Wednesday, September 07, 2011

Less Than Nothing

Republican presidential candidate Mitt Romney unveiled an economic recovery plan yesterday. I know what you're thinking...Mitt who? But believe me, he's trying to become the next POTUS, and there are some people who aren't Rick Perry who think he might just seize the nomination.

Mitt has experience in business and would become perhaps our first CEO-style president since, well, since George W. Bush, were he to win. Moreover, he's using his business experience to argue that he can fix the economy:
Mitt Romney unveiled his plan to rejuvenate the American economy here Tuesday, offering a detailed outline that includes repealing President Obama’s health care law, cutting the corporate tax rate, placing sanctions on China as a currency manipulator and immediately reducing taxes on savings and investment by the middle class — and promised to push many of these policies on his first day in the Oval Office.

With his business background, Mr. Romney has portrayed himself as the presidential candidate best prepared to steer the nation at this time of economic distress, and his economic plan is a classic Republican blueprint that relies on tax cuts and reduced regulation — not stimulus — to jump-start the economy.
OK, well, the economy sucks, so I'm willing to listen:
Standing in front of a large banner that read “Day One, Job One,” Mr. Romney detailed the 10 actions he would take the first day of his presidency. Five are executive orders, and the other five are pieces of legislation, including the tax changes, he would send to Congress and request action on within 30 days.

“The right course for America is to believe in growth,” Mr. Romney, a former Massachusetts governor, said at the McCandless International Trucks dealership here. “Growing our economy is the way to get people to work and to balance our national budget.”

In the plan, whose stated goal is to “restore America to the path of robust economic growth necessary to create jobs,” he promised to immediately cut the corporate income tax rate, currently topping out at 35 percent, to 25 percent. Although he did not outline any specific proposals for closing loopholes or otherwise simplifying the tax code, he also promised to make permanent the tax cuts on individuals enacted under President George W. Bush and to eliminate taxes on dividends, interest and capital gains for anyone making less than $200,000 a year.
Yup, that sounds like CEO-style thinking to me...the same kind of "cut taxes on the powerful, never mind the details, just let them run wild, and we'll all be just fine" type of thinking that led to the economic crises that ended GWB's term in office. But more specifically, every person in America who is not a corporation (and as Mitt will tell you, that's not as many people as you would imagine) will have the same income tax rate they now have, but the corporations will pay even less.

The problem with corporations paying even less, though, is that currently a shockingly large number of them are paying nothing at all. Corporations like the behemoth General Electric:
General Electric, the nation’s largest corporation, had a very good year in 2010.

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
OK, so let's do the math. If the current corporate tax rate is 35% and in that climate GE was able to claim a tax benefit of $3.2 billion, how much more will the average US tax payer need to cough up to keep GE rolling in record profits under Romney's proposed 25% tax rate?

But wait...don't answer just yet, because Mitt's just pulling your leg here. He knows that although the official corporate tax rate is 35%, most corporations with means have entire departments dedicated to finding loopholes that already enable them to pay much, much less than that:
Of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate — both federal and otherwise — of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent.
So in order to calculate how much more your average American is going to have tighten their belts to keep profit record-breaking corporations from paying any taxes at all, you will have to figure in all the loopholes they're already taking advantage of that Romney shows no interest in closing.

Let's see: -$3.2 billion paid under the 35% rate - an additional 10% + whatever new loopholes they'll buy under a Romney administration = at least $320 million (unless I have no idea how to do this, which is entirely feasible) ...or, in other words, $1 from every man, woman and child in the country. Mind you, that's probably the $1 most Americans were counting on saving or investing so that they too could benefit from Romney's plans, but...

Labels: politics


Anonymous Anonymous said...

I could be totally wrong about this, I was a liberal arts major not an economist and I'm not grinding any political ax with my comment. But its my understanding that corporations/business of any kind never pay any taxes. The price of their merchandise/services are raised to pass the tax on to the consumer. So its the consumer that pays the corporate taxes by the raised price. This is a hidden tax on consumers. And if the corporation has to employ a huge department of bean counters to figure out how to squeeze through loop holes then their wages are added into the cost for the consumer.

Like I said, I could be wrong about this. It seems that simplifying everything would be better, but then lots of accountants and lawyers would be out of work.

I'm not sticking up for bad behavior in business, just thinking aloud.

9/07/2011 11:09:00 AM  
Blogger Edward_ said...

Anonymous, the taxes paid by consumers on commercial transactions are not the same thing as income taxes paid by corporations. The sales tax you pay on purchases goes to the government independently of whether the company that made those goods made any money (by selling more goods than they had expenses) that year or not.

If a corporation makes no income (i.e., if they have a bad year in which their expenses exceed the money they brought in), they don't pay any income taxes (although they pay other taxes, like corporate taxes, payroll taxes, etc.). This is as it should be.

