Most Americans have it exactly backwards on corporate taxation

In March, ABC News’ Website reported that “The top tax bracket for U.S. corporations stands at 35 percent, one of the highest rates in the world. So how is it possible that a giant of American business, General Electric, paid nothing in federal taxes last year, even as it made billions in profit?” the story asked. And it then questioned if GE CEO, Jeffrey Immelt, should be advising the president on business.

The story continued, “GE's success at avoiding taxes is nothing short of extraordinary. The company … earned $14.2 billion in profits in 2010, but it paid not a penny in taxes because the bulk of those profits, some $9 billion, were offshore.”

ABC was unable to connect the dots between the U.S. corporate tax rate of 35 percent, which it noted is “one of the highest rates in the world,” and the fact that most of GE’s profits come from operations that the company owns outside the U.S. Indeed, GE is a major sore spot among those who believe that heavily taxing corporations actually makes sense, and who complain that some corporations pay little or no taxes.

Among countries with a lower corporate rate than the U.S. are Mexico, Canada, Chile and Ireland – 30, 29.5, 17, and 12.5 percent respectively. Only Japan, at 39.5 percent, has a higher rate than the U.S.

You might expect an organization like ABC News, that has both a staff of professionals and the obligation to provide Americans with accurate and relevant information, to understand the topics it covers, like business and taxes. But ABC and nearly all of the major media either do not understand the intricacies of business and taxation, or an honest discussion of those topics gets in the way of their agenda. It’s no wonder the American people don’t understand business and taxation, being continually misinformed by the American media.

Why do so many Americans think taxing business is a good thing? Is it the widely held idea that the owners of businesses that pay little or no tax are collecting “ill-gotten” gains? After all, we have exempted 51 percent of U.S. households from paying personal income tax, so where is the money to run the government going to come from if not from businesses?

Corporate taxation enthusiasts think corporations are greedy for wanting to pay less in taxes. But businesses have to keep expenses as low as possible in order to make a reasonable profit and keep their doors open, and taxes are one of the expenses they need to control, a big one.

Consider how tax rates affect a business. A company with $5 million of taxable income will pay $1,750,000 in the U.S. at 35 percent, but only $625,000 in Ireland at 12.5 percent. To businesses, Ireland’s lower rate looks pretty appealing, helping them keep expenses low, and saying in effect, “Move your company to Ireland. We’ll save you money.”

However, the main thing the “tax the corporations” folks don’t understand is that corporations don’t really pay taxes, an occasional theme here; they just write the check.

A U.S. Treasury research paper titled "A Review of the Evidence on the Incidence of the Corporate Income Tax" looked at three different studies on corporate taxation, and noted the following:

1. It is estimated that 61% of any additional corporate tax is passed on in lower wages in the short run, and around 100% in the long run.

2. Using cross-country panel data from the Luxembourg Income Study, it is estimated that a 10% increase in the corporate tax rate decreases annual gross wages by 7% percent.

3. The results in this paper suggest that corporate tax rates affect wage levels across countries, and that higher corporate taxes lead to lower wages. A 1% increase in corporate tax rates is associated with nearly a 1% drop in wage rates.

The paper concludes: “Corporations don't pay taxes, individuals pay taxes in their roles as shareholders, workers and consumers. Higher corporate taxes translate to lower dividends for shareholders, lower wages for workers and/or higher prices for consumers. According to the empirical evidence presented in this paper, it appears that a substantial burden of increases in corporate taxes fall on the workers employed by corporations. Higher corporate taxes = lower wages.”

Raising corporate taxes is a terrible idea, unless we want prices to remain high or get higher, or want wages to go down, and corporate dividends to be cut.

Put into the context of the on-going failing recovery, raising taxes on corporations, or even keeping the corporate tax rate near the top of world-wide rates will perpetuate the recent pitiful economic performance, not encourage businesses to expand and create jobs.

As the U.S. Treasury research paper noted, over-taxing business hurts workers, shareholders and consumers, and also damages the country by driving business activity to more business-friendly countries, killing jobs and lowering GDP.

Our government spends far too much money, and then punishes businesses and the most productive individuals with ridiculous tax rates to raise the money to pay the bills. It just doesn’t work, and the sooner that reality takes hold, the better for us all.

