Obama created lowest corporate tax rate since '72

Yep, bonus depreciation is just another example of how Obama is killing private business and job creation. Putting $55 billion back in Big Business's pockets is not nearly enough; it's practically Marxist. He needs to cut their taxes even more! They've hardly got enough cash to fuel up their private jets, for goodness sake!

Seriously though, the WSJ has been doing some serious reporting of late on corporate taxes. This came after pointing out that two-thirds of U.S. corporations pay no income tax. If you crumple and burn their ridiculous editorial pages, (or just ignore and recycle them, if you want to be eco-friendly), then WSJ ain't so bad.

With Tax Break, Corporate Rate Is Lowest in Decades

By Damian Paletta

February 3, 2012 | Wall Street Journal

U.S. companies are booking higher profits than ever. But the number crunchers in Washington are puzzling over a phenomenon that has just come into view: Corporate tax receipts as a share of profits are at their lowest level in at least 40 years.

Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008.

Corporate income-tax receipts typically fall during recessions, and they declined sharply after the 2008 financial crisis, which wiped out big swaths of profits across the huge financial sector. But U.S. profits have rebounded sharply in recent quarters, while tax receipts have stayed low.

So where is the money? There are a lot of moving pieces, budget watchers say, but one view shared inside Washington is that a temporary tax break—supported by both political parties—is a key reason.

This tax break, known as "bonus depreciation," has allowed companies to write off investments in goods like industrial equipment, manufacturing machinery and computers in the year in which they're bought rather than over time. The White House estimates the subsidy has saved companies roughly $55 billion in corporate income taxes over each of the past two years.

Companies just reporting fourth-quarter earnings made clear they have aggressively taken advantage of the tax break, which lasted in full through December.

Union Pacific Co. said the benefit lowered the railroad's taxes by $450 million last year compared with the year before. Energy company Dominion Resources Inc. has said the bonus depreciation provision will cut its income taxes by $1.2 billion to $2.1 billion in 2011 through 2013, even as the tax break shrinks. Shedding light on its 2011 taxes, Time Warner Cable Inc. said it expects to pay $700 million more in taxes this year, assuming capital expenditure is flat, now that the stimulus benefit is lower.

The tax break spurred purchases. Another railroad, Kansas City Southern, said it accelerated investment in 30 new locomotives last year to capture the bonus depreciation. Truck maker OshKosh Corp. said the deduction inspired its customers to speed up purchases of its trucks. General Motors Co. on Wednesday attributed some of the drop in sales of SUVs and pickup trucks in January to higher purchases in December by corporate customers that wanted to capture the accelerated depreciation.

The tax break shrinks for calendar 2012. Now, companies can write off only half of their investments, but the White House has proposed expanding it to again cover 100%. The White House estimated this would cost roughly $5 billion, as it only accelerates deductions businesses would otherwise have taken over time. Business groups have supported the tax break, and some are now lobbying Congress to extend it through 2012.

The breaks may be helping stanch a years-long economic downturn, but they are also extracting their own price. Companies paid just $181 billion in federal corporate taxes in fiscal 2011, about 8% of the $2.3 trillion in total revenue collected by the federal government. That's down from 15% of the total in 2007.

Individuals, meanwhile, paid $1.1 trillion in income taxes last year. Much of the rest comes from the taxes that fund Social Security and Medicare, which are paid by employers and employees.

Earlier this week, the CBO raised its projection for the government's 2012 budget deficit from $973 billion to close to $1.2 trillion, in part because of "disappointingly low corporate tax receipts of the sort that's a little puzzling," CBO director Douglas Elmendorf said.

The CBO cut its projections for 2012 corporate income taxes from $279 billion to $251 billion. It expects them to rebound to $427 billion in 2014 as the tax breaks ends.

The White House is gearing up to propose overhauling the complicated U.S. corporate tax code. Beyond the partisan bickering that's sure to ensue, the White House will need the business community's support for its effort, and companies might be reluctant when current rules work in their favor.

The U.S. has one of the highest corporate tax rates in the world, with a combined top state and federal rate of 39.2%. But many companies pay much less because of a number of tax breaks and other provisions that reduce their tax bills.

There also has been an increase in the number of firms structured as "pass-throughs," which pay no federal corporate income tax and instead distribute their profits to investors, who pay taxes on the income as individuals.

