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Big Boys Duke It Out
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Faye Dunaway had a great line in the movie Chinatown. She said:
I don’t get tough. My lawyers do.
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Some of the biggest titans of industry are currently in brawl over a ton of money. As is usual in America, when powerful forces get into a fight they turn to their lawyers (and lobbyists) to do the actual punching. While this may appear to be civil, it’s not. There’s too much at stake.
The issue is the $1 trillion of earnings that corporate America has piled up outside of our borders. This money represents the profits from foreign activities that have not been repatriated back home. This loot has already been taxed in the foreign jurisdiction where the profits have been made. The average tax on this pile of money is only 12%. To bring the money home would trigger an additional tax liability to the IRS equal to ~23% (35% marginal tax minus 12%, foreign taxes paid).
What’s at stake is $250 billion. With that much money on the table the big hitters get the best lawyers and lobbyists to “Get tough”.
On one side of this slug fest are 50 big companies including Apple, Cisco Systems, Devon Energy, Google, Microsoft, Oracle, and Pfizer. They are jointly represented by a slick lobbying outfit called WinAmerica. (link) This is the mission statement of WinA:
Congress should pass legislation to offer an immediate reduction of taxation on income earned overseas by innovative American businesses to allow that money to be brought home and invested in the United States.
Gee! That sounds smart doesn’t it? Some details from WinAmerica:
Currently, there is over $1 trillion earned by American businesses trapped overseas. An essential first step would be to allow these worldwide American businesses the freedom to bring up to $1 trillion in global earnings home to invest it now into our still fragile economy.
Let’s be very clear on this. GOOG/AAPL/MSFT/GE etc. are pushing for a tax holiday. They want to bring all of their foreign profits back home and pay no US tax. This has been done before and there is very little evidence that those companies who benefited in the past actually invested in the US and created jobs. They paid dividends and reduced debt with most of the money.
On the other side of the tax holiday being pushed by WinAmerica are Kimberly-Clark, Zimmer, United Technologies and Caterpillar. Corporate officers of these big hitters testified on this matter to Congress. This group is arguing against a holiday. From a Newsweek report:
"The four chief financial officers testifying at the hearing said they oppose a one-time repatriation holiday that would allow companies to bring back overseas profits at a reduced rate."
So what’s this really about? Why are the titans of American industry spending big bucks and beating each other up? Enlightened self-interest is the answer.
Apple, Cisco Systems, Devon Energy, Google, Microsoft, Oracle, and Pfizer had a total of $164 billion in accumulated undistributed foreign profits. They want that money in their pockets and they don’t want to pay a penny in taxes. This group is prepared to make concessions regarding future tax benefits (deductions economically related to foreign earnings) in exchange for the cash.
Those apposed to a one-time holiday don’t have the big stash of foreign cash, so a holiday does them no good. In some cases a holiday would create a competitive disadvantage. This group is more interested in maintaining the existing tax structure as it is. They want to keep credits for US located activities of R&D, workforce training, and manufacturing.
So the pissing match between the titans (and their lawyers) is about money. It’s about greed and tax avoidance. Surprised?
I think the scale is going to tip in favor of the nice folks at WinAmerica. This is the argument they are selling:
The likelihood of another stimulus, additional tax cuts, or action by the Federal Reserve is low, and unemployment is still too high.
Providing American businesses with incentives to invest at home is a common sense solution that will immediately inject up to $1 trillion into our economy and provide businesses with the certainty they need to help get Americans back to work.
The first part of this is true. There is no stimulus coming from the monetary or fiscal side. The second part is bullshit. There is a ¼ Trillion of tax revenue at stake. That will be traded for a promise of some jobs in the US. There will be some jobs created as a result. But the cost of a $60,000 job will be $500,000 in the final analysis.
Either way this plays out Corporate America will win, the average American will be the loser.
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If the US wants American jobs to go to Americans, they need to let/encourage Americans to compete for the jobs (what a novel economic concept). I hesitate to blame businesses for outsourcing American jobs overseas or to illegal aliens...a good business exists to maximize profits, not just to earn a modest wage. Excessive government intervention drives businesses out of America. The government sets a price floor, called minimum wage, and then claims that menial labor jobs are just jobs that "Americans won't do," while subsidizing the meth-smoking, couch-potato life styles of those same Americans who "won't do" the work. Then they burden a business with taxes and insistence that the business also offer its employees medical insurance and retirement plans. Why should a business put up with it? Out of their patriotic duty? This is a problem to be fixed by removing stupid laws, not by creating more.
