Keeping with the light blogging schedule, this is a repost from Alter.net about why the people of OWS are so ticked off and why they are protesting. Consider it a primer to help in understanding their positions.
1. Wall Street caused the crash: Unless you are suffering from financial amnesia, you should remember that it was Wall Street’s reckless gambling that did us in. It was Wall Street banks and hedge funds, not home buyers, who created the enormous demand for high-risk mortgages to pool, to securitize, and to turn into Ponzi-like gambling structures with names like CDOs, CDO squared and synthetic CDOs. It was the money-grubbing rating agencies that blessed these pieces of garbage with AAA ratings. As a result, trillions of dollars of worthless toxic assets polluted our financial system. When the bubble they induced burst, our system crashed, causing 8 million working people to lose their jobs in a matter of months due to no fault of their own. Anyone who still blames low-income home buyers, or regulations or Greece — or anyone other than Wall Street — should be checked for dementia.
2. The Wall Street crash directly caused the gravest unemployment crisis since the Great Depression: We’re three years into the worst jobs crisis since 1937. Upwards of 29 million people are out of work or have been forced into part-time jobs. The number of people who have been jobless for more than 26 weeks is at post-WWII record levels. And there’s no end in sight to this misery. Meanwhile, Wall Street’s representatives in Washington want us to focus on cutting public employment and public services to address the debt that Wall Street itself precipitated. WE wouldn’t have a debt crisis were it not for the bailouts, the crash, the lost jobs and the soaring cost of jobless benefits that can be laid at Wall Street’s door. (The debt was also caused by tax cuts for the rich, and the bankers certainly don’t want to talk about that.) For those diversionary debt tactics alone, Wall Street should be occupied until it pays to replace the jobs it destroyed.
3. Wall Street profited from the bailouts and remains unaccountable: Taxpayers provided trillions of dollars in cash and asset guarantees to the wealthiest bankers and hedge fund managers in the world. But nothing was extracted from them in return. Here’s one egregious example: Goldman Sachs paid $550 million in SEC fines for selling mortgage-related securities that were designed to fail so that a large hedge fund could bet against them. The securities failed as planned and the hedge fund pocketed $1 billion in profits. But after we bailed out AIG, Goldman Sachs picked up nearly $12 billion for similar bets that AIG had insured. Goldman Sachs collected 100 cents on the dollar and those dollars were ours.
4. The super-rich are getting richer: When the economy was crashing during 2008, high frequency traders in hedge funds and banks made upwards of $20 billion from the turmoil. This trading scam provided no redeeming value to our economy. Rather, it was a hidden tax on our sorrows — a transfer of funds from the many to the few. In 2010 the top hedge fund managers “earned” over $2 million an HOUR! The top 25 hedge fund managers took in as much as 650,000 teachers. Young people have the right to question these lopsided values. All of us have the duty to do something about it.
5. The super-rich are paying lower and lower taxes: While the government pleads poverty when asked to create a massive jobs program, our financial elites use every loophole available to avoid taxes. In 1995, the 400 wealthiest families paid about 30 percent of their income in taxes (after all deductions). Today their effective rate is less than 16 percent. And for what? What did society gain from their retained wealth? Not jobs, not debt reduction, only more Wall Street gambling.
6. Financial elites pay lower taxes than their secretaries: Venture capitalists and private equity fund managers, as well as some hedge fund elites, get a fantastic tax break called “carried interest” that allows them to pay a top rate of 15 percent on their income (rather than the 35 percent top rate regular people pay). This tax break, originally designed for small business partnerships, has made the mega-rich even richer. You might be wondering why this outrageous tax break continues for billionaires. The answer is simple: these elites are pouring money into Washington to make sure that Republicans and Democrats alike keep the loophole in place. Even some liberal Democrats are parroting the line that this tax break for billionaires is good for America. So when the occupiers say they are disenfranchised, they’re right.
7. None of those who caused the crash have been prosecuted: Raj Rajaratnam, the hedge fund billionaire, is going to the hoosegow for insider trading. Bernie Madoff is in prison for life for his Ponzi scheme. And about 40 others have pleaded guilty to insider trading crimes. Yet none of these scoundrels, as immoral as they may be, had much to do with the financial crash. They didn’t peddle toxic mortgage-related securities. They didn’t push predatory loans. They didn’t rate garbage securities as if they were gold. None of these perps pumped up the housing bubble. Those who did are still roaming free, financially armed and dangerous.
8. Wall Street is much too big and its salaries are much too high: The financial sector is supposed to be an intermediary that turns our savings into productive investments. It’s not supposed to be a casino and it’s not supposed to dwarf the rest of the productive economy. But after years of deregulatory foolishness, it has metastasized to destructive levels. From the 1930s until the mid-1970s, financial sector employees earned the same as those in other sectors, relative to their skills and experience. That’s the way it should be. But since we embarked on the long march of financial deregulation and tax breaks for the super-rich, people working in the financial sector have seen their incomes skyrocket compared to everyone else. The bigger that gap, the more danger we face. And unless we build a massive populist uprising, it won’t change.
