Category Archives: corporate taxes

Let’s Review and Make Some Conjectures