So, continue on with the globalists' mantra that Americans must give up their standard of living and the protection of justice and high levels of achievement--not because of unavoidable disaster, not because the international bankers stole it and offshored it--but because we are lazy. We don’t buy it.
When the globalists Kissinger and Rubin made pacts with the Red Chinese to replace “Made in the U.S.A.” with “Made in China” they forgot to insist on democracy for the Chinese people. Pseudo capitalism can never give the spring to invention that our Founding Fathers gave to Americans.
Slave wages and slave treatment are a disincentive to innovation and wealth. That is not what created America, the greatest economic miracle on earth. Freedom created America.
A banker-controlled Congress and policies that advocate monopoly and special privilege for the friends of those who control the NYFed, such as Goldman Sachs and Chase, create French revolutions. As Louis found out, mankind will not willingly be a peasant with a “noble” riding on his back.
The Fed is not creating wealth. “Wealth cannot be created out of thin air. Only production effort can create TV sets, refrigerators, automobiles and houses. Money can be created out of nothing, because money is not wealth. --Robert J. Ringer, Restoring The American Dream, 1979
China, riding on the back of the commandeered machinery of Americans’ stolen manufacturing base, patents and educational system, is not going to be the engine that pulls the globalists’ world economy. Americans are going to revolt and take their economy back from the oligarchs who moved in and stole it.
The New York Times believed Stalin’s Five Year Plans worked; now they want you to believe China’s is working.
The globalists offshored America’s manufacturing base to China while Congress and our so-called Presidents turned a blind eye. And now the “slug fest of 50” want to bring their ill-gotten gains back into the states, under the full protection of the American System, and retain the USA as an unemployed consumer base!
If they can kick Americans out of their livelihoods and means of production, by Gad, Americans can kick them out of the country. And good riddance!
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foreign governments (meaning foreign citizens who elected decent politicians) were clever enough to tax these companies, until Amerikans wake up and get political they will continue to be vultured by the corporo=kleptocrats
Just how many ways can we (the US taxpayer) be screwed. A trillion here, a trillion there and Everett Dirksen will turn over in his grave. Thank you Bruce, I follow all of your comments, so keep up the good Bear food.
Great article, Bruce.
It’s uncanny how many criminal sides there are to this prismatic crisis that now are being exposed. Every facet of it shows itself to be another view of the criminals – the tax havens, the push for tax evasion, the use of offshore slave and low-wage labor and H1-B visas that destroy American livelihoods and reduce American wages and standards of living, the access to bailout money, the manipulation and handling of markets…
Every one of them is a staggering duplicity of injustice – the triumph of global monopolies over legitimate American businesses trying to be fair and loyal to their countrymen.
It goes back to John D. Rockefeller whose chief ambition was to eliminate all competition so he could price gouge and corner special privilege – so he could force Americans either to pay his prices or park their cars…
How about elimination of the corporate tax...make it ZIP. Taxes will be paid by the actual recipients of the dough...the owner/share holders. Make it so this is revenue neutral and get corporations OUT OF THE LOBBY business. There is where they do their bribing and political manipulation and other garbage that screws us and their competitors.
Perhaps if they were not trying to tune the system to their favor we could get a decent tax code.... remember....revenue neutral. I as a shareholder pay the tax, effectively the corporate tax and the personal income tax portion....The government gets their dough and the system is relieve of the bribery that distorts every revenue discussion. Heck...all companies could be like ge....wonderful corporate citizens donating their CEO to the government for his wisdom and insight (yes that part was sarc)
no default, they just want to spook everyone rich and poor. washington is and always be full of bullshit artists
"They paid dividends and reduced debt with most of the money."
I doubt very much there is evidence that the repatriated cash goes to pay dividends. More likely to buy back shares to window dress the return on equity, or make up for obscene levels of stock options granted.
Look Bruce, everyone knows that the current situation is not sustainable and the blood is already in the water. It is no surprise that the sharks are trying to get everything that they can, as fast as they can. All things physical continue to disconnect from all things paper. Just who will these global companies be selling to when the world can barely feed itself? Mars? So many structural problems, so little time left for economists to reconnect with reality. Nature and the laws of physics roll on either way and really don't give a shit anyway.
If these were American Citizens what would be the rule?
"As a U.S. citizen or resident alien, your worldwide income generally is subject to U.S. income tax regardless of where you are living. Also, you are subject to the same income tax return filing requirements that apply to U.S. citizens or residents living in the United States"
http://www.taxmeless.com/IRS593Publication.htm
Why should they get a break?
nationalize the fed and erase a bunch of the nations debt
Bankers own the FED.