9. Wall Street still owns the regulators: When you put too much money in the hands of the few and when you deregulate finance, you get a financial casino. That’s what happened in the years leading up to the 1929 crash, and it happened again in 2008. During the New Deal we regulated the tar out of finance, ending their reign of speculative terror. And it worked for nearly a quarter of a century as financial crises virtually disappeared. Since financial deregulation reappeared over the last 30 years, there have been over 180 financial crises around the world. So you would think after 2008, we’d be back to reining in the bankers. But, no…our leaders are afraid to stifle “financial innovation” (See next point.) The Dodd-Frank bill is weak and getting weaker, thanks to intensive Wall Street lobbying. High government officials still believe that Wall Street can lead the nation forward. The kids are telling us that we should shut down the casinos now. Right again.
10. Financial innovation is a joke: Washington genuflects before the gods of financial innovation: the adjustable no-money down mortgages with resetting teaser rates, the synthetic collateralized debt obligations that turn garbage mortgages into AAA securities, the credit default swaps that are financial insurance policies without regulation, the nanosecond trading programs that flip millions of stocks per second while milking slower investors, and the myriad of ways to make enormous financial bets using little or none of your own money. They tremble at the thought of whispering anything that might stifle these highly profitable Wall Street inventions. They are wowed by trading measured in nanoseconds, by the alphabet soup of securities, by the dark pools of financial trading and most of all by financial billionaires and their lobbyists. But to paraphrase former fed chair Paul Volcker, the only real financial innovation in the last 25 years is the ATM machine. The rest are simply gambling games designed to enrich Wall Street’s elites who pocket the winnings and pawn off the losses on us. The protesters sense the game is rigged. It is.
22 comments
October 13, 2011 at 9:04 am
Vern R. Kaine
1) Wall Street cannot “create enormous demand for high-risk mortgages”. Government with Wall Street created ripe conditions for both predatory lenders (supply push) and greedy homebuyers (demand pull), but even this could have been mitigated with the following point:
“It was the money-grubbing rating agencies that blessed these pieces of garbage with AAA ratings.
This, to me, is the crux of it right here. This is where the problem went global, and where the economy itself was being duped (stock market, private investment market, real estate market, etc.) Unfortunately so many people from government on down to the local mortgage company on the corner have their fingers in this pie it is doubtful any real convictions are ever going to happen.
2) “Washington want us to focus on cutting public employment and public services to address the debt that Wall Street itself precipitated.”
Haha! Instead of making this a blanket justification for bigger government, which in turn means bigger bureaucracy and red tape, be specific and make it a case for more LAW ENFORCEMENT. We need far less laws (we’ve got enough already that aren’t acted upon) in the form of, say, a Consumer Protection Bureau that gets to operate outside the rules of Congress, and more law enforcement. Both the right and the left should agree on that one.
3) Unaccountable. Yes! They should be in jail. Make note, however, of under which legislation (and who’s legislation) this unaccountability has been left to stand. Look to Government first, not Wall Street, for this one (or, just find all the Wall Streeters INSIDE Government as a place to start!)
4) The super-rich will get richer no matter what because those who’ve actually earned their money are smarter, bolder, and think further ahead than everyday people. That’s nature. How much they get rich by and whether they do it legally, however, is up to Government.
5) Super rich are paying lower and lower taxes. This has to happen in order for businesses to stay put. Lower tax rates but broaden the tax base and close the loopholes. Also, make taxes predictable and this problem is relatively solved.
6) Elites pay lower taxes than their secretaries. Haha! Enter the Buffett argument yet again. Elites pay lower tax RATES because rich take a different source of income (i.e. dividends and capital gains). They get a break on that because it’s money that has been 1) already taxed, and 2) RISKED. The middle class tax base is too broad to offer dramatic tax decreases – the Canadian Government knows this all too well. Want to lower this rate, you have to increase the amount of people paying taxes (federally)into the system which means finding a way to capture revenue from the 40% of the middle class who either don’t pay taxes or get back more than they put in.
7) None of those who caused the crash have been prosecuted. If OWS is so about change, get them to ask the White House why it was allowed to pick which banks failed and which didn’t, which got scrutinized and which didn’t, and to this point, why there have been no significant investigations or arrests. Don’t sit on Wall Street and ask the criminals why they’re not in jail, ask law enforcement – i.e. THE GOVERNMENT.