Traditionally, the vast majority of corporate income taxes are paid by businesses with more than $250 million in assets. The Internal Revenue Service hasn't published data on the breakdown in corporate filers since 2008, so it couldn't be learned whether that proportion had changed in the last few years.

Business groups expect tax collections to turn back up soon as tax subsidies expire and once past losses can no longer be carried forward to offset profits.

"Everybody is expecting it to come back up," Martin A. Regalia, chief economist at the U.S. Chamber of Commerce, said of corporate tax receipts. "It's just being delayed because of the depth of the recession."

Sachs 'surprised' by CEO's ignorance, avarice

Economist Jeffrey Sachs, director of The Earth Institute at Columbia, is really showing he lives in the ivory tower. In his flabbergasted reaction to former AmEx CEO Harvey Golub's WSJ op-ed, Sachs reveals his ignorance about how fiscally retarded Americans really are, from the meanest unemployment-collecting Tea Party members all the way up to richest millionaire CEOs.

(And what in the world is "somewhat surprising" about the rabidly right-wing editorial pages of the Wall Street Journal publishing a slapdash, angry, ignorant rant from some rich blowhard? That's quotidian. It would be surprising if they didn't.)

All of Sachs' points are well taken... by reasonable, rational people. But again, Sachs, who divides his time among places like New York, Davos, Brussels, and Third World/developing countries, apparently doesn't visit American flyover territory often enough to interact with average Americans, whose intensity of feelings about our country problems bears no relation to a given problem's magnitude.

The sad truth is, most Americans will keep on blaming "high" taxes, "overpaid" teachers, "lazy" minorities, and "corrupt" bureaucrats for our nation's problems, while warning Washington to keep its guvmint hands off their Medicare, long after the collapse of the U.S. middle class and the establishment of a permanent plutocracy. 

Average Americans will not "act, and act resolutely" against the mega-rich who threaten the general welfare; they never have and never will. Because they aspire to be rich assholes themselves someday, even though their prospects are next to nil.

Sadly, scarily, professional scrooge Harvey Golub is in the mainstream of current political mood, and professional problem-solver Jeffrey Sachs is on the fringes.

CEO Follies

By Jeffrey Sachs

August 22, 2011 | Huffington Post

There may be no group of people in the world more out of touch with U.S. ground reality than super-rich CEOs of major U.S. companies railing against Warren Buffett's suggestion that the rich should pay higher taxes. The Wall Street Journal today brings a somewhat surprising case in point ("My Response to Buffett and Obama," by Harvey Golub, August 22, 2011). Former American Express CEO Harvey Golub, generally respected among his peers, lets loose an ill-informed screed that shows the cocoon in which many of these CEOs live their lives.

Before turning to Mr. Golub's list of particulars, let's start with the big picture. U.S. CEOs pull in compensation that is hundreds of times higher than their workers, a far higher multiple than in any other part of the world. Many of them pulled in hundreds of millions of dollars in compensation and stock options over the past decade or so. They shelter their money in endless tax loopholes; live like royalty in a country that once prided itself on being a republic; effectively set their own pay through their pals on the executive committee; and all-too-frequently drive their companies and the U.S. economy into bubbles and frauds, all the while taking tens or hundreds of millions of dollars in compensation.

Now comes Mr. Golub, reportedly with hundreds of millions of dollars in net worth, to tell us that he's upset with those asking him to pay more taxes. He's so upset indeed that half of what he says is utterly absurd. Mr. Golub is incensed that "gifts to charities are deductible but gifts to grandchildren are not." I'm going to assign that little philosophical puzzler to my freshmen students at the start of school this fall.

It gets worse. "Do we really need an energy department or an education department at all?" Golub's confusion on energy seems to be rather primitive. He asks why the government spends money on "solar panels, windmills, and battery-operated cars when we have ample energy supplies in the country." Golub seems to be completely unaware of some rather basic issues in the land, such as greenhouse-gas emissions, the government's role in R&D and environmental management, and the national balance sheet of energy resources. I will make Golub's energy views the second question I pose to the incoming class.

As for Golub's suggestion to close the Education Department, where should we begin? Should we begin with America's low rankings (in the 20s and 30s) in international comparisons of student performance? Or should we take notice of the low levels of educational attainment in the Southern states, where conservative leaders join Golub in hankering to end the Education Department? Or should we first note the soaring costs of college tuition, and the mass dropout rates of working-class kids who can't make it? Or perhaps we should focus on the withering job pool and falling incomes of kids without a college degree, a majority of America's young people?