Bankers do not lose. Repeat it with me now: Bankers do not lose.
The mediaheads always press for an increase in the debt limit...its so easy. But w/o GDP and more importantly job growth, its insane to just increase the debt so the pain goes away for a few months only to come back more intensely. Lets face reality, corporation can't create a lot of jobs in America when our labor force is 10+ times more expensive than China/India. Of course there are exceptions i.e., engineers, teachers, govt/union workers, but for the majority of work we are overpriced and we can't afford the large expensive safety nets used by many.
---"Let's face reality--" you couldn't handle reality.
This whole tax holiday program is a stalking horse for the next administration to approve, not this one. The planners know that Congress and Obama are not going to windfall overseas earnings to the corporations who haven't been employing voters here.
This trial balloon phase is setting up for the kill in 2012-2013. The political climate needs to be a little rosier than it is now in order for the public to buy into this. A few thousand down on the major indices and the public will be clamoring for it or for sure, not objecting to it.
it only goes skin deep...the reality is much darker.
MUST SEE: Flaws of globalization: A prophetic interview with Sir James Goldsmith in 1994 Pt1
http://www.youtube.com/watch?v=4PQrz8F0dBI
Billion Chinese and Indians are willing to work as slaves for the benefit of top 0.1% corporate executives and shareholders. American and European middle class has no chance unless a revolution happens.
Governing Dynamics: Ignore the Blond Scene - A Beautiful Mind Movie
http://www.youtube.com/watch?v=CemLiSI5ox8
Nash : Adam Smith needs revision.
Hansen : What are you talking about?
Nash : If we all go for the blonde...we block each other. Not a single one of us is gonna get her. So then we go for her friends, but they will all give us the cold shoulder because nobody likes to be second choice. Well, what if no one goes for the blonde?
We don't get in each other's way, and we don't insult the other girls.
That's the only way we win.
(Laughs)
Adam Smith said the best result comes from everyone in the group doing what's best for himself, right? That's what he said, right?
Others : Right.
Nash : Incomplete.
Incomplete, okay?
Because the best result will come...from everyone in the group doing what's best for himself...and the group.
The whole of America knows the truth deep down. The legacy of Reaganomics and the mind set it created was to install the bubble cycle to replace the business cycle. Fed on irrational exuberance in the aftermath of the Berlin wall collapse and the NWO dictat. The triumphant Oligarchs who received its legacy as their feudal inheritence then decided that the financial world was theirs. Greenspan's zero interest hyperinflationary asset bubble funding, consumer spending and global outsourcing created the FIRE inflationary risk asset tsunami that fed two bubbles; where in their incredible arrogant 'we can't lose' hubris, the Oligarchs lost 2 trillion in the dot.com bubble, then another 12 trillion in the sub prime capitalistic debacle that nearly tanked the capitalist system; only saved because the FED and WH allowed debt to be socialised and profits to be privatised massively on unprecedented scale. A day in infamy...like never before.
Now in the winter of their discontent the same Oligarchs want to make a market killing of 20 trillion to win back what they lost. They are prepared to tank the world economy, engineered by GS, for their benefit so that they can dominate once again the world and make up for their past losses. We all know it won't work. But they won't admit it.
They know they have middle america by the short hairs. As, what is wose than the hyper inflation this new bubble generates is the hyer deflation required to cure it, which will bring down all of USA. They know that you know that the alternative to hyper inflation bubble cycle is worse medecine than their bubble play which leads nowhere. They know that middle america wants them to keep kicking the can, as to face the ONLY other alternative in PEACEFUL times is worse than the present crazy trend. They know that and play on this FEAR of middle america. Your damned if you do, your'e damned if you don't. So they play along hoping to make their next big kill and hoping the silent people will swallow the bitter pill...No way out!
the last time 'the rich' did this (WW2) they all ran to the usa to wait it out....now they have shit where they eat and they will hide where....? oh yes in argentinia...one of the least revolutionary countries ...right. the rich will be eaten this time and i think THEY know it deep down...!
the poor smucks in the usa dont have a clue. they will do what they are told. either by the 'gov' or by the next revolutionary but they will be led by the nose....wont be pretty but it will be entertaining.