8) Salaries too high. Full agreement there. Cronyism at its best. A 200:1 ratio of exec to middle management pay goes against business best practices. No small or mid-sized business that I know of operates with those ratios and sustains itself long-term, but with compensation that high execs don’t have to think long-term, which is why it is wrong – ESPECIALLY when they’re taking the economy to get that pay!
9) Wall Street owns the regulators. Yes, which are in Government! So again I ask, why are the OWS clowns petitioning the criminals? They should be parked right outside Geithner, Paulson, and Bernanke’s front doors.
10) Financial innovation is a joke. Really? It’s what allows people to get into a home with only 5% down, or buy a car with less than 100%, or have any sort of growth that beats inflation. Surely the post author has a car or a mortgage so that’s a pretty weak criticism.
Industry lobbying is a joke. Protest that. The current state of law enforcement is a joke. Protest that. Beyond that, stop being lazy and read what it is that you’re actually signing and getting yourself into. Don’t assume that “housing will always go up” just because some clown on TV or your Dad or your neighbor says so.
The common ground I see is that the points of frustration are very much similar between the right and left camps, it’s just that the left wants to go too far in protecting those who allow their entitlement issues to flourish (Government) and the right wants to do the same with those who allow theirs to flourish as well (Wall Street). That’s why I firmly believe that for OWS to truly gain momentum and be a force to be reckoned with, they need to be parked both on Wall Street AND the White House simultaneously. Only then do I think that we’ll actually start to see any real change. Protest Wall Street and I’m certain within 3 months you’ll have some banker’s head on a lance.
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October 13, 2011 at 9:07 am
Vern R. Kaine
Sorry – two corrections: 1) “Tanking the economy” not taking, and 2) Protest the White House and I’m certain within 3 months you’ll have some banker’s head on a lance.
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October 13, 2011 at 8:01 pm
Alan Scott
Say a lie often enough and if it is not challenged it becomes the truth . ” Wall Street caused the crash: ”
Like blaming the flies for the odor coming off of the manure pile .
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October 14, 2011 at 2:28 am
Vern R. Kaine
Haha! Wall Street was definitely complicit, but the actual cause? No way.
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October 14, 2011 at 2:55 am
renetascian
This doesn’t really focus on the bigger picture, and no one seems to fail to grasp where the “tax issue” really plays in. Wall Street is the scape goat for an industry that makes Wall Street look like a casino. Wall Street is a good place to start, however, if it were me I’d be banging down the door of every company making record profits while everyone else is suffering, and figure out why it is happening. Big Business is a problem, and Wall Street is just their figure head. It has no real power on the system compared with it’s trusts, it’s the entities behind it that are. The intentional manipulation of the prices of good, securities, and assets to hedge the economy in favor of pure capital profits. Our nation is practically being run by the Feringi (a fictitious race from Star Trek: TNG) who cared only about profits, less about resources (especially people). Look to the fortune 500 companies for answers and hold them accountable for their predatory behavior.
They are responsible for the biggest cost of living increases we have seen in 50 years from 1990 – 2011, the loss of jobs, the inflated housing market, and the excessive house building that occurred in the last 2 decades. They are also responsible for the turn Wall Street made from financial investment to gambling. They have their fingers in everything, from Government, to Grocery Stores. Big Business is bigger than our government. What you both are failing to understand is they went from infrastructural progression to pure capital betting. It’s the infrastructure of our country that has suffered as greed took place and people started caring more about money and capital than in building lasting investments. They don’t just have influence over our economy, but what we eat, what we drive, where we work, and what we wear.
It’s the companies (probably not all of them) but the top capital producers that are plugged into Wall Street that are responsible. Corruption exists in both places though, so Wall Street is also culpable. The Big Business in America needs to see taxes around 50% or greater, and I’ll tell you why. Because they abuse the infrastructure when they are allowed to shirk taxes for this need. They depend upon more, use more of, and need more of our total US infrastructure (resources, land, roads, assets) than any one else. Asking them to pay appropriate taxes isn’t redistribution of wealth, or even unfair. It is their responsibility to pay for who and what they use, and they are not. I am not saying we need more laws, we need for Corporate America to pay for what they use, which is a shitload. Buy getting takes breaks and loopholes to dodge taxes they are essentially billing us for their expenses and it’s time it stopped.
No pity parties for them, no sympathy. Any corporation moving assets overseas will face tariffs and additional taxes for operation within the US. No more free trade agreements until we rebuild. Cancel the Free-trade agreements with China and the EU until we recover and pay our debt. Regulate Wall Street as if it were the New Deal Era, stop the buck where it needs to stop. Lowering the tax rates is the worst suggestion, and highly contradictory to small government to increase the tax base. Make Big Business pay what they owe, which is despite what you may argue, much greater in percent than us. Don’t tax the middle class to pay for this crap, tax the people who need and use it the most. If a homeless man steal 100 dollars from a bank because he was hungry he gets more time in jail than a man who stole a billion.