Click Here to Comment
Technorati Tags: Taxation, Politics, Liberalism, Economy

Latest from Bones

Click Here to Comment

Education department does more than just spoil public education

If you thought the biggest offense of the Department of Education has committed was messing up public education, you may be dismayed to learn that it has done much worse than that.

According to KXTV News 10 in Stockton, CA, at 6:00 one morning, hearing noise outside his home, “I look out of my window and I see 15 police officers,” Kenneth Wright said.

Wright came downstairs in his boxer shorts as a S.W.A.T team barged through his front door. Wright said an officer grabbed him by the neck and led him outside on his front lawn.

“He had his knee on my back and I had no idea why they were there,” Wright said. According to Wright, officers also woke his three young children ages 3, 7, and 11 and put them in a Stockton police patrol car with him. Officers then searched his house.

“They put me in handcuffs in that hot patrol car for six hours, traumatizing my kids,” Wright said.

And what monstrous, heinous, unspeakable atrocity did Kenneth Wright commit to warrant a S.W.A.T. team breaking down his door at 6 a.m.?

None. He does not have a criminal record and was not even who the S.W.A.T team was looking for that morning. They were looking for his wife, Michelle – his estranged wife.

And what monstrous, heinous, unspeakable atrocity did Mrs. Wright commit to warrant this gross intrusion of an innocent man’s home?

According to the TV station, DOE spokesman Justin Hamilton confirmed that the department did issue the search warrant at Mr. Wright’s home as part of an ongoing criminal investigation, but would not say what crime his estranged wife was suspected of committing. Such searches are utilized for offenses like student aid fraud, embezzlement of federal aid and bribery, the spokesman said.

So, on the mere suspicion that Mrs. Wright may have committed a non-violent crime like bribery, embezzlement or fraud in the student loan program, the DOE’s militarized police force attacked the wrong residence, physically assaulted an innocent man and terrorized him and his three children. Remember that in America we are innocent until proven guilty, and none of those crimes posed any danger, and did not justify a S.W.A.T. team intervention.

This incident invites a few questions:
• Did you know that the DOE utilizes a S.W.A.T. team?
• Did you know that the DOE can issue warrants authorizing deadly force for non-violent crimes without a judge’s authorization, or issue warrants for any reason without a judge’s authorization?
• Do you think this is proper for a non-police agency, or any federal agency?
• What is there within the realm of education policy that could ever justify using armed force?

S.W.A.T. stands for Special Weapons and Tactics, and a S.W.A.T. team is a special group of police trained to deal with unusually dangerous or violent situations, and having special weapons, such as rifles more powerful than those carried by regular police officers. They are employed, for example, in situations when hostages are being held, or heavily armed persons need to be captured.

The DOE spokesman said that the people who broke into Mr. Wright’s home were federal agents with the DOE’s Office of the Inspector General, not local S.W.A.T., a distinction that most likely means very little to Mr. Wright and his frightened children.

Another pertinent question goes to the judgment behind the decision to unleash a S.W.A.T. team on this innocent family. Even if Mrs. Wright is guilty of one of the crimes mentioned, was there no other way to gain entry and to search for evidence, like knocking on the door and asking to speak to Mrs. Wright, and showing the search warrant? And perhaps first, make sure Mrs. Wright still lived in the place and was likely at home?

This attack was grossly improper as it was, but could have been much, much worse. What if Mr. Wright had heard someone break down his door and tried to protect his children and his property with a weapon, as is his right? He or some of the police could have been injured or killed.

Realizing that S.W.A.T. teams are special units used in “unusually dangerous or violent situations,” and knowing that Mrs. Wright is not suspected of holding hostages or threatening to blow up a building, just who thought this situation warranted such an extreme measure?

This action by the Department of Education is intolerable. The person responsible for authorizing it should be immediately fired and prosecuted to the fullest extent possible.

The idea that the DOE thinks it needs and uses a S.W.A.T. team is a clear signal that something is terribly wrong in that agency, and perhaps in the federal government generally. Do the FDA, Interior, Commerce, the EPA and other federal bureaucracies also have armed S.W.A.T. teams ready to be unleashed against citizens? Do these other agencies also trample citizens’ rights to privacy and security in their homes?

