Guest Post: Paul Ryan's Budget Arithmetic Makes No Sense

Tyler Durden's picture

Submitted by Nomi Prins

Paul Ryan's Budget Arithmetic Makes no Sense

Leaving aside for the moment
the petty let's be children and see if we can grind the government to a
halt game going on amongst parties and sub-parties, and the fact that
both parties blessed every single debt cap increase placed before them
in equal measure over the past decade of Bush *2 + Obama * 1/2, I just want to focus on House Budget
Chairman, Paul Ryan's, corporate tax decrease proposal for a second -
because the math is so bizarre.

Looking at 2010 - the Federal government took in about $2.1 trillion worth of tax revenues, 8.9% of those
came from corporate taxes, or about $187 billion. That left individuals
footing 41.5% of the bill through individual income tax and another 40%
through social security and retirement taxes (get it - we do pay into
the system, $840 billion dollars in 2010 to be exact), with the
remainder of tax receipts coming from excise and 'other' sources. (The
percentage of federal tax revenues that corporations paid in 2009 was
6.6% - the lowest on record.)

The notion that slicing the corporate tax rate from 35% to 25% would spur large corporations to either:

a) fire their accounting staffs and do their returns on Turbo Tax 

b) willfully bring all their relevant earnings onshore

c) engage in major hiring sprees or

d) pay rank-and-file workers proportionately more and CEOs proportionately less  than in the past 

is obviously ludicrous, though not to
Ryan or the GOP or apparently, the portion of the Dems that aren't
spitting at them with their calculators. 

Besides that, it's not supported by
fact. To the contrary, since the 1930s, each year in which corporations
paid less than 10% of the overall federal tax receipts, coincided with
recession and unemployment spikes. The last time that the overall
percentage of corporate tax receipts was greater than that of individual
ones was in 1943. In other words, when things are shaky for the overall
economy, corporations bear a proportionately lower share of tax
revenues than individuals. This is not exclusively, but certainly
probably, due to their ability to move stuff around their books and hire
scores of CPA's to help.

During the 1920s, Treasury Secretary,
Andrew Mellon substantially hacked tax rates for companies and the
general public under the premise that a magical 20% tax rate would
discourage the rich and the corporate from seeking off-shore tax havens
and on-shore loopholes. Though Mellon did manage to balance the budget
after World War I, the tax practice led to an over-bloated and
over-leveraged financial economy during the 1920s followed by the Great
Depression. It didn't make charities out of companies. Even though it
was more progressive than what we have today.

Sure, the budget stands a bloated mess.
But the revenue side and mechanism is far more broken than the spending
side, which itself grew due to the cost of wars, weapons and financial
subsidies to the nation's richest people and corporations (especially
the Wall Street ones). Lowering the corporate tax rate would merely
reduce the share of corporate taxes getting to the federal till even
further. 

Companies like GE may operate under a
35% tax rate in theory, but in practice that rate could be 50% or 0% and
the result would be the same, not only because of the complexity of the
loopholes in the corporate tax code, but also because there is no
wherewithal in the government, or the Treasury department to do anything
about it. Hell, the Treasury Department assisted GE Capital, GE's
financial, er - hedge fund - arm, when it needed a 'crisis' bailout. The
FDIC stepped in with a $140 billion guarantee for their debt in 2008
and 2009. Not only didn't GE pay any taxes during those years, but for
2010, the company managed to manufacture its largest tax refund - $4.1
billion.

How is lowering the corporate tax rate
going to change that exactly? Uh, it's not. What it would do, is create a
wider budget gap and send more politicians scratching their heads over
why. So, it's really just a super-bad and dumb idea.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
NOTW777's picture

put your check to obama in the mail - prins. all is good, just leave the corruption in place

AR15AU's picture

35% tax rate is an abomination to a free society, and this statist hooker fails to recognize that.

DoChenRollingBearing's picture

- 1 for this POS article.

I have a better idea.  Let's just cut government spending across the board!  Everything gets cut some.  10% might be a nice place to start.  The military, entitlements, everything.

Though if I were President, I would pick and choose cuts with gleeful abandon...

