Your Tax Dollars At Work

Your Tax Dollars At Work

“The general American public should not have to make up the balance as corporations avoid paying billions in U.S. taxes,” Senator McCain said.  NYTIMES 5-23-13

“The middle class and future generations are being robbed by U.S. tax policy, as it presently stands.  The middle class, what remains of it, cannot escape paying taxes, and pay a higher rate to subsidize those entities, individuals and organizations, which often pay at half the tax rate we do, that is if they pay any taxes at all.”  JM Hamilton Blog, 3-17-12 – Mr. Demagogue?

By J.M. Hamilton (6-8-13)

This blog has gotten a number of things wrong, but over the last couple of years, it’s nailed a few calls, too.  Among the issues it has correctly called is the grand heist the American taxpayer suffers daily, when it subsidizes major corporations and wealthy private enterprise, and the numerous tax loopholes these entities lobby for, write, and embrace.  Tim Cook, Apple CEO, was recently before a Senate committee, and elaborated on how Apple dodges taxes by shifting earnings to subsidiaries that do not exist anywhere.  That is to say these subsidiaries are domiciled nowhere on this planet (maybe – this being Apple- they are in the cyber realm?).  The “check the box” loophole, along with the “Double Irish, and Dutch Sandwich” loopholes, et al., are said to allow Apple to avoid paying $9 billion dollars in taxes last year, per a recent Insight piece written by Reuters (5-31-13).  

Even the CBO estimates the wealthiest will enjoy a tax break of $12 trillion in the coming decade.

Apple is not alone.  G.E., Facebook, Google, you name it, if a major multinational isn’t deploying these strategies, their tax department would probably be responsible to their shareholders for errors and omissions, and fiduciary liability.  What’s galling is not that these corporations deploy these lawful strategies, but that our elected officials allow these loopholes to exist at the taxpayer’s expense, and that nation states – and these United States - allow themselves to be played off upon one another, in a tax arbitrage/tax code race to the bottom.  Meanwhile, Europe and America suffers from economic malaise, wage stagnation, fiscal austerity, record budget deficits, and high unemployment and underemployment.  Politicians being what they are, and in many cases owned by these corporate and private interests, it should not surprise any of us that this goes on.

Mr. Cook was recently filmed and quoted, as shown on Bloomberg, telling students from his alma mater, Duke, that they should break existing rules, and write their own rules.  Sounds like a recipe for anarchy, civil disobedience, and nihilism that the elites are said to abhor.  Then again, these same executives are often fond of talking about capitalism’s “creative destruction.”  Yes, their creativity (1%), and our destruction (99%).  Perhaps Mr. Cook is merely stating the obvious:  that he who owns the gold makes the rules.

It’s not just that the average taxpayer is paying a higher tax rate to subsidize the low rates corporate and private enterprise pay, and that this means the public has less discretionary income to spend within the economy, but an even bigger problem is what the G.E.s, Apples, Googles, and private equity does with tax dollars they are able to retain, as a result of the public’s tax assistance for the wealthy. 

A quick digression: Taxes are not only meant to pay for the various services government affords to maintain the capitalist system, but they also are used to guide and direct social policy (e.g. the child tax credit and/or the punitive tax on tobacco). 

Therefore, we can read into today’s tax code that you, Dear John Q Public, are being penalized for being an ordinary citizen, and the tax code is rewarding the aristocracy and the elite for being wealthy.  In short, you are being penalized for minding the rules, while they make up the tax laws as they go along.  But I stray.   Back to what these monopolies do with the tax dollars that they are able to retain and dodge paying, as a result of our dysfunctional political leadership and government institutions.

What these entities do with your tax subsidy, mixed in with earnings and ldebt, is eradicate and buyout competition, which often eliminates management and jobs from going concerns.   It’s all over the news that Apple has purchased nine companies in the last fiscal year.  With those purchases comes synergy and pink slips, and a growing Apple monopoly on products and services, which translates into fewer jobs and opportunities for the American public, not to mention fewer product and service options.  It also means fewer investment opportunities for those who would like place their money into Silicon Valley stocks and bonds. 

Private Equity, a classic example, enjoys numerous tax loopholes and dodges, including but not limited to the tax deductibility of debt and carried interest.  When, we the people, allow our politicians to dole out tax favors to our friends in private equity, at our collective expense, not only do we have to underwrite the resulting tax liability; but we also allow private equity to turn around and gut businesses, merge, strip, and often enough bankrupt them with our tax dollars; which again, results in the 99% having fewer economic opportunities, fewer product and service options, and fewer investment opportunities. 

In short, your tax dollars at work! 

And you are paying higher taxes to allow this to happen, and incurring an ever growing mountain of Federal and State debt, and the resulting interest on same, to allow this to be done to you.   As result of all this M&A activity and taxpayer subsidized globalization, your wages stagnate, due to the lack of entrants and competition in a given business sector.

If you are middle class, or wealthy and cannot escape paying taxes, when you give a corporate or privately held monopoly a tax break, you are quite often giving them more money with which to leverage up and destroy and eliminate their competition, and solidify their economic, political and financial hold on power.  

Much of this corporate money is said to be parked offshore, which is really a euphemism for Wall Street banks (remember the offshore subsidiaries, who are domiciled no where?).  The corporates are crying out for a tax holiday, so that they can repatriate these funds to America, and pay themselves a huge dividend.  If our politicians agree to this, there will almost assuredly be no quid pro quo.  If the prior Bush Holiday is any indication, our elected officials will not insist that these tax breaks (not even a portion) contribute to jobs or investment in America… but almost assuredly, our politicians will request a campaign contribution or donation.  No direct linkage of course.

Seeing as how our tax dollars are spent by the elite, and often the resulting elimination of jobs and opportunity, perhaps it is time for the American taxpayer to insist upon their own tax holiday?  What better way to stimulate the economy?  At the minimum, the American people should insist that the corporates pay at an equitable rate.  If our corporate friends and private partners had to pay at the same rates the middle and upper middle class pay, real tax reform would begin in earnest.

P.S. 

Another thing J.M.H. called in a recent editorial (ThePolitical Tide Breaks?  Roll Tide!) was the nature of the current Presidency and our government.  Believing he was clearly the lesser of two “concerns,” I voted for President Obama twice.  Americans are often distracted by political labels (Republican versus Democrat), and social policy, which is really the only thing remaining that differentiates the two political parties, both in practice and reality (all campaign rhetoric aside)… that said, we should make no mistake about it, both parties are dedicated to the military & cyber industrial complex, monopolies, and big government.  As such, we really do live in a one party state, and this state has increasingly encroached upon your freedoms since, and at the excuse of, 9-11.

Arguably, this government is no longer by and for the people, but apparently by and for the protection of the elite. 

Given NSA data mining and intelligence gathering on U.S. citizens by the government, of which Apple and Silicon Valley appears to play an exceptional and extraordinary role, it would appear that we are all assumed to be guilty, until proven innocent.


 Copyright JM Hamilton Publishing 2013