Americans are increasingly becoming the servants and the government the master, which is exactly backward. The people in Washington need a strong message that things have gotten turned upside-down, and are going to have to change.

Click Here to Comment

Technorati Tags: Government, Politics, Bill of Rights, America

Who’s dumber: Sarah Palin, or the liberals who think she’s dumb?

Okay, that’s a rhetorical question. But it is really interesting to watch how people react to Sarah Palin. Mrs. Palin has done as good a job as anyone I can remember at twisting the mainstream media and other liberals into quivering puddles of hyper-frenzied protoplasm. They watch her every move, parse her every word, and ridicule and criticize her at every turn.

For the record, I’m more or less neutral where Mrs. Palin is concerned; I’m not one of her legion of raving fans, and I’m not one of the legion of irrational haters. And I’ll give the media and the liberals more benefit of the doubt than they give to Mrs. Palin by saying that she does say things sometimes in a manner that invites negative attention.

The latest example of that was her comment about Paul Revere’s famous ride. One of the stops on her current bus tour was a visit to the Freedom Trail, and Paul Revere’s house, where after visiting the house she was asked about the famous messenger’s activities that April night in 1775. In response, she said: “He who warned, uh, the British that they weren’t going to be taking away our arms uh by ringing those bells and making sure as he’s riding his horse through town to send those warning shots and bells that we were going to be secure and we were going to be free and we were going to be armed.”

Okay, that wasn't the smoothest delivery and, hey, everybody knows that Paul Revere warned the colonists that the British were coming, and he didn't warn the British that the colonists were ready for them, right?

Well, no, according to several historians, and Paul Revere’s own account. The story we all learned in school is not exactly correct; at least, it’s not the whole story.

Dr. Robert Allison, Harvard Ph.D., and Chairman of the History Department at Suffolk University in Boston, told a National Public Radio interviewer, “But in fact, the British were going to Concord to seize the colonists’ arms.”

NPR Interviewer: “So you think basically, on the whole, Sarah Palin got her history right.”

Allison: “Well, yeah, she did. Remember, she is a politician. She’s not an historian.”

Still not convinced? Paul Revere himself said in a written account of what happened after he warned the colonists that he was confronted by six British Regulars, and one of them ordered him to dismount and asked him some questions. Asked his name, he replied “Revere,” and the British officer asked if he was “Paul” Revere, and if he was a courier. “I told him … that there would be five hundred Americans there in a short time, for I had alarmed the Country all the way up” Revere said.

Sounds like a warning to the British to me.

Folks who issue their criticisms judiciously might stop to double-check facts before they criticize, but, given the prejudices and arrogance of the liberals and their brothers-in-arms in the media, that’s not necessary where Sarah Palin is concerned. Her vast body of self-appointed and self-credentialed critics, denigrators, and ridiculers is convinced that the woman knows nothing, and certainly not as much as they know, so they felt comfortable automatically ridiculing her over this statement, no questions asked.

You won’t have as easy a time finding stories telling you that Mrs. Palin was essentially right and setting the record straight as you will have finding stories ridiculing her. There are at least two reasons for that: First, those shoot-from-the-lip critics don’t have the gumption to fess up to their unprofessional and idiotic behavior, and second, some of them don’t know enough to realize that they screwed up.

Even when confronted with evidence and authoritative support for her account, some folks refuse to accept that she was factually correct. That sort of thing is indicative of a mental disorder: when you are looking at the bark of a tree, but insist that you are looking at a fish, you have a serious problem.

When you know their attitude about the former governor, then observe their behavior, you can’t help asking “If she is so stupid, why do they expend so much emotion and energy attacking her?”

This compulsive behavior is another sign of mental trouble.

Once again Sarah Palin has shown herself to be much brighter than her detractors give her credit for, and much more savvy than they are.

Click Here to Comment

Technorati Tags: Sarah Palin, Politics, Liberalism, Media

Energy solutions and job creation handcuffed by liberal ideology

The lack of a logical, well-thought-out US energy policy – or any kind of energy policy, for that matter – is now being felt through high gasoline prices and unemployment. This is not new with the Obama administration; the US hasn’t had a sound energy policy in recent memory. But the situation has reached unimagined levels of incoherence under Mr. Obama.