New_Meat's picture

DCRB-

How 'bout old "Silent Cal" in early 1920's?  He caused the economy to slurp in, then "markets cleared" and "voila' "

Please come up here and become Gov of the "Bay State".  Please?  You have a better idea.

- Ned

{and OT--do you have any info on Japan and  pachincko?  perhaps you have answered b4?  Just wondering.  Thx }

DoChenRollingBearing's picture

Ned!  Mass. too cold for this Bearing!  But, if I had to and it being Mass., I would probably cut everything 15%!

...

Re Japan, I am following this as closely as I can because we source 85% or so of our bearings from Korea and Japan.  Today's article about India banning Japanese fish imports of some kind had an interesting Reply that showed that the Fukushima radiation would be carried by the winds to southern Japan and then over S. Korea over the next few days  Ugh.  

I also read somewhere today that it looks like Fukushima will likely turn out to be the world's worst man-made disaster (I presume that excludes wars).  Ugh again.

 

EDIT:

Disclosure, since I know nothing of Massachussetts' state finances, the above 15% is really meant more as humor than a real proposal.

On the other hand, make me governor of California, and yes I would cut, cut, cut, cut and cut.

stephenwv's picture

HELLO???  Where does business tax money come from? Do they print it?

HELLO???   Where does all the free money given to the states by the Federal government come from?

HELLO?  Where does all the state money paid to local and county government come from???

HELLO??   Where does all the money come from to pay the salaries and pensions and healthcare and taxes of ALL Government workers???

HELLO???   Where does all the money come from to pay the bloated prevailing wages of government contractors union workers???

HELLO???   Where does all the money come from that pays the salaries, healthcare, retirement, and taxes of ALL employees that get most of their income as a result of government contracts, grants, and purchases???

ALL GOVERNMENT SPENDING IS PAID BY THE REST OF US THAT HAVE REAL JOBS.    HELLO????   Do you get it yet????

 

Look,  everyone agrees that the consumer drives the economy.  The consumer spending is efficient spending creating real demand for goods and services that create real jobs and real economic growth and prosperity.

 

The government spending is downsizing the real consumers' ability to grow real demand spending to effect real economic growth and real GDP growth and prosperity.

ALL Government spending comes ONLY from those of us that have REAL jobs.   The Government then redistributes that money as it sees fit with the financial beneficiaries being ONLY those that do not have real jobs.   Is it starting to sink in yet???

This redistribution to create consumers is artificial.   Created by government.  THIS IS DONE BY OUR CAREER POLITICIANS WHO HAVE BEEN CHOOSING THE WINNERS AND LOSERS.    

HELLO???   The winners are receiving the government money.   The losers are paying all the money that, one way or another, the career politicians pay out to hacks and special interests.

 

As for the vilification of businesses and banks.  They only do and get away with that which the career politicians want/allow/require/let them do.   The Career Politicians are responsible.  Profits go to the top because they do not have to go to the bottom (workers).  The profits do not have to go to the workers because there are too many workers and not enough jobs.   Why?  20 million guest workers and illegals.  10 million legal Americans unemployed.  Go figure.   The career politicians have not really effectively enforced the guest worker and immigration laws.   Their personal and special interests want it that way.   This is not what is best for the American People and America.

 

BOTTOM LINE:  We are responsible for electing these career politicians.   WE are responsible for not paying attention.   We are responsible for having trusted the career politicians to do what was actually best for the People and the Nation.   WE were asleep.   Shame on us.  They woke us up.   WE WILL NO LONGER BE SILENT.

We are now paying attention.   We will now hold them accountable.   We gave them the first small taste of our bottom up leadership on Nov. 2, 2010.   2012 will take care of the rest of them that just don't get it.

We don't work for them, they work for us.

 

High Plains Drifter's picture

quit fighting wars and bring the troops and navy home and disband most of it and quit being a slave to raytheon.........

Bobbyrib's picture

"Though if I were President, I would pick and choose cuts with gleeful abandon..."

