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Where Are Your Tea Bags Now? May 5, 2009

Posted by Kate Ryan in 2010 Budget, Barack Obama, Economic Stimulus, Economy, National Politics, Politics, Taxes.
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During the 2008 presidential campaign, the subject of corporate taxation was an oft-discussed issue.  John McCain and the Republicans cited the United States as having the highest marginal corporate tax rate in the world at 35% while the Irish Republic had the lowest at 14%.  Notwithstanding the current total global meltdown, the Irish economy was the hottest on the planet – showing the most growth and GDP gain in the developed world.  What was less discussed is that even though Ireland had a lower corporate tax rate, it actually has a higher amount of  corporate tax revenue as a percentage of GDP than the United States.  It’s about twice as much.

How can that be?  Well, Ireland does not have the strange and mystical tax law contructs that allow its corporations to evade taxes like the U.S. has.  Many economists believe that if the loopholes allowing U.S. companies to evade taxes were closed, the U.S. corporate tax rate could be reduced to around 20% – and still bring in more revenue.  The GAO estimates that U.S. corporations use these loopholes to evade over $100 million per year in taxes.  What’s worse is that these same tax loopholes encourage American companies to move jobs overseas because there is a tax benefit for them to do so. 

Yesterday, President Obama announced a plan to reform the tax code and close the loopholes.  “The way to make American businesses competitive is not to let some citizens and businesses dodge their responsibility, while ordinary Americans pick up the slack. Unfortunately, that’s exactly what we’re doing,” Obama said.  Indeed.  The U.S. Public Interest Research Group (USPIRG) released a report on April 15 – tax day for most of us regular folk – that showed how this corporate tax avoidance impacts everyday citizens.  This practice shifts the tax burden to individuals; California taxpayers are on the hook for $11 billion more, Texas taxpayers are paying $8.5 billion more than necessary.   The Obama administration hopes that the changes they are proposing will create or bring jobs back to the U.S., add $210 billion in tax revenue to the Treasury, and help to lower the overall corporate tax rates.  Plus, the administration is beefing up the R & D tax credit to encourage business to do development activities within the United States.  Who could possibly be opposed tothat?

The Republicans (and Conservadems), of course!

Senate Minority Leader Mitch McConnell of Kentucky immediately pounced on the Administration’s plans by releasing a statement that the plan will “raise business taxes” at a time of economic trouble.  I didn’t know that if you were avoiding taxes, being asked to start paying them was a tax increase (it follows along the same logic as eliminating the earnings cap on Social Security is a tax increase).  The U.S. Chamber of Commerce – our government’s corporate shill – also came out against the plan, as did Democratic Senator Max Baucus, Chairmain of the Finance Committee.  “I want to make certain that our tax policies are fair and support the global competitiveness of U.S. businesses. These policies must be designed to encourage economic growth and create good-paying jobs Americans need right now,” he said.

How sad for us.  Our representatives in Congress, elected by and for us, are more interested in corporate profits rather than their constituents.  The government has thrown billions of dollars at corporate interests in the last six months and we the people are like mongrel dogs waiting for scraps from the table. 

Those companies that took our tax money?  The GAO found 18,857 businesses registered at the Ugland House in the Cayman Islands (pictured above).  Some of them are  Morgan Stanley – which has 273 subsidiaries in tax havens, with 158 in the Cayman Islands alone.  Citigroup has 427, with 90 in the Cayman Islands, and 59 of Bank of America’s tax-haven subsidiaries are there as well.    These businesses are using OUR tax money to avoid paying taxes.  Its surreal.

On April 15 – U.S. tax day – thousands of people held protests around the country obstensively about taxes and government spending.  Named, “Tea Parties”, these demonstrations were held to highlight the unfairness in the U.S. tax code.  The parties were organized by Republican operatives and publicized by the Republican Party news network, Fox.

So where are your tea bags now?



1. Where Are Your Tea Bags Now? - May 5, 2009

[…] Original post by Kate Ryan […]

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