The american people have to realise a simple fact about Reaganomics and its underlying mindset that runs deep into the psyche of the Oligarchic class : They lost 2 trillion in the dot com debacle and they lost 12 trllion in the sub prime debacle. So they need to make 20 trillion in the current bubble cycle. That is their objective. Now that the world is run by Oligarchs and the bubble cycle has replaced the business cycle they hold the world by the balls.
The underlying truth is very simple : Middle America, all of it, hates the bubble cycle and the hyperniflation that results. But it all hates worse the inevitable alternative the deflationary cycle which will inevitably result if this cycle fails.
The Oligarchs know that. That's why they have middle america by the short hairs...And they are prepared to sacrifice it to get their way ! Period.
Try getting a job at GOOG/MFST/GE/AAPL.
Patriotism is always for the dude on the bottom of the food chain. The generals are never cannon fodder even when they should be by rights.
The government of No: the Boss has a spine made from boiled spaghetti, the rest of Governance Cadre is made of hired hands, hired by whom?
Prez steve sez: pay taxes or else lose your corporate charter allowing you to do business in the US, also will freeze your assets and ask foreign banks to freeze assets until all liabilities are cleared (including repayment of all bailout funds).
Prez steve sez: hold corporate execs personally responsible for corporate liabilities under Sarbanes: I will detain individuals leaving the country under Patriot Act and hold them in 'black' prisons until all liabilities are cleared. If I can detain taxi drivers and stand up comics I can detain overpaid desk jockeys.
Big business isn't the only entity that can 'Do the Paulson'.
Prez steve sez: all Fed fiat is now demurrage money: a monthly demurrage fee must be added by way of taxing authority to all forms of cash in and out of the country, all amounts revert to zero w/o demurrage.
How much cash does China hold again? $2 trillion?
Hmmmm ... demurrage money! Fed could raise rates and remove excess funds from circulation among other things ...
However, folks love that status quo, getting focked by the devil they know.
what else is there to serve for if not country? that one literally does go "right to the top" and isn't just the purview of Generals and Admirals. Why would a politician ever stand in front of any of us? Ever? Honestly: listen to ourselves? What are we trying to create here? Take God and country out of language and what do we have left? Anything passionate? Anything about life or actual living? So life is a Constant Sorrow. Get over it and move on.
http://www.youtube.com/watch?v=YZtgZ5fHOuU&feature=player_detailpage
"what else is there to serve for if not country?"
how bout the earth? for it is the one that sustains us, even when country rots back into dust.
Ashes to ashes, funk to funky
We know Major Tom's a junkie
Strung out in heaven's high
Hitting an all-time low
http://www.youtube.com/watch?v=DLBlFq4oE2I
It is kind of hard for me to get upset about this. Either the money goes to a bunch of rich executives who will spend it on booze, hookers, mansions and yachts. Or it will go to Uncle Sam who will waste it on wars, bridges to nowhere, and salaries for bureaucrats to administer all this. Either way, the money isn't going to benefit me or anyone that I know.
Heh, heh! Know what you mean. I'd rather see the loot go to hookers and bootleggers. At least they probably earned it!
corporations complain more about paying taxes than the 50% of US workers that dont pay them
Really Bruce ?
My tiny corporation pulled in 100,000 last year.
22,000 of that went to taxes. I'm to small to avoid paying Uncle Sam.
As long as they have to spend as much on lawyers and lobbyists as they would have spent on taxes then I say give it to them! Clearly corporations always spend money better and wiser than government.
Even if the entire 1 trillion was repatriated today and taxed at 35%, it would cover less than 1/4 of the current deficit.
Bruce,
With all due respect, your argument is specious. The money will be deployed one way or another. The choice is between letting private industry or government deploy it. I think we all understand that private hands will put that money to better use.
The less money that is paid in taxes, the better off we all are. The more money companies make, the more competitors are attracted to enter the market. New entrants mean new hiring hiring. Unfortunately, the big companies can avoid the taxes and the small ones get saddled with it. The playing field needs to be leveled and I would be happy if ALL corporate taxes *and subsidies* were eliminated.
The fundamental problem our economy is government intervention in all facets of the economy, with the result that our workers are forced to carry costs that foreign workers don't have (taxes, rents, bailouts, inflation, etc.). We need to lower the costs bourne on top of our labor and increase the costs carried by foreign labor so that we are more competitive relative to them. Then we get to balanced international trade.
"The more money companies make, the more competitors are attracted to enter the market."
Right -- Apple, Google, and Microsoft have soooo much competition. Corporations are making more than ever in the last few decades, yet the number of companies gets smaller as the big fish eat little ones and the smaller competitors who aren't bought out, drop out.