This system is fucked if we don’t start fixing it. Don’t believe the crap you’re told about the rich and taxes, they owe much, much more than they pay. Revamp the tax system, tax them for at least 50%, fix our social systems, fix our roads, fix our air travel, fix our military spending, make new checks, balances and regulations for Congress, Wall Street and the Houses, regulate the Federal Reserve more, bring our troops home, fix our infrastructure and the economy will mend itself. Taxes pay for our infrastructure which wouldn’t be nearly as big as it is if it weren’t for big business, they should pay to maintain it and pay equitably. Wake up and smell the coffee.
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October 14, 2011 at 2:55 am
renetascian
Correction: Everyone seems to fail to understand the tax issue.
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October 14, 2011 at 9:17 am
Vern R. Kaine
Renetascian,
Some very astute observations and I like that you recognize as complicit and not the overall enemy. I would only “challenge” one thing: I don’t think forcing a 50% tax will be a long-term solve.
Times have changed from when we can do that. Yes, due to regulations now in place but globalization is more the reason why we can’t get away with that anymore.
We can’t be a free country and yet force people, or companies, to remain inside our borders. Also, “third world” isn’t so third world anymore. 20 years ago most companies wouldn’t even think of moving to China. It was largely a very primitive country and very business-unfriendly. Now that’s changed, and not only there, but most everywhere in the emerging markets.
On the other side of that is a population (market) that sets the price point and therefore ultimately the demand of a good or service that businesses are forced to respond to. There is simply no way an iPod can be produced as cheaply in this country as it can somewhere else, and lord knows we can’t live without our iPods.
But I’m all with you on fixing the tax code and closing the loopholes. It’s my same opinion with middle-class taxes: lower the tax rate, but broaden the tax base.
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October 14, 2011 at 9:51 am
renetascian
The problem is that they already are making much of our products outside of America to sponge off the economy and we need to close down some of the lopsided open trade agreements with other nations that we have. We need to tax imports more, we need to make it profitable to produce in America again and we aren’t doing it. Outsourcing is already a problem because these companies and big business in general have been allowed to get away with it and it is time we stopped that. It is cheaper to make goods overseas that it is here, which is why 80% of the electronics you see in your Wal-Marts and Targets are made in China, Singapore, and Hong Kong. We have really dropped out of the production market and have become major importers thanks entirely to Corporate America’s greed. And if that was true what you say about a 50% tax then nations like the Scandinavian would have collapse with their much higher taxes.
If we don’t tax them we are all going to lose and our infrastructure will fail and they’ll go elsewhere anyways which they have been doing for a long time anyways. We need to start taxing big business for what they really owe to our infrastructure, and start taxing our major imports to make building in the US profitable again, plain and simple. We need to stop letting the CEOs get away with eroding our infrastructure because of flimsy law, tax codes and weak taxation for the sake of their profiteering. We can tax them at 50%, if we start taxing all good produced overseas again. It’s not intended to be a permanent action but one to pay for what they already shirked out of. It can be adjusted as needed, but it’s much to low as things are. We need to make our economical back bone (the 99% of us) strong again, we need our social programs to stand on their own as well as our market. We need to rebuild America, plain and simple; and make those responsible for that erosion pay for their share. Infrastructure makes jobs, not capital.
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October 14, 2011 at 12:29 pm
Vern R. Kaine
“And if that was true what you say about a 50% tax then nations like the Scandinavian would have collapse with their much higher taxes.”
Without getting into the booming economy of Scandinavia, you miss my point. I’m not saying businesses can’t absorb a higher tax rate. They can, primarily because those taxes get passed on to the consumer anyways.
What I’m saying is that because of OTHER countries trying to attract American businesses, it’s far easier for an American company to move to a more business-friendly country than it is for a foreign company to come here, especially where manufacturing is concerned. Raising the tax gives them an easy excuse. Costs at home have to be more competitive, not less.
If America had far less debt owed to foreign countries we may have been able to tax and tariff our way out of this, but with so much debt in foreign hands I don’t think so. Therefore, i think American companies simply have to be made to be more competitive in the global market and start to domesticate some money back that way.
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October 15, 2011 at 10:51 am
The Arbourist
What I’m saying is that because of OTHER countries trying to attract American businesses, it’s far easier for an American company to move to a more business-friendly country than it is for a foreign company to come here,
Following that chain of reasoning it would then be most advantageous for businesses to relocate to countries with the lowest tax rates available. Ireland, Slovakia and Hungary possess the lowest corporate tax rates, yet they are not burgeoning hubs of economic power.
The problem lies within making the statement that low corporate tax rates are only reason to locate your business in country X. A stable society that can safely support workers and a market able to distribute goods are vital to any sort of reasonable profitability when it comes to most goods (arms and illicit drugs being notable exceptions).
