Tuesday, May 05, 2009

Republicans Brand Obama's Proposal To Make Big Business Pay Their Taxes As "Raising Taxes"


My ears are still ringing from waking up to the howls and yowls of outrage-- and that was yesterday... and it isn't stopping. The wealthiest and most powerful-- always campaign donors-- have spent billions of dollars to make sure they wouldn't have to pay taxes and to make sure the federal government's primary tasks would be to guarantee their continued primacy. This Obama feller isn't playing by their rules-- the ones they paid for. The hysteria that started yesterday was sparked by the gumption of this guy trying to force them to pay their taxes. God, you would have thought he just decided to change the name from "Congress" to the "People's Soviet!" What he did was take aim at tax avoiders seeking to shelter their money in offshore accounts. Now there's something to stir the rancid hearts of any teabagger too stupid to put 1 + 1 together and figure out not to eat his own feces on the subway! Obama estimates getting these scofflaws to pay their fair share will add $210 billion to the treasury over the next decade. I wonder if Grover Norquist drowned himself in his own bathtub today.
While most Americans pay their fair share of taxes, Mr. Obama said, “there are others who are shirking theirs, and many are aided and abetted by a broken tax system.” Multinational corporations, he said, paid an average tax rate of just 2 percent on their foreign revenue. And some wealthy individuals hide their fortunes in foreign tax havens.

The president thus set up a frontal clash with big business over the tax advantages enjoyed by companies with extensive overseas operations.

Few Republicans are stupid enough to take this on directly and head-on-- maybe Michele Bachmann, Paul Broun, Virginia Foxx and Richard Burr. But Mitch McConnell, Paul Ryan, Eric Cantor and other right-wing shills for Big Business were already twisting the argument away from tax fairness and towards... socialism. That worked real well for them in the early 1930's (not!) and I have my fingers crossed that it will have the same impact this time-- 88 Republicans left in the House of Representatives. Miss McConnell was already calling the proposal “a significant tax increase on companies representing 44 percent of total U.S. private employment” and said that in the depths of recession, it seemed “particularly harmful to our shared goal of creating more American jobs rather than driving them overseas."
President Obama addressed some of the concerns Monday, saying that “I want to see our companies remain the most competitive in the world” but that the way to do that was “not to reward companies for moving jobs off our shores or transferring profits” abroad.

One proposed change would restrict companies from deferring the payment of taxes on profit earned overseas. Administration officials said the plan would keep businesses from taking deductions against their taxes by inflating the amount of foreign taxes they paid.

Mr. Obama raised the idea frequently during his presidential campaign. In his remarks to Congress in February, as he outlined his priorities for the year, he pledged to make the tax code more equitable by “finally ending the tax breaks for corporations that ship our jobs overseas.”

The White House said that Mr. Obama is seeking to shut down overseas tax havens in an attempt to “close the international tax gap.”

Mr. Geithner noted that the Group of 20 industrial countries had agreed this year to act against tax havens like Switzerland, Liechtenstein, Luxembourg and Monaco. Amid such rising pressure, 10 countries have agreed to adopt new international standards, he said.

“For years, we’ve talked about shutting down overseas tax havens,” Mr. Obama said.
“That’s what our budget will finally do.”

The president said he hopes to remove the competitive advantage for companies that invest and create jobs overseas, working to replace their tax advantages with incentives to produce jobs in the United States.

The richest and most powerful among us don't plan on taking this lying down. Like Illinois Senator Dick Durbin reminded us a few days ago, they own the Senate. They own the entire Republican Party lock, stock and barrel and they own the DLC wing of the Democratic Party-- corrupt reactionaries like the Evan Bayh anti-Obama Bloc, bribe-taking sleaze-bags, Blanche Lincoln, Ben Nelson and Max Baucus for example.

Baucus was as fast out of the gate defending his wealthy patrons as McConnell was! Obama's plans to close loopholes that have been paid for by the wealthy via immense bribes to members of Congress are causing major turmoil in Washington. (Remember, more than a few people think it was President Kennedy's and, even more so, President Nixon's eyeing the oil depletion allowance that led to one being assassinated and the other being deposed in a bloodless coup.