Would it be like the Republicans' who just voted to extend farm subsidies (put in place by FDR's brain trust of Liberal Progressives after they visited the USSR), but now want to slash other social programs?

earnulf's picture

DCRB, while I enjoy most of your postings, this reply was not one of them.    The Politicians in DC use fuzzy math all the time, to make thier point that they can't afford to use real math or it exposes too much.   We could cut 10% across the board and it wouldn't be enough to cover the interest on the national debt.

Ryans proposal was DOA and just another shot in the finger pointing over who's fault the shutdown will be.     It wasn't realistic to begin with considering Defense was verbotten.

If we cut 10%, froze spending on the rest and managed to increase income by 10% it would still take three years (10% each year) to reach a "balanced budget"...We are not going to see a 30% increase in revenue in this economy and no one on the hill has the courage to propose sensible cuts that would actually do something.

The new healthcare bill alone created a "federal police" along with reporting standards for metal purchases and who knows what else in it's 3,000-plus pages.    What that has to do with getting healthcare to people who need it, I don;t know.

shargash's picture

The economy was healthiest and the nation strongest when the top income tax rate was 90%. The country has done nothing but go downhill since.

Dr. Acula's picture

Cum hoc ergo propter hoc

Tejano's picture

The country has done nothing but go downhill since that abominable tax and that damnable bank were imposed upon the people of this nation.

Long past time to water that tree.

 

YouBetYourLife's picture

Are you referring to Jefferson's quote, that "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants" ?

A Nanny Moose's picture

I am busy honing my alchemical skeelz. About to turn these beers into urine. Will that suffice?

John117's picture

You mean when the US had no other competition left in the world after we bombed Europe and Japan back to the stone age...and then rebuilt them?  Ah the 50s, such a heady expansive time.  

Why don't you tell exactly how many folks came anywhere even near earning 400K (top bracket) in the 1950s? 

Get Real.  It's 2011, pal. 

http://www.truthandpolitics.org/top-rates.php#fn-6

Blano's picture

If you're not voluntarily paying 90% already, STFU.

Pool Shark's picture

 

That's funny...

I thought this country functioned pretty well and became a world power (with Roosevelt's "Big Stick" navy) in just 140 years with no income tax whatsoever...

What did you learn in history class Shargash?

 

A Nanny Moose's picture

Uhhh...you prepared to detroy the productive capacity of the rest of the world to get there? That's how we did it last time in the little tit-for-tat we like to call WWII. At the end nobody else had any industrial capacity. We eliminated the competition.

ZakuKommander's picture

So abominable, in fact, that GE paid nothing! LOL

Tejano's picture

That would be the PERSONAL income tax, Comrade.  Of course GE paid nothing.  I pay more than nothing - anything is too much.  GE pays no corporate tax because their lawyers wrote the tax code. Immelt owns the US presidential palace.

AchtungAffen's picture

I tell you about abominations. An ever decreasing tax rate for corporations, and yet they rarely pay any taxes. And their participation in tax's total revenue still is kinda low (considering the rest of the bill is footed by individuals, specially those who can't avoid em - those who have less). You can lower that rate and you'll still get no corps. to pay anything. Even more nowadays with so many people working for free just to be able to put in their CV's that they weren't unemployed. Damn, I'm thinking about starting a business, you know how great returns on cotton were, right? I might start a plantation myself. And I'm only gonna hire Americans who work for free. And considering I'm not in the states, I'm not gonna pay em a plane ticket. Just a place inside a container carrying ship. It's a return to the good old days, you wanna sign up? Polish your CV with exciting experience in the cotton picking industry now!

Skeptical_10016's picture

Thank god there are other people out there who "get it".........government is not an effective "allocator" of capital, "innovation", job creation, "efficiency", "waste reduction", well, much of anything.

Is it any small wonder that Washington DC has seen the fastest home price appreciation & real income growth over the past decade of any STATE in the UNION? (I know DC isn't a state, per se, but that's how the economic table was presented.

Rich liberal doo-gooders.......always blame the adult republicans FOR TRYING TO CLEAR UP THE LIBERALS MESS!