What's especially absurd, however, is the phony way that Golub argues against the need for more taxes by citing spending programs that he considers wasteful and costly. We all have our list of least-favorite spending, and we should all agree that spending should be cost effective. Yet there is a fundamental falsehood at the core of Golub's rant. The budget deficit has very little to do with Golub's list.

Golub attacks job-training programs, alternative energy, subsidies for sugar farmers and ethanol producers, rail subsidies, unneeded post offices, and energy and education programs. This is not the place to debate the merits of this list in detail. (I can agree on sugar and ethanol, but I would disagree vehemently on most of the others.) This is the place to show the irrelevance of Golub's list.

The entire Education Department budget in Fiscal Year 2012 is around $77 billion. The entire Energy Department budget is around $30 billion. The entire Labor Department budget is $13 billion. Obama's rail programs are around $8 billion. Farm subsidies, even on the most expansive definition, are in the range of $20 billion. Even if we closed all of these departments and programs entirely (and accepted the national catastrophe that would follow), the direct budget savings would be around $150 billion, or roughly 1 percent of GDP. Yet the federal budget deficit this year is roughly $1.4 trillion or 9.5 percent of GDP. Golub's list is a smokescreen, not a solution to anything.

Golub's attack against outlays on education, energy, training, and other programs on the list misses the basic truth of our fiscal arithmetic. Our current tax collections don't even cover Social Security, Medicare, Medicaid, the Pentagon, and interest on the public debt, much less the programs for education, environment, energy, job training and the rest. Golub evades the real question: how the core of the budget - health, social security, defense, interest servicing -- is to be financed. Should we raise taxes and preserve these programs, or should we spare Mr. Golub and his friends of this modest burden on their great wealth, and instead eliminate the core social and health security in this country? Or perhaps Mr. Golub is calling for a default on interest payments?

I'm sure that Golub's own health care and retirement comfort are not in danger. If Golub and like-minded CEOs continue their campaign to resist the tax revenues needed to protect the health and social security for average Americans, implying the need to slash core budget outlays, they will hear an earful. ["An earful"?!? Ooooh, anything but that! - J] That's why Golub has taken the easy way, railing against small targets that play well in the halls of the rightwing American Enterprise Institute that he helps lead. While Golub's targets are generally phony or misguided (yes, we do need education and energy programs), such attacks are less likely to elicit a broad public rebuke than would a frontal attack on social security and health spending.

Golub is one of the most fortunate people on the entire planet. America has treated him well. He perhaps went to public schools and made his way up with plenty of benefits of American society in the middle of the 20th century. He like everybody in his generation owes his prosperity not only to his own deeds ("I did earn it," he writes) but also to the vibrancy of America during the formative years of his career. Mr. Golub's generation, and the generations that have followed, owe a great deal to the New Deal and the vigorous U.S. Federal Government that led the world in technology and rebuilding after World War II, including the promotion of science, technology, national infrastructure, social security, public health, and higher education.

In another age, Golub would be asking what he could do for his country, partly to help ensure a safe and prosperous country and planet Earth for his own children and grandchildren. Not any more. The American people will not forget the irresponsibility of CEOs who are helping to lead the country towards the cliff. Currently the American people are stunned and bewildered. In the future they will act, and act resolutely to secure the future from those who now threaten it.

Top 1 percent's 'missing' wealth

Very interesting!

Pondering America's Most Puzzling Inequality Stat

Families in the nation's top 1 percent are grabbing a rising share of the nation's income. So why do newly released Federal Reserve numbers show no jump in their share of the nation's wealth?

April 20, 2009

By Sam Pizzigati | TooMuchOnline.org

[...]

[I]n 2007, even without the fortunes of the Forbes 400, the top 1 percent still held a whopping 33.8 percent of America's total family wealth. Families in the bottom 90, all together, only held 28.5 percent.

Robert Frank, the Wall Street Journal reporter who covers the paper's wealth beat, finds these numbers deeply troubling — and not just for the obvious reason that they reveal a staggeringly unequal America. For Frank, the Fed numbers on the top 1 percent's wealth just don't make sense statistically.