What's particularly galling about GE is that they did indeed see quite a bit of income in 2010 and still managed to game the system such that they paid no income taxes.

9/07/2011 11:16:00 AM  
Anonymous Anonymous said...

Mitt wears magic underwear , then you have president superfly and another NWO stooge from Texas. Ill never vote again . fuck it i am moving to Uruguay. jobs aint coming back for the majority of american grunts. your competition is a asian engineer who makes $500 a month.

9/07/2011 11:42:00 AM  
Blogger Edward_ said...

Mitt wears magic underwear

Er...let's avoid mocking people because of their religion, can we?

9/07/2011 11:52:00 AM  
Anonymous Anonymous said...

Sorry Ed and to all the Mormons out their . I get wound up. To much coffee. I have a few relatives who are Mormon . The Mormons are team players Thats what i like about them and their word is gold. I just Can't trust Mitt .

9/07/2011 12:06:00 PM  
Blogger Edward_ said...

thanks for that. :-)

9/07/2011 12:09:00 PM  
Anonymous Kurt said...

Ed, if I understand your sarcasm correctly you seem to be suggesting that our problems are caused by too much tax on the commoner and too little on the corporations due to tax loop-holes, and if we could reverse this situation, then all is long as we don't ease up on regulating businesses either, because that works so well so far?
You didn't specifically offer a solution but I'm left with the feeling you would endorse a solution of giving us commoners a tax break, or even a tax elimination, and boost the taxes on the corporations? This could still result in zero revenue gain since it just points the gun at the other head. Then what? Seems to me, no matter how the issue is spun, it indeed is an over-spending problem. And here, the chubbiest elephant in the room is our militarization of the planet. This you can bet ole Mitt wouldn't change one bit - nor would anyone in the potus running except for Ron Paul.

9/08/2011 01:21:00 AM  
Blogger Edward_ said...

I don't know, Kurt. If you have to create that many strawmen and project that many motivations to set-up the sales pitch for your candidate, perhaps he's not all you think he is.

You're "left with feeling" incorrectly about my solution (which may be my fault, I'll concede).

Essentially, I feel the deck has been stacked in the favor of the uber-wealthy (and that includes the corporations, if we're gonna count them as "people" the way Mitt does) in terms of Federal taxes. Hell, the deck's been stacked in their favor in terms of the entire capitalistic system...the government works much better for them than it does for the rest of us if income inequality is anything to go by. And even if this inequality is the result of their being more productive* (as a class) than the middle or working classes are (highly unlikely across the board, mind you), it still holds true that a Democratic society cannot withstand such inequality for very long before revolutionary leanings begin to appeal to enough people to bring one about.

So my solution would be to bring about a bit more parity by, yes, raising taxes (mostly on the top 1%, but also by letting the Bush tax cuts expire), reconsidering Obama's tax breaks for the poor (i.e., ensuring that everyone is paying something), and by all means dropping the corporate tax rate to 25% (with an eye toward keeping as many jobs here and creating new ones as possible) but capping how low that rate can go via loopholes. 20% minimum sounds about right, given the reality of the revenue currently coming in. Had GE been forced to pay 20% of the $5.1 they earned from their US operations alone, that would be an additional $640 million revenue. Add that to the revenue brought in by the other corporations nickeling and diming the tax man and you begin to have some real money.

In other words, true shared sacrifice, that's my solution.

*This coinage of "the Productive class" for rich people is about as offensive (and incorrect) as any term I've ever heard. The idiots promoting it should remember from history that once you strip the working class of their hard-earned pride, they have very little left to keep them from viewing the wealthy as the "enemy." Oh, and, have I mentioned? Today in the US, most of the working class have guns. Find another term.

9/08/2011 08:10:00 AM  
Anonymous Kurt said...

Whaaa?...I never used "the productive class" phrase. Anyway, all I'm suggesting is that we should certainly question certain enormous expenditures such as having U.S. military bases spread all throughout the globe, corporate welfare, and foreign aid, rather than immediately seeing it as a low, or disproportional, revenue problem. I do agree with you that all corporations should pay what's fair to all, but people should not pay federal income tax on their labor. To do so implies the gov owns our lives and are due a portion of it, which isn't the case in a free society like ours(as put forth in the constitution but not in practice anymore). Besides, according to the 1984 Grace Commission Report,
100% of what is collected is absorbed solely by interest on the Federal Debt ... all individual income tax revenues are gone before one nickel is spent on the services taxpayers expect from government."

I've never heard of Obama's tax break for the poor, but, under current income tax code, if one is poor, then one pays no federal income tax.

Yes indeed, Ron Paul is all I think he is. His consistent congressional voting record and philosophy for over 30 years, along with my own research into the issues that are choking our nation gives me the confidence to say so. All other candidates I could give a rat's poopoo about.

9/08/2011 03:46:00 PM  

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