The “lower corporate tax rates other wise business won’t come here” is flawed from the beginning. It is nonsensical “common sense” phrase meant to stop arguments with a ‘fact’ that does not hold up to critical analysis. Innovative, productive societies have high levels of equality and taxation that have a dual focus on people AND the economy, as opposed to the damaging mono-focus currently dominating North American thinking. A society that builds education, retraining and universal healthcare into its fabric ( in short…more equitable) is far more durable, responsive and productive that one a society that caters only to its business elite.
So rather than trotting out race to the bottom argumentation that hollows out societies and ultimately destroys them debate needs to be structured around the idea that the needs of business need to be in balance with the needs of society and not the other way around.
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October 15, 2011 at 8:56 pm
Vern R. Kaine
“The problem lies within making the statement that low corporate tax rates are only reason to locate your business in country X.”
I never made that statement, that they are the ONLY reason to locate a business overseas. You did. Of course there are other strategic reasons to stay or move.
Here’s an article from ’09, but still enlightening nonetheless.
http://online.wsj.com/article/SB124338175183056465.html
“Accenture is Seeking to Change Tax Locales”
“In a trend that has gained momentum over the past six months, numerous U.S. companies are reincorporating from tax-friendly locations like Bermuda and the Cayman Islands to Switzerland and Ireland, in an effort to cope with what are expected to be significant changes in how the U.S. taxes multinational corporations.
As previously reported, Tyco International Ltd., Foster Wheeler Ltd., Weatherford International Ltd., Transocean Inc., Covidien Ltd., and Ingersoll-Rand Co. have all announced plans or finalized plans to make such moves over the past six months.
Many of these companies have said taxes were a reason behind the move but have also emphasized other strategic reasons for the changes.”
From March 24, 2011:
http://www.irishcentral.com/news/US-companies-aid-in-Irelands-economic-recovery-118568364.html
Headline: “US Companies Aid In Ireland’s Economic Recovery”
Quote: “Today we have over 600 US companies employing 100,000 people in Ireland.”
From Jan 2011:
“Meeting between the Taoiseach and Mr. Tom Donohue, President and CEO of the US Chamber of Commerce”
“Speaking at a breakfast meeting in Iveagh House, Dublin this morning, the Taoiseach assured representatives of US multinationals in Ireland and leading Irish businesspeople that the 12.5% rate of corporation tax will not change.”
May 25, 2011
Headline:
http://www.tax-news.com/news/Irelands_Corporate_Tax_Attracts_US_FDI____49522.html
“29% of those questioned said that Ireland’s competitive corporate tax regime was a positive attribute when considering Ireland as a location for FDI.” That’s almost one out of 3.
Note this comment from the finding: “20% admitted that Ireland’s national financial instability was a negative factor in decision making:” Wow, so you mean indecisiveness of a country actually affects investment in that country’s growth or infrastructure? :) That’s 1 out of 5.
Who cares if Slovakia and Hungary have 0% tax rates. The fact is that Ireland has enough of a positive, attractive business climate overall vs. the one here at home for it to make sense that American companies move, especially when “there is enormously widespread anxiety over the political leadership of the country”. (Zuckerman, WSJ, Oct 15 2011)
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October 15, 2011 at 9:07 pm
Vern R. Kaine
…debate needs to be structured around the idea that the needs of business need to be in balance with the needs of society “
Debate? By who? A few businesses, politicians, and consumers in some room somewhere? That’s as useless as squatting in a park. :)
The so-called debate happens without words and happens instantly with society’s DOLLARS. Society said it needed low-cost items first and high returns on their 401k’s/RRSP’s second. Businesses then delivered on both counts so in effect, it was being “in balance” with what society said it needed. Could these companies have sustained jobs listening to the fringe instead? Not a chance, because the fringe does nothing significant to affect society’s demand as a whole.
“Everyone having a job” must have been a very distant third demand because the bulk of society during that time screwed themselves out of one based on every effort going to fulfilling those other two needs. If the bulk of society truly gave a shit about domestic jobs you’d see “Buy American” or Canadian products and services at the top of sales lists, but you don’t.
The market doesn’t initiate, it responds and adapts to society’s demands which are communicated with society’s dollars. It’s therefore up to society to use their dollars to tell businesses what their needs are. Squatting or squabbling doesn’t cut it.
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October 15, 2011 at 10:57 pm
renetascian
On this one though, you are wrong on all counts. Lower per capita tax rates work in small nations with much lower populations and much simpler infrastructures… Look at Hong Kong’s success with intensive non-local infrastructure, and they fact that they can fastidiously modify their own infrastructure as a “capitalist island economy” because of their size. You can’t do that in a country like America. There is a reason why big business shifted it’s model, once again, because it was cheaper to produce somethings abroad in the interests of profit. However, what they US government didn’t do was maintain the “leash” on corporate interests which is why we are where we are now. We can and should tax the wealthy 3% at rates from 45 – 60% based on total income. The reason once again comes down to the fact that the state of our infrastructure as it is now is their responsibility, not the average 99% taxpayers.