At a time when the country was suffering, the Obama administration banned drilling for oil in the Gulf of Mexico after the tragic Macondo well explosion last year, idling thousands of workers in the oil industry and related businesses, and halting efforts to open new drilling projects that would provide new jobs and increase the oil supply. Production on every existing and potential project in the Gulf is at a standstill, except for one exploratory project, and some drilling rigs once operating there have been repositioned to other countries where there is a friendlier atmosphere for oil projects and jobs.

The left doesn’t like fossil fuels, and our president is a prisoner of leftist ideology. Coal and oil are the primary fuels in use today to produce electricity. Opponents don’t like coal because it produces pollution when it is burned, underground mining is dangerous to miners, and surface mining destroys the physical environment, they say. Oil is also a poor choice for energy, because it, too, pollutes the air when it is burned, and pollutes water and land if a drilling accident occurs.

Fossil fuels, however, offer significant advantages over newer, “greener” forms of energy. They produce 86 percent of our energy; there are proven reserves that will last dozens of years, at least; we have systems in place to utilize them to provide all of our energy; and they are relatively inexpensive, and would be less expensive still if the excessive regulations that raise the costs of acquisition and production are removed.

The costly and obstacle-ridden regulatory atmosphere has beaten the energy industry into submission as illustrated by American Electric Power’s announcement last week that it would retire or down-size 11 coal-fired power plants in seven states, costing 600 power plant jobs worth $40 million in wages rather than spend $6 billion to $8 billion in capital investment over the next decade to comply with EPA regulations. The industry has begun looking to natural gas to gradually replace coal and oil for electricity production. It is abundant and produces less pollution.

The Marcellus Shale Natural Gas Field Formation extends through West Virginia, Ohio, Pennsylvania and New York, and holds a huge amount of natural gas, perhaps more than 500 trillion cubic feet of gas. It is estimated that some horizontal drilling and hydraulic fracturing methods could recover as much as 10 percent of that, about 50 trillion cubic feet, enough to supply the entire United States for about two years, with a wellhead value of about one trillion dollars.

The American Petroleum Institute (API) notes that natural gas production in the Marcellus added 57,000 new jobs, mostly in Pennsylvania and West Virginia, as production increased in 2009. “This new analysis predicts that many tens of thousands of more jobs could be created in the coming years if public policies do not drastically limit production,” said Dr. Timothy J. Considine of Natural Resource Economics. "Under the best scenarios the development of Marcellus could mean $24 billion in total economic value to the region, which would positively impact all sectors of the economy.”

But the environmental faction is trying to accomplish through fear and distortion what it cannot accomplish by using reason and science. Opponents claim that deep drilling technologies such as hydraulic fracturing (fracking) pollute groundwater, a concern the API attributes largely to fear-mongering by environmental groups. “Hydraulic fracturing has been used in more than one million wells in the United States in the past 60+ years, and there is not one confirmed case of groundwater contamination,” API said, likely because the water table is usually 100 feet or less below the surface, while these gas reserves are more than 5,000 feet down.

The National Center for Policy Analysis (NCPA) calls fracking a technique with “startling” implications, saying that “natural gas may be only the beginning. Fracking also permits the extraction of previously-unrecoverable ‘tight oil,’ thereby postponing the day when the world runs out of petroleum.

“If gas hydrates, as well as shale gas, tight oil, oil sands and other unconventional sources can be tapped at reasonable cost, then the global energy picture looks radically different than it did only a few years ago. Suddenly it appears that there may be enough accessible hydrocarbons to power industrial civilization for centuries, if not millennia, to come,” NCAP wrote.

If we don’t shoot ourselves in the foot by doing to natural gas what we have done to coal and oil, our energy problems could be solved pretty soon.

However, leftist ideology is harming the country. It is impeding the recovery, killing jobs, and destroying our energy infrastructure in favor of an alternate one that isn’t yet able to replace the existing infrastructure.

So long as Washington is controlled by liberal ideologues, the future for both energy and jobs looks grim.