[…]

The Wall Street Journal's Robert Frank has still another explanation for the top 1 percent statistical puzzle, an explanation that no one, he concedes, can yet prove.

Those huge incomes that go into rich people's pockets aren't translating into a greater share of the nation's wealth, Frank postulates, because the rich have been busy spending massively on "McMansions, yachts, planes, Gucci bags, bottles of Mouton Rothschild, and $300,000 watches."

The rich, in other words, have been consuming, not investing, a huge chunk of their incomes. Now some of this consumption may add to a rich person's net worth on paper. A yacht, for instance, can appreciate in value over time. But much of this consumption — a $2,632 ticket to a ballgame at the new Yankee Stadium, for instance — simply subtracts from a rich person's net worth.

Could America's rich actually be consuming, on personal pleasures, enough to put a statistically significant dent on their share of U.S. family net worth? Maybe. We have no reliable national data on rich people's personal consumption. But every so often we do get a glimpse at the immense fortunes America's rich are regularly spending to be all they can be.

The puzzle of our top 1 percent's static net worth share, for now at least, must remain unsolved. Should that bother us? Does this puzzle, in the final analysis, really matter?

Sure does. The puzzle that the Wall Street Journal's Robert Frank has identified carries much more than just statistical significance. The entire rationale for cutting taxes on the rich rests, after all, on the notion that the wealthy will "invest" the extra dollars tax cuts deliver unto them. These investments, the argument goes, will strengthen the core economy and leave all of us better off.

But if the rich are frittering away their fortunes, they're not creating wealth, they're burning through it. And that, advises the Journal's Frank, ought to be "a worrying sign for those who hope that the rich are sitting on the sidelines with loads of accumulated wealth, ready to lead us into recovery."

WSJ: Obama and G'itmo

This WSJ editorial burns me up.  "Isn't responsibility fun?" WSJ asks snidely.  No, Obama never said he was in this for s--ts and giggles.  And no, taking responsibility for your predecessor's messes, after he failed to do it himself, is no fun at all.  Not in Iraq, Afghanistan, or Guantanamo Bay. 

 

The creation of "G'itmo" is a mirror image of Bush's disastrous Iraq policy: act quickly and decisively, giving yourself no back door or parachute, and then worry about the consequences later.  Apparently, Rumsfeld, Rove, Cheney, and Bush didn't stop to think for one minute what they were going to do with these hundreds of inmates.  What, eventually have them all shot?  Keep them locked up for life without charges or trials, and not suffer a single outside inquiry from concerned family, friends, or home governments? 

The shrug-of-the-shoulders irresponsibility of Bush's thoughtless decision to build a place like G'itmo in the first place is astounding and infuriating.  You'd expect school children to come up with such a naïve, undeveloped idea: "Hey, let's build a jail on the moon, or deep under the ocean, and send all the terror suspects there!"  Hey, let's send every Muslim with a beard we find in Afghanistan to some God-forsaken corner of Cuba, where U.S. laws and human rights don't apply!  Um, not so fast. 

 

The WSJ will prove itself to be infinitely snarky and immature if its attitude toward Obama every time he tries to clean up on one of Dubya's doo-doo piles is to snap, "See, it's not so easy now, is it, Mr. Messiah?" 

 

Thanks to Bush's handling of G'itmo, Iraq, the economy, etc., I'd say a good metaphor for Obama's first term is going to be Andy Dufresne's escape in the movie The Shawshank Redemption: crawling on his belly through 500 yards of the worst slime and filth you can imagine, before finally emerging to sweet freedom.

 

 

Obama and Guantanamo

Fighting terrorism is simpler when you're a candidate.

January 22, 2009  |  WSJ.com

 

Campaign promises are so much easier to adhere to when they're strictly hypothetical, as Barack Obama is discovering. The then-President-elect said 10 days ago on ABC that while he still plans to close Guantanamo, "it is more difficult than I think a lot of people realize" and that "many" of the enemy combatants are "very dangerous."

 

Merely for gesturing at this reality, Mr. Obama suffered the blunt-force trauma of his left-wing allies, and the panicked transition leaked new details on the Administration's intentions last week. On Tuesday the Pentagon halted military commissions at Guantanamo for 120 days, and reports as we went to press yesterday said Mr. Obama would sign an executive order today that the base be closed within a year. This was after he told the Washington Post that closure might take even longer. Isn't responsibility fun?