They are the one who needs it. Its the reason why nations which low tax rates have weaker infrastructure, and why smaller nation states have refined infrastructure with lower tax rates. We have over 300 million, 3.8 million square miles of land, much infrastructure to maintain, low corporate tax rates are killing this union. There is no way you can shirk that with a few articles about tax rates, especially not ones from the Wall Street journal. Even if they spoke of something in honesty, they are only doing it so they can lie to you later. It’s called plausible deniability, and you set you can set it up by being honest about things not vitally crucial to your interests or goals and lying about the ones that are. Quite frankly we have an expensive infrastructure, but that is both positive and a drawback depending on your business style, and product.
When a tree grows out of control unchallenged by natural balance usually governing tree growth and starts damaging your house do you cut your house away to allow the tree to grow? It makes no logical sense, does it? I don’t really know why you think high tax rates are going to hurt business in America, but you are wrong. They are here for reasons other than tax rates, and the current state of financial regulation. However, if the loose tax laws, financial deregulation, and ability to make money hand over fist at the expense of averages American’s is any companies sole purpose in America, then we need to get rid of them. Rebuild good business in America, not predatory capital greed driven Ponziists. They are bad for business, bad for government, and bad for America. Make want to leave, and tax their goods sold in America, plan and simple. Low taxes are the reason we are in a bind right now, suggesting that is the way to go is ludicrous as it seems to be the crux of your argument. There is more to economics than who is making money.
You do make other good points about other elements of what makes for growth and good infrastructure, however, the way those things are employed is different for every country. What works in Ireland, or Hong Kong will not work here.
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October 15, 2011 at 11:01 pm
renetascian
Apparently naps make my typos worse, sigh.
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October 16, 2011 at 9:24 am
Vern R. Kaine
“On this one though, you are wrong on all counts. Lower per capita tax rates work in small nations with much lower populations and much simpler infrastructures.”
Wrong on what? I just showed you how billions of our domestic company’s dollars are being spent in at least one foreign country to create jobs, and they’re stating that low corporate taxes are a key reason for it. No matter how much you might not like or trust the WSJ, those are facts and they are indisputable.
Low tax rates also work State to State in the US as well, and province to province in Canada in attracting business. Sure, even with Alberta’s lower tax rate and no provincial sales tax there will still be operations in BC, for instance, because they need a different type of access to their customers, but we’re talking about companies that have a choice in where they operate that more/less comes down to finances alone. Look at the boom in tech companies and call centers in Atlantic Canada. Government programs there to incentivize and attract business were a key factor in those startups or moves.
In the States it’s similar. “Business-friendly” means not just taxes but other things as well, and you’ll find tons of evidence showing anti-business States like California losing companies left and right because of its taxes, EP rules, employment legislation, etc.. America at this stage is not very business friendly at all. Canada is, however, and just beat the U.S. in Forbes for business-friendliness. Look at what they credit that to:
http://www.forbes.com/sites/kurtbadenhausen/2011/10/05/canada-trounces-u-s-in-best-countries-for-business/
“Canada Trounces US in Best Countries for Business”
“Canada’s standing as a business friendly locale has improved thanks to tax reform over the past two years. It also scores highly as far as trade freedom, investor protection, low corruption and minimal red tape.”
To ignore all that and just repeat “fair share” ignores what really creates (long-term) jobs and makes an economy run. Bottom line is America should be ATTRACTING foreign business, and it isn’t because it can’t even properly compete for its own domestic ones..
“We can and should tax the wealthy 3% at rates from 45 – 60% based on total income.”
Is that an arbitrary number that you’ve picked out of the air? Exactly how much revenue will that generate in theory vs. reality?
A big problem with the Liberal point of view on this is that they never take the statement through to the end of the numbers and the reality of it. I can guarantee you that no one who’s actually EARNED their money will give 60% of it away to government even though the public might be fooled into believing that that’s what they’re now being taxed at.
Believe it or not, though, I’m all for your suggestion, if perhaps for different reasons.
If I earn $1m this year and can expect to have $400,000 in my pocket at the end of the day because of your suggestion taking hold, then you’re saying that I should give the government more of my income than I should keep for myself. Nope. Won’t happen. I’ll just shift my income to more tax-preferred ones – JUST LIKE WARREN BUFFETT DOES. Unlike Warren Buffett, however, I’ll actually pay my back taxes.