Click Here to Comment

Technorati Tags: Energy, Politics, Liberalism, Government

Responsible budget policy missing-in-action in Washington, DC

Here are some important numbers to think about:

• Through the years the US has amassed a national debt of $14 trillion ($14,000,000,000,000).
• President George W. Bush increased the national debt by $4.2 trillion to $10.4 trillion over his eight years in office.
• President Barack Obama has increased the debt by $3.5 trillion to $13.954 trillion in his two-plus years in office.
• The debt now exceeds 90 percent of GDP; we owe nearly as much as we produce each year.
• The U.S. now borrows 40 cents of every dollar it spends.
• Social Security, Medicare, and Medicaid account for 43 percent of federal spending.

What our government is doing is similar to a person – call him Joe – who brings home $3,000 a month. That will take care of his needs, but it doesn’t buy all he wants, all of which totals $4,200 a month, so he borrows the rest from a credit line.

When you borrow money, you generally make monthly payments that cover the interest on the loan and some of the principal, but Joe only pays the interest. He borrows $1,200 each month and each year he adds $14,400 to his debt.

The lender put a limit on how much Joe can borrow based upon his financial circumstances. At some point he will have taken all the money available on his line of credit, and will have to make some hard choices, some lifestyle changes, start living within his means and start paying down his debt, unless he can convince the lender to raise his credit limit, which the lender likely wouldn’t do.

Here the comparison breaks down, because unlike Joe and the rest of us, the federal government can raise its own debt limit whenever it wants to borrow more money through an act of Congress, and has done so five times over the last several years. The spending-addicted Washington elite want to raise it again.

Where Joe is forced to begin living within his means and start paying down his debt, the federal government can theoretically just keep endlessly borrowing and avoiding fiscal responsibility.

Over the years the irresponsible, self-serving spenders have accumulated so much debt that every man, woman and child in America would have to pony up $45,000 to pay it off. Contrast that with the fact that the country produces only about $8,400 per person. Clear thinking people recognize that we have a debt crisis, but in the fantasy land that is Washington, DC, politicians think it is a signal to borrow more and spend more.

Our president, demonstrating the leadership qualities he developed in a few years of organizing communities and lecturing college students, leads the charge, proposing budget deficits exceeding $1 trillion in 2011, 2012 and beyond.

The dire circumstances the president and his cronies in DC are unable to comprehend, however, do not escape the understanding of a majority of Americans. An April Gallup poll reflects that two out of three Americans believe Social Security and Medicare costs are already creating a crisis for the federal government (34 percent) or will do so within 10 years (33 percent), while only 7 percent believe the cost of these programs will not create a crisis for the foreseeable future.

The spending-addicted ruling class believes we should just go merrily along spending, spending, spending, while they continue to selfishly put their political futures and big government ideology ahead of their duty to the country and its citizens.

Republican Rep. Paul Ryan, Chairman of the House Budget Committee, has done what should be done and what previous House leaders have refused to do: put forth a plan to address the fiscal crisis. However, Congressional Democrats who apparently want to continue spending 40 percent more than the country collects in taxes annually responded not with a good faith effort to find responsible ways to reduce spending, but by clouding the issue. Their answer is to scare elderly Americans, who are the target of a commercial showing a man pushing an elderly lady in a wheel chair toward a cliff and then dumping her over. This ad is the most idiotic, the most dishonest, and the most perverse piece of political fraud trotted out so far in the young 2012 political season. Congratulations, Democrats!

Rep. Ryan’s budget plan would not take away Granny’s Medicare coverage, as this cheap-shot, deceptive ad suggests, and the Democrats know it. His plan does not affect anyone 55 years of age or older.

We can have a discussion about whether Mr. Ryan’s proposal is a better way forward or not, and we should have that discussion, but it appears Congressional Democrats are unable to offer sensible arguments, and instead prefer to maintain the status quo and demagogue the issue. They falsely claim ObamaCare will take care of the problem, or most of it, and say, “Not to worry. We’ve got ten years to work on a solution.” That is simply not acceptable at this point.

It is time the folks in Congress earn their pay, make the hard but responsible decisions they were sent there to make, and return fiscal stability to our country.

Click Here to Comment

Technorati Tags: Economy, Politics, Government, Democrats