To continually point out the budget under President Blow Job (aka Slick Willy) is a joke......heard of SPURIOUS CORRELATION? WHY NOT GET TO CAUSATION.......the tax rates had very little to do with it as the "surplus" was driven mainly by (1) declining interest rates (2) Slick Willy changing the debt maturity profile (see moving to volatile short term funding) (3) Manipulating the long end of the yield curve (no more long bonds) (4) SPENDING REDUCTIONS (as % of GDP) (5) AGAIN, ADULT REPUBLICANS IN THE HOUSE LOCKING THE BASTARDS OUT!!!!!!!!!

The Ryan plan is far from perfect, but as Barack said many times, its about COMPROMISE.......So any good negotiator would advise not to begin with the plan you want, but give yourself some negotiating points.......AT LEAST THE GOP HAD THE BALLS TO TAKE THE LEAD

traderjoe's picture

I appreciate some of your comments but allow me to stick my two cents in right here. ANY austerity - in an attempt to pay 'our' debts is merely carrying water for the TPTB. They want to get paid back. And squeezing austerity merely will complete the transfer of wealth to the elites/bondholders. Austerity assumes the debt is legitimate. It is not. We should not be borrowing our money from the banks and the Fed. Default is the best option for the people.

Then we can create a people's budget - no wars, no standing armies, no interest, etc.

mdwagner's picture

Absolutely right.  People need to stop falling for this partisan nonsense.

If the banks want this, that's all you need to know.  Paul Ryan gets most of his money from banks.  Politics and government is like a tennis match with the banks controlling both players.

MiguelitoRaton's picture

From the title I was expecting real math instead of this touchy-feely crap. Yeah get rid of loopholes and lower the overall rate...voila more corporate tax receipts. ZH how can you pass on this statist crap? Oh, we paid for our social security, no you paid it under the guise of social security and it was already spent as regular tax receipts...the ponzi continues.

Professor Hindsight's picture

I've had it with these GOP dumbasses. These idiots need to be voted out they only make things worse for the middle and lower class.  

Corn1945's picture

I'm really amazed at this mindset. We clearly have a jobs problem in this country and the solution is to dis-incentivize people who want to start businesses and create jobs by taxing them to death? Then the "middle and lower" classes wonder why they have no jobs?

The solution is to eliminate this woman's former employers (Goldman Sachs and Bear Stearns) and reward real, productive businesses for creating jobs. A small business owner should be rebated for each permanent position that is created.

Professor Hindsight's picture

We are now creating 200K jobs per month. Just give it a little time and we will be at 5% jobless rate in no time.

Decreasing federal revenue will work cause decrease govt. jobs.

Corporations dont need anymore incentives.

Corn1945's picture

We are doing no such thing. Greater than half of the "200k" was created by the fantasy birth-death computer model. The "improvement" in the labor market is not evident in the labor participation rate (now at two decade lows?) or the hourly wage component.

The only reason the unemployment rate is less than 10% is because they don't count people who stop looking for work!

If you truly cared about the "middle and lower" classes you would demand an accurate representation of the labor statistics in this country. The fact that you have a limited understanding of this reeks of an agenda.

Professor Hindsight's picture

The truth will never be acknowledged. It is merely a confidence game to which the majority abides to. So the truth doesn't matter.

Corn1945's picture

More bogus nonsense. The money to pay government salaries comes from the private sector. Every job that exists in the government is one that can't exist in the private sector.

The "lower and middle" classes are struggling so much partly because of the outrageous tax burden they are under. Property taxes in NJ, for example, can easily hit 10k a year for a dumpy house. Where does that money go? Why, it goes to pay the benefits of someone like Joseph DiVencenzo Jr.

http://www.nj.com/news/index.ssf/2011/04/essex_county_executive_apologi....

disabledvet's picture

the answer is to become your own government.  that means "don't pay your taxes at all, raise a private army with Buffet's front running dough and invade Iowa for no apparent reason."  trust me, everything 'll be just fine then.

johnnynaps's picture

Dictator is the Highest paying position on the planet!

Professor Hindsight's picture

It's only a matter of time before the federal government bailouts the states.

All the funding will eventually come from the federal reserve not the private sector in order to fund the debt.

Besides deficits don't matter in this dimension.