Emily Pierce got it exactly right at Roll Call, writing that "despite being blamed for the near collapse of the U.S. economy, banking interests remain a powerful force in shaping-- and killing-- legislation on Capitol Hill. But their muscle is being tested by a series of bills aimed at bringing the industry under Washington’s regulatory thumb."

“I don’t know how they could bring us to this situation in this economy and have lost so much credibility as an institution,” said Senate Majority Whip Dick Durbin (D-Ill.), who suffered defeat in a major battle with the banks last week. “To think they still have clout in this chamber to dictate what we’re going to do in terms of mortgages and foreclosures. It really troubles me.”

Durbin pointed to an April 23 Gallup Poll showing that only 18 percent of Americans expressed strong confidence in U.S. banks. But Durbin indicated that he believes the $37 million in campaign contributions and $56 million in lobbying expenses that commercial banks spent during the 2008 election cycle helped bolster the banks’ case with his colleagues.

Durbin has sworn off ever supporting any more bailouts for this crooks. That I love! And Larry Lessig takes it one giant, important step further: taking Congress back from the dirty filthy banksters.
Thousands of people are telling members of Congress they won't get a dime from us unless they co-sponsor Senator Durbin's Fair Elections Now Act to overhaul congressional campaign financing. It would replace our broken system with citizen-funded elections, a hybrid of public funding and small-dollar donations.

Already, our strike has withheld over $1.25 million from politicians (based on contributions last cycle). It's also been featured by ABC, NBC, the Associated Press, Politico, Huffington Post, and others.

Now is the time to send politicians a message that we absolutely demand they change the system.

Nothing is more important than getting the corrupting influence of Big Business out of the electoral system. "They own the place" is not something we should be content to ever heard about the relationship between corporate criminals and our government. Meanwhile, in this morning's Wall Street Journal Matthew Richardson and Nouriel Roubini, both distinguished professors at NYU's Business School, point out academically what almost all Americans feel in their gut: taxpayers should not continue subsidizing crooked, arrogant banksters. Just because the Bush Regime started it there is NO reason for the government to continue "providing capital, loan guarantees and financing with no strings attached."
Banks should understand this. When providing loans to troubled companies, they place numerous restrictions, called covenants, on what these firms can do. These covenants generally restrict the use of assets, risk-taking behavior, and future indebtedness. It would be much better if the government focused on this rather than on its headline obsession with bonuses.

For example, consider the fact that the government, while providing aid to banks, did not restrict their dividend payments. A recent academic study by Viral Acharya, Irvind Gujral and Hyun Song Shin (www.voxeu.org) notes that banks only marginally reduced dividends in the first 15 months of the crisis, paying out a staggering $400 billion in 2007 and 2008. While many banks have been reducing their dividends more recently, bank bailout money had been literally going in one door and out the other.

Consider also recent bank risk-taking. The media has recently reported that Citigroup and Bank of America were buying up some of the AAA-tranches of nonprime mortgage-backed securities. Didn't the government provide insurance on portfolios of $300 billion and $118 billion on the very same stuff for Citi and BofA this past year? These securities are at the heart of the financial crisis and the core of the PPIP. If true, this is egregious behavior-- and it's incredible that there are no restrictions against it.

...Is there anything more important in solving the financial crisis than creating a law (an "insolvency regime law") that empowers the government to handle complex financial institutions in receivership? Congress should pass such legislation-- as requested by the administration-- on a fast-track basis.

The mere threat of this law could be a powerful catalyst in aligning incentives. As the potential costs of receivership are quite high, it would obviously be optimal if the bank's liabilities could be restructured outside of bankruptcy. Until recently, this would have been considered near impossible. However, in 2008 there was a surge in distressed exchanges of debt for equity or preferred equity... The government should be able to dangle an insolvency law as an incentive to cooperate. This will result in a $1 trillion game of chicken. But given the size of the stakes, and the alternative of the taxpayers continuing to foot the bill, it's the best way forward.

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