 

The first practical question is where to transfer Khalid Sheikh Mohammed and the 245 or so other remaining G'itmo prisoners. Dangerous enemy combatants can't simply be released into the streets. The Obama camp says that after reviewing the classified files, it will try to repatriate as many as safely possible. But 60 already cleared for release remain because they may be persecuted by their home countries. And even Mr. Obama's vaunted diplomacy is unlikely to convince rights-protecting countries to resettle people he believes are too dangerous to release in the U.S. -- and the more willing Mr. Obama is to release prisoners, the more difficult this problem will become.

 

One suggestion is moving the remaining prisoners to Kansas's Fort Leavenworth, but state politicians are already sounding a red alert. The military base is integrated into the community and, lacking Guantanamo's isolation and defense capacities, would instantly become a potential terror target. Expect similar protests from other states that are involuntarily entered in this sweepstakes.

 

[This is a terrible idea.  Thank goodness Obama didn't give it a thought. – J]

 

In any event, this option merely relocates Guantanamo to American soil under another name. The core challenge is not a matter of geography but ensuring a stable legal framework for detaining and punishing fighters engaged in unconventional warfare against the U.S.

 

In the Military Commissions Act of 2006, the Bush Administration and Congress painstakingly set thresholds for who can be detained and under what rules. Mr. Obama argues that work was flawed and that the trials should not continue in their present form. But he also said in his ABC sitdown that he wants to create "a process that adheres to rule of law, habeas corpus, basic principles of Anglo-American legal system, but doing it in a way that doesn't result in releasing people who are intent on blowing us up."

 

Sounds great. But this "balance" is difficult to strike because many of the Guantanamo prisoners haven't committed crimes per se but are dedicated American enemies and too dangerous to let go. Other cases involve evidence that is insufficient for trial but still sufficient to determine that release is an unacceptable security risk.

 

[They are guilty because they are guilty.  Their guilt is assumed.  The problem is how to display their guilt in a court and guarantee a guilty verdict.  This is the point of view of all G'itmo defenders. Mao or Stalin would have recognized such legal reasoning. – J]

 

The stock anti-antiterror position is that detainees should be charged with crimes, either through military courts-martial or (preferably) the ordinary criminal justice system. Anyone who can't be indicted should be set free. But such trials are unworkable even for the 70 or 80 detainees that prosecutors had planned to try with military commissions, let alone prisoners who are too dangerous to release but for which there isn't sufficient evidence for a tribunal, much less civilian courts. Critics like to point to aggressive interrogations as somehow tainting these cases, but the real problems are far more prosaic. For instance, any evidence probably can't be admitted in civilian courts because terrorists aren't read their Miranda rights when picked up in combat zones. 

 

[I like the way the WSJ acknowledges the anti-torture argument without actually addressing it.  You don't have to be a lawyer to understand that a confession elicited under torture can't be considered admissible in a court of law.  Otherwise, you must be prepared to explain why hundreds of thousands of innocents who were tortured and sent to Soviet gulags or executed were not guilty. – J]

 

An alternative to military commissions that is gaining political traction is the idea of a national security court, composed of Article III judges to supervise detentions and administer trials. There are real risks here. Politically, it will cost time and capital that Mr. Obama probably prefers to spend elsewhere. Practically, any new system is likely to face the same legal challenges from the white-shoe lawyers at Shearman and Sterling and anti-antiterror activists that for years tied down military commissions.

 

But legal experts across the political spectrum including Harvard's Jack Goldsmith, the Brookings Institution's Ben Wittes and Georgetown's Neal Katyal advance this option as a way to restore "credibility" to the detainee process. The national security court would operate under rules of evidence and classification that would allow the military to avoid compromising intelligence sources and methods, as well as admit intelligence gathered under battlefield conditions.

 

[Harvard, Brookings, Georgetown: Part of the neocon axis in U.S. think tanks and academe. WSJ is right, a national security court is also a stupid idea. – J]

 

Then again, such rules would be almost identical to those now used in . . . George Bush's military commissions. On wiretaps, interrogations and now G'itmo, the new Administration is discovering that the left-wing attack lines against Bush policies are mostly simplistic illusions. Now those critics are Mr. Obama's problem.