You’re likely going to tell me that this is my “fair share” for using roads and infrastructure? Guess what – If I have a fleet of trucks, I’m already paying environmental taxes, vehicle registrations and commercial license fees, fuel taxes, safety inspection fees, DOT fees, etc. etc. etc. which are already designated towards those infrastructure costs by the government. (By the way, I just ordered a pizza last night in Canada and on the bill was a – get this – there was an “Environmental Tax” on my bill. For a PIZZA!!!!!) The government already designated this as “fair share”, hence the tax. But how much of that money, however, actually gets to the causes they’re supposed to vs. paying for bureaucracy and overinflated salaries? Liberals should be answering that question first before they scream about new taxes.
Anyways, In Canada my marginal rate is 56% (In the U.S. it’s about 35%). Here’s what I do in Canada:
I shift part of my income to dividends on the Class A shares in my company on which I get about a 25% tax break. Then I crystallize some of my Capital Gains for which part of my withdrawal is a return of my original capital and therefore tax free. Then I invest in RRSP’s for that tax deduction, then I maximize my 17% Charitable Deduction. In effect I bring my taxes down to about 35% net. Consider, however, that NONE of my personal income in Canada as a result of all that goes to new investment. After saving for my own retirement, my own Canadian bills (which Canadian taxes inflate), future kids education, etc. there’s nothing left. I just keep it in the company. Now threaten to raise corporate taxes in Canada? I’m going to start looking to the U.S. or elsewhere for my headquarters.
Raise the taxes as you’d like to see them raised in the US and you’ll have people’s money fleeing in droves unless there are incentives to keep it domestic.
The declaration of “Obama Introduces New Tax on the Rich!” will sound good as a headline and give OWS and Liberals everywhere warm fuzzies for the moment, but when you follow the money through to the end I’m positive you’ll see that this “Rich Tax” will have an opposite effect than the one you intend.
There needs to be incentives to keep the money domestic, otherwise it will go overseas. it’s that simple, and don’t blame the government or business for that, blame globalization. More countries now have the ability to compete for American business, and we can’t force these countries not to try unless you are actually for American Imperialism. You can’t tariff your way out of that challenge, either. it just won’t work.
Here’s my final thing, though: no rich person I know expects to pay zero tax, and despite what Liberals want to think, they don’t want to ruin America but they don’t want the government ruining it either, which they’re doing. Read Steve Steckler’s comment from Politico – it to me says it best (http://vrkaine.wordpress.com/2011/10/10/steve-steckler-re-raising-taxes-on-the-rich/). As a comparison, I don’t want to give my nephew $10,000 for him to go buy crack even though my child support might state he’s supposedly getting that $10k for food, housing, and education. Government right now is the kid on crack.
It’s a simple choice America has: be MORE competitive, or less competitive. Either lower taxes, close the loopholes, and broaden the base, or try your way of raising taxes and closing the loopholes which will do nothing but move money out of the system and promote further hoarding as it’s already doing simply out of concern that that’s what’s going to happen.
Keep in mind that businesspeople are 100x faster and smarter than any overpaid bureaucrat in government at any level, and even the public for that matter, because businesses are forced to think ahead not just in theory, but in reality. Most if not all of them have already seen this coming based on the clues and have acted accordingly while the government continues to take its sweet-ass time bickering and playing politics. I can assure you that by the time the government comes around to actually trying to tax at those levels, the money it was hoping to grab will be already gone.
In the meantime, they’ll have fed the general public the b.s., feel-good headlines about some new “Rich Tax!” and what income they EXPECT to get from it, but next election the people will realize that the revenue never happened. What are we going to do then, go back and squat in the park?
If we want this economy to work we need to listen to businesspeople, not punish them based on what has amounted so far to little more than jealousy and false characterization.
Sorry for the long reply, but it’s a deep and complex subject that usually just gets superficial treatment.
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October 16, 2011 at 11:19 am
The Arbourist
The government already designated this as “fair share”, hence the tax. But how much of that money, however, actually gets to the causes they’re supposed to vs. paying for bureaucracy and overinflated salaries?
You don’t get to use that one Vern. The government bloat people mention is often duplicated in the private sector in spades. Shall we talk about the bonuses and payouts during the 2008 meltdown? The 2008 payouts, were just the most egregious that the media mentioned, the system of extravagant perks was in place long before it was vividly brought to the public’s attention.
A more charitable statement would be that inefficiencies exist in both the public and private sectors. The public sector though has more responsibility though and more stakeholders that it is required to be accountable for, hence more bureaucracy.
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October 16, 2011 at 3:31 pm
Vern R. Kaine
You ignored the first part of what you quoted of mine, which contains the point. People on the left use the excuse of “well the rich use roads, they should pay for them” and ignore the fact that the gas tax has already been designated for that purpose.
http://money.cnn.com/2011/08/04/news/economy/gas-tax/index.htm
If they want to raise taxes for road infrastructure, they should start there and debate it, but like I said the Left rarely follows the numbers through to the end of their declarations.
