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Weissman writes: "Keep your eye on the three shells. President Obama promises not to back down on his promise to raise personal income taxes on the rich."

President Barack Obama speaks at a campaign rally in Fayetteville, North Carolina 10/19/08. (photo: Jim Young/Reuters)
President Barack Obama speaks at a campaign rally in Fayetteville, North Carolina 10/19/08. (photo: Jim Young/Reuters)


Is Obama Playing a Shell Game on Tax Reform?

By Steve Weissman, Reader Supported News

12 December 12

 

This is the report Steve Weissman's analysis below is based on: The CEO Campaign to 'Fix' the Debt.

eep your eye on the three shells. President Obama promises not to back down on his promise to raise personal income taxes on the rich. Several leading CEOs, including Lloyd Blankfein of Goldman-Sachs, say they will happily pay higher income taxes if government cuts spending and introduces personal and corporate tax reform. And the big business-backed Campaign to Fix the Debt, whose CEOs met with Obama, are pushing a tax reform proposal that would exempt American corporations from paying any tax at all on their overseas income. Under which shell will we find the big money?

"The CEO Campaign to 'Fix' the Debt: A Trojan Horse for Massive Corporate Tax Breaks" gives the shell game away. Published by the Institute for Policy Studies (IPS), a left-leaning Washington think tank (whose founders I worked with politically in the 1960s), the report reveals just how much money the globe-trotting corporations stand to gain - and how much lost revenue ordinary taxpayers and small businesses will have to make up.

As the IPS report explains, the CEOs who back Fix the Debt personally saved $41 million last year from the Bush tax cuts. Consider that a rough estimate of what it might cost them if Obama fulfills his promise and does away with the tax cuts for those making over $250,000.

But that's small beer for the CEOs. "The 63 Fix the Debt companies that are publicly held stand to gain as much as $134 billion in windfalls" if Congress exempts them from paying taxes on overseas income by changing to what is called a territorial tax system. That is, companies would be liable to pay taxes only on income earned within the territory of the United States.

Corporate lobbies began pushing for this multi-billion dollar "reform" long before debts and deficits became their rallying cry. And, for good reason from their point of view.

Under our present system, they owe Uncle Sam the difference between the taxes they pay overseas and what they would have to pay under US tax rates. But they pay only if and when they bring the money back home. The result is that America corporations are now holding trillions of dollars overseas, which the proposed "reform" would allow them to bring back to the United States tax free. This is the immediate windfall they would receive if they have their way.

The CEOs claim they would then invest the money to create jobs in America. But that is pie in the sky. American multi-nationals already sit on huge piles of cash in the US and most are not using them to create jobs.

Their jobs argument also fell flat after 2004, when corporate lobbyists convinced Congress to pass the so-called American Jobs Creation Act. This allowed the multi-nationals to bring their overseas money back at a bargain basement tax rate of 5.25%. According to the IPS report, "Instead of creating jobs, the biggest beneficiaries downsized. Pfizer, for example, cut more than 10,000 US jobs in the six years after it repatriated $40 billion."

Tax reform is needed, to be sure. But not the kind "Fix the Debt" is pushing. One big target should be the accounting rules that allow American multi-nationals to write off their costs against American taxes while transferring their profits to shell corporations in low-rate tax havens. Stopping that would go a long way to bringing jobs home.


A veteran of the Berkeley Free Speech Movement and Ramparts magazine, Steve Weissman lives in France, where he is currently working on a book, "Big Money: How Global Banks, Corporations, and Speculators Rule and How To Break Their Hold."

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

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