Did private hands "put the money to better use" in Iraq?
Great point we need to level the playing field so that American workers get the same perks and benefits as those in the emerging markets. And then with no taxes and no government intervention we all would live happily ever after in a global corporate village. Brilliant.
impossible since chindians are so desparate and cheap
what US can do is as a society invest more in technology for use only by American workers to raise the productivity.
instead of 1 American vs. 20 Chinese, we can have a 1 American controlling & 5 automation robotics vs 20 Chinese doing everything by hand
+1 Chindians.
I'll have to remember that one.
I think he was being sarcastic. What I know for sure, is that he's found a kick-ass way to game the voting system.
Score changes we can believe in.
I believe much of these profits were derived from technology developed in the USA. I think that goods and services delivered need to be taxed directly in the US where they are sold so the accounting games/scams with profits won't matter as much.
The Mass Psychology of Liberalism
By Stanley Aronowitz
"...there is little difference between the two parties. In reality, the ideological divide between the Democrats and Republicans is between the two historic branches of liberalism.
Liberalism is the dominant capitalist ideology. But like most dominant ideologies it has several variants.
The 18th century doctrine rests on three pillars of freedom:
the “free market” — freedom from government regulation;
“freedom from coercion” — the individual negative liberty of freedom from central powers either of law or custom;
and “freedom of association,” which entails freedom for groups and parties to organize, assemble and seek elective office under the capitalist state.
Of course, the free market has never really existed.
For centuries business has sought and secured the financial, political and legal support of the state, but resists according the same privileges to the rest of us.
Private capital avoids shouldering the risk of building roads, ports, power systems, waterworks, airports or public transport.
On the flip side it relies on government to provide communication mediums, courts, police and emergency services, zone land, issue currencies, set interest rates and monetary policy and regulate — and repress — labor.
And when everything blows up, as it inevitably does, from finance markets and foreign relations to oil wells and nuclear reactors, it needs government to assume the liabilities, clean up the mess and restore the profit-making order.
In recent decades, free-market liberals have become known as “conservatives” (neo-liberalism) even though they are no longer conservationists or environmentalists like their Republican predecessors."
http://www.zcommunications.org/the-mass-psychology-of-liberalism-by-stan...
How liberal (in the above sense, 19th Century style) is a law of 22'000 pages?
Say Bruce in your Social Security analysis has anyone factored in the effect of the long term unemployment and reduced earnings from this recession/depression on future benefit payouts? If two or three million ( and that could be very conservative) people spend 2 or more years unemployed and millions more see their lifetime earnings reduced from what prior SS forecast assumed that has got to affect the benefits paid out when those folks 'retire' or start collecting benefits. Maybe the problem isn't as big as we previously thought.
There is a formula. If you work a total of 40 quarters (10 years) you get benefits. People who work more subsidize that don't. But once you are in you are in with minum benefits. The net of less contributions today does not reduce future liabilities by very much.
The Homeland Investment Act of 2004 enabled US corporations to repatriate $362 billion without any tax ramifications. While lobbying for passage of the Act, corporations promised to hire new workers and invest in new plant and equipment. The law explicitly stated that repatriated funds could not be used for executive compensation, dividends, or stock redemptions. The law also stated that the funds could be used for paying down debt and to increase cash reserves. Due to the fungibility of money and the use of a few simple accounting procedures, these corporations were able to increase payouts to shareholders by up to .92 cents for each $1 repatriated. The HIA did not spur domestic investment and employment.
The WinAmerica campaign Mission Statement says "Providing American businesses with incentives to invest at home is a common sense solution that will immediately inject up to $1 trillion into our economy and provide businesses with the certainty they need to help get Americans back to work." This another veiled attempt by corporate interests at using job creation and investment to allow tax free repatriation. These funds will be used again to increase payouts to shareholders or will be "round tripped" back out of the US to build or expand overseas ventures which will have the unintended consequence of increasing employment abroad.
Exactly.
As noted above.
Fuck them.
Anyone who falls for the "pity the poor over-taxed job creators" after having been screwed once via this tactic is an idiot.
Was it Hitler who said that if you repeat a big lie often enough, people will believe it?
actually it was goebbels that said the big lie....goerrbals was a shoe salesman from leipzig.
no hitler said..'I don't care to belong to a club that accepts people like me as members.'...or something like that.
Groucho Marx: "I don't care to belong to a club that accepts people like me as a member."
actually I think it was Goerrbals