President Obama announced today the first steps in a redistribution of tax revenues. He is beginning the shift in the tax burden from the middle class to a more equitable share to be paid by those who have become obscenely wealthy during the Reagan-Bush years. The first step is to shut down off-shore tax avoidance schemes.
The measures announced today had to do with taxes in the short run. In the long run the policy will make those large corporations who have their real base of operations here and do business around the world declare once and for all whether they are Americans. Are they, those corporate entities, American citizens or citizens of the Grand Caymans or elsewhere in the world.
Fox News immediately announced within seconds of the President’s announcement, that this would be a major blow to the economy, which is a standard release from them on anything that will help American citizens and cause even the most minuscule hardship on their patrons, the Republican lobbyists and Neocon Republicans in Congress and Corporate America.
This move, by almost any standard, will bring into the treasury at least $200 billion over ten years. This will assist the country with deficits and health care and Social Security. More than that, the incentives will see to it that good American jobs are restored rather than rewarding U.S. corporations for investing abroad. Over time it will help pay for recovery, for new industry and for job stimulation. The President’s proposal offers incentives for these companies to hire American workers, build plants and research new products right here at home.
Fox News says that the $210 billion in additional revenues will make a “modest” dent in the $1.2 trillion deficit. And the Chamber of Commerce said that it will hurt industry. But you do the math. The immediate impact, according to the Wall Street Journal, on General Electric will be a 27% reduction in profits. Actually, that means that they are making an additional 27%…a huge amount of money in a corporation of that size…enough to create literally thousands of jobs and build new plants. Multiply that by the profits being made…just on overseas, non-taxed income…for Hewlett-Packard, Johnson & Johnson, Cisco Systems and others with the same kinds of numbers.
Thousands of corporations do this. And who could blame them? Blame George W. Bush, Dick Cheney and the Republican Congress that created these policies in tandem with their lobbyist friends at the Heritage Foundation and the Hudson and Cato Institutes…lobbying think tanks on how to remove money from the the Middle Class and put it in the hands of the rich. And they have been doing so at record rates. With hundreds of companies like Hewlett Packard and Cisco Systeems using similar overseas tax breaks it becomes immediatly apparent how large the tax windfall and the job creation will be.
Income inequality in the United States is already is the greatest in the free world by a wide margin. Even in countries where literally whole provinces were handed down from generation to generation income equality has become less in the last 40 years. But not here.
Some statistics: The share of income held by the top 1% was as large in 2005 as in 1928. Reported personal income increased by 9% in 2005, with the mean for the top 1% increasing by 14% and that for the bottom 90% dropping slightly by 0.6%. Between 1979 and 2005, the mean after-tax income for the top 1% increased by 176%, compared to an increase of 69% for the top quintile overall, 20% for the fourth quintile, 21% for the middle quintile, 17% for the second quintile and 6% for the bottom quintile. For the same time span the aggregate share of after-tax income held by the top percentile increased from 7.5% to 14%.
Since we all live in the same community share the same communities, the facts say simply that the rich are getting a lot richer a lot faster and the poor are going broke faster than ever. In 2007, the average after-tax income of the richest one percent of households rose from $722,000 in 2003 to $868,000 in 2004, after adjusting for inflation, a one-year increase of nearly $146,000, or 20 percent. In contrast, the income of the middle fifth of the population rose $1,700, or 3.6 percent, to $48,400 in 2004. The income of the bottom fifth rose a scant $200 (or 1.4 percent) to $14,700. (Congressional Budget Office)
Of course, as the President was speaking, the Wall Street Journal almost simultaneously reported that a senior Republican aide called the proposals a “revenue grab,” and predicted that it would somehow drive more corporations (who, if they are not careful, may end up as completely foreign corporations with no U.S. protections) overseas. It would be interesting to see how the competing corporations, who do have U.S. tax breaks, who do pay taxes and who do get favorable U.S. market treatment would fare against those former U.S. Corporations.
Naturally the CEOs and the owners of huge blocks of stock in international corporations are concerned. This means tens of millions of dollars that they can no longer put in their pockets by sending work abroad, holding profits abroad while maintaining U.S. protections and reaping the benefits of the American lifestyle. It would be interesting to discover how many of those same individuals have personal accounts abroad in the same banks.
This legislation will mean that, in order to earn U. S. tax breaks, President Obama, speaking for the majority of Americans, insists that these corporations create jobs here in the United States. We see huge corporations earning the bulk of their revenue from the U.S. market and then sending all their profits abroad. U.S.corporations have a huge number of tax deductions. No wonder so many middle class Americans feel the pinch on tax day and in their daily lives.