The article brings up another point. The Left would likely claim that the Tea Party wants to leave road maintenance to the private sector. A lot of the argument against taxes is against FEDERAL taxes, and the Tea Party’s desire to move more Federal powers back to the States as was originally intended in the Constitution. See how much of native resource-rights money goes up to the Federal government versus the percentage that gets returned.
“The government bloat people mention is often duplicated in the private sector in spades.”
And you’re basing that on what? I’m looking for more recent #s, but according to the New York Times Wall Street bonuses were $2 billion at their worst across the top 25 banks in 2008, and was reported to be a fraction of that in 2009. (http://topics.nytimes.com/top/reference/timestopics/subjects/e/executive_pay/index.html).
Now check out the GAO’s numbers on government waste, or a second study on duplication.
Just ONE example: The federal government runs 80 economic development programs across 4 agencies at a cost of $6.5 billion with “little evidence of economic impact”.
Another example to the topic at hand (infrastructure): “Highways programs have not been rebooted since 1956. The Department of Transportation (DOT) spends $58 billion on 100 separate programs run by five DOT agencies with 6,000 employees. GAO says the programs have “not evolved to reflect current priorities in transportation planning.”
More:
http://www.cblpi.org/resources/speech.cfm?ID=14
Even at Wall Street TOTAL compensation for 2008 at $135b, duplication and waste at the Federal Level amounts to trillions, yet, as I say, the Left never wants to go there. I call “bullshite” to anyone who wants to try and tell me the reason for that waste is a bureaucracy put in place is some sort of response to the “need for accountability”.
These agencies need to be accountable to the people, but “the 99%” continue, year after year, to give this inefficiency a free pass – ESPECIALLY ON THE LEFT. With perhaps the exception of Military/Pentagon waste, show me one Liberal or #OWS talking point that speaks to any of this government waste at all.
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October 16, 2011 at 7:08 pm
Sean Patrick Hazlett
Well it seems everyone is talking past one another on this site.
Suffice it to say, I am in Vern’s camp, due to…well…math.
Rather than elaborate why increasing the corporate tax rate in the United States (which is also the second highest in the world, BTW) will reduce the number of jobs in the United States, I will simply provide some links to a seven-part series that shows mathematically why corporations offshore. It also shows what happens to corporations who do the “right” thing by not offshoring, and by upporting union labor.
Enjoy:
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October 17, 2011 at 1:33 pm
The Arbourist
Well it seems everyone is talking past one another on this site.
Welcome to DWR.
Vern and I often talk past each other as he part of the business elite oligarchy while I am the hippy pinko leftist radical and correct most of the time ( :) ). It takes us a while to find commonality as we are both invested in our versions of ‘reality’ and feel the need to change the others mind. Sometimes wisdom is exchanged, sometimes we just write each other off as a deluded capitalist or socialist. It usually works out not so bad.
It also shows what happens to corporations who do the “right” thing by not offshoring, and by upporting union labor.
I have not read the links yet, but many of the issues when it comes down to the hilt of the problem lies within the idea of the market rational answer and then the idea of what is good for society answer. Conflict arises often when these two ideas clash and the facts and rhetoric exchanged come fast and furious but on a more general level I think what is really being debated is the primacy of economic concerns in a society. Where one draws the line determines the stance one takes and the arguments supported as evidenced by the disagreements Vern and I have.
That being said, you will have to allow me some time as my reading schedule for this week is already quite full, but I do look forward to perusing your links.
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October 17, 2011 at 10:35 pm
Sean Patrick Hazlett
No worries. And I have visited and posted here before, just not recently.
These examples are admittedly oversimplified, and tend to invoke the market rational approach. That said, thinking of creative ways to make the “math work” for corporations is the surest way to prevent them from offshoring, in my opinion.
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October 18, 2011 at 4:57 pm
Vern R. Kaine
Vern and I often talk past each other as he part of the business elite oligarchy while I am the hippy pinko leftist radical and correct most of the time ( :) ). It takes us a while to find commonality as we are both invested in our versions of ‘reality’ and feel the need to change the others mind. Sometimes wisdom is exchanged, sometimes we just right each other off as a deluded capitalist or socialist. It usually works out not so bad.”
Hahaha!! But when we do find that commonality, it’s pure bliss, isn’t it Arb?! :)
By the way, check out the salaries they’re fetching at UCLA! ;)
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October 18, 2011 at 5:00 pm
Vern R. Kaine
“That said, thinking of creative ways to make the “math work” for corporations is the surest way to prevent them from offshoring, in my opinion.”
But what if you like to watch those third-world employees and their tiny little fingers making all those hats? It’s like watching an ant colony – fascinating stuff.
Then again, I hate ants.
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