The private sector will eventually become extinct.

disabledvet's picture

it is a "dimension."  at first i thought:  Kafka.  Then, no Dali.  But now I realize "it's the Comedy Channel in Hell."  I can't stop laughing at it--it's killing me.  Literally!  WTF's funny about...ah, forget that thought.

Teamtc321's picture

by Professor Hindsight

"Besides deficits don't matter in this dimension.

The private sector will eventually become extinct."

 

How about we take a vote to see if the fed and banksters should become extinct?

On second thought, let's don't take a vote............

 

Lednbrass's picture

Not happening, state bailouts would spark a massive political uproar and political crisis.  At the point the other states might as well just hand out money.

Too many people despise and are looking forward to the crash of California, Illinois, etc. Much of the rest of the country would flip.

 

MiguelitoRaton's picture

+100 corn hole the silly statist hindsight, 200K jobs a month, what a fool to believe that. prof. hindsight probably thinks that the debt/gdp is less than 100% too (uh add in Fannie, Freddy and unfunded liabilities). You would think that someone on ZH would not buy this crap.

Teamtc321's picture
by Professor Hindsight
on Tue, 04/05/2011 - 19:47
#1139127

 

The truth will never be acknowledged. It is merely a confidence game to which the majority abides to. So the truth doesn't matter.

 

I'm sure glad you posted all your elitest spew tonight you piece of shit bankster troll. 

Giggle bitch, but remember that when you have your night light on and sucking your thumb.

You fuck's have way under estimated the so called sheeple you think you own mfer.

Finish your ponzi, get it started....come on in, the water is warm.  

Don Smith's picture

Do you have any idea of the length of time it will take to get back to 2006 employmentnumbers at 200K jobs a month? About ten years with the population growth.

Your second sentence is unintelligible, and your third is uninformed. 

Professor Hindsight's picture

200k is just the start. At one point we were losing 600k+. Who say we cant start adding 600k a month.

In the second sentence I ment to say that by decreasing government revenue, we will lose government jobs which will be counter productive and delay the recovery.

When the labor market improve then we can cut government spending.

Dr. Engali's picture

Rah rah rah go Obummer. The fact is labor will not improve as long as there are so many over paid pencil pushing porno watching bureaucrats sucking the life blood out of this nation. Get rid of the majorty of those boils on the hind end of society and we will be better off.

calltoaccount's picture

instead of getting rid of them-- how about requiring them to do their fucking jobs and enforce the laws on the books against outright fraud.  The higher ups at the SEC, Congress and other govt agencies have been sucking Wall St. dick (and likely some Koch as well) for at least the past dozen years.  They  have been corrupted/bribed into incompetence , inaction and or malfeasance by venal vulture corps and banksters to betray their oaths and their country.  As someone so well said above, exhortations to austerity are bs distractions/misdirections from the massive ongoing criminal manipulations and theft that are responsible for the financial crisis and most of the deficits we face. 

Teamtc321's picture

"When the labor market improve then we can cut government spending."

You are a complete fucking love the bankster troll.

The so called labor pool is getting very sick and tired of hearing how to eat a shit salad there  "Professor Hindsight"

I would walk softly bankster troll, ever heard the saying, walk softly but carry a big stick?

Small business, ranchers, farmers, construction worker's, drivers etc, are starting to tap there boot's mfer.

Until that day bankster troll, we will keep our gun's free and are BTFD!

 

Blano's picture

Professor Horsesass

There, fixed it for you.

Jerome Lester Horwitz's picture

"In the second sentence I ment to say that by decreasing government revenue, we will lose government jobs which will be counter productive and delay the recovery."

So. using this logic, we heavily tax private businesses and employees, thus ensuring we end up with less of both, so that we can create more government jobs. Brilliant. You may well be the next Nobel Prize winner in Economics!

Dr. Engali's picture

Man are you really that gullible ? Or just a government welfare queen? If you think we are creating jobs you're nuts. More than half the "jobs created" were from the birth death model.

Landrew's picture

We need 200K jobs a month to stand still! At that pace we will never have less then 16% unemployment!

oldmanofthesee's picture

You read like a perfect fool, Professor. $5,000,000,000,000 in debt, since the dims ran the Congress (2006)!