore apart a potentially overlooked consequence of the so-called "Gang of Six" debt-reduction plan that's been bandied about this week.

At issue is a proposed "corporate tax holiday", a temporary repeal of a tax on repatriated cash from multinational corporations' overseas operations. Under current rules, multinational corporations are exempt from paying U.S. tax on cash that is held by overseas subsidiaries, but they must pay that tax if they attempt to bring the cash back stateside.

Lobbying efforts, however, have insisted that the corporations' inability to bring that cash home has hampered their ability to begin hiring American workers. Similar reasoning led to Congressional passage of a "one-time" tax holiday back in 2004--reasoning that, as Taibbi points out, turned out to be utter bullshit.

For those who don’t know about it, tax repatriation is one of the all-time long cons and also one of the most supremely evil achievements of the Washington lobbying community, which has perhaps told more shameless lies about this one topic than about any other in modern history – which is saying a lot, considering the many absurd things that are said and done by lobbyists in our nation’s capital.

Here’s how it works: the tax laws say that companies can avoid paying taxes as long as they keep their profits overseas. Whenever that money comes back to the U.S., the companies have to pay taxes on it...

Only there’s a catch. In 2004, the corporate lobby got together and major employers like Cisco and Apple and GE begged congress to give them a “one-time” tax holiday, arguing that they would use the savings to create jobs. Congress, shamefully, relented, and a tax holiday was declared. Now companies paid about 5 percent in taxes, instead of 35-40 percent.

Money streamed back into America. But the companies did not use the savings to create jobs. Instead, they mostly just turned it into executive bonuses and ate the extra cash. [Note: many of them also used the cash to increase dividends, simply returning the tax-free cash to shareholders.] Some of those companies promising waves of new hires have already committed to massive layoffs.

It was bad enough when lobbyists managed to pull this trick off once, in 2004. But in one of the worst-kept secrets in Washington, companies immediately started to systematically “offshore” their profits right after the 2004 holiday with the expectation that somewhere down the road, and probably sooner rather than later, they would get another holiday...

I’m shocked there isn’t more of an uproar about this. Could you imagine what the Tea Party would be saying right now if there was a law on the books that allowed immigrants to indefinitely avoid taxes on income sent back to family members in the old country, in Mexico and Venezuela and India?...

As it is, leading members of the Senate are seriously considering giving the most profitable companies in the world a total tax holiday as a reward for their last seven years of systematic tax avoidance.  Hundreds of billions of potential tax dollars would disappear from the Treasury. And there isn’t a peep from anyone, anywhere, on this issue.

We’re seriously talking about defaulting on our debt, and cutting Medicare and Social Security, so that Google can keep paying its current 2.4 percent effective tax rate and GE, a company that received a $140 billion bailout en route to worldwide 2010 profits of $14 billion, can not only keep paying no taxes at all , but receive a $3.2 billion tax credit from the federal government. And nobody appears to give a shit. What the hell is wrong with people? Have we all lost our minds?

I don't usually excerpt at such great length, but Taibbi is almost always worth it. Indeed, he's dead right. There's any number of reasons behind our current budgetary crisis--a couple of long and expensive wars, unwarranted tax cuts to high-net-worth individuals, Medicare Plan D, demographical shifts that have left us with fewer taxpayers and more tax recipients, and the list goes on--but one of the most overlooked items is the ever-declining share of tax revenue paid by our corporations.

Along those lines, Barry Ritholtz passes along a couple of incredibly insightful charts showing the steady decline in corporate taxes paid over the last several decades:

 

The argument, of course, is that lower corporate tax rates help stimulate the overall economy, fueling job growth at home as our largest corporations open up their hiring doors. But with unemployment remaining stubbornly high and large-firm CEO pay soaring to record highs, I think it should be fairly clear where, exactly, this lost tax revenue is ultimately ending up. If you don't tax the corporations, it's just giving another tax cut to the richest Americans, plain and simple.

Trickle-down economics is a scam. Continuing to make cuts to middle-class benefits (like Social Security and Medicare) without addressing such a significant core revenue problem as this is fraudulent. If a corporate tax holiday is indeed passed this summer, shame on the "Gang of Six"--they'd be nothing more than common thieves.

[Rolling Stone]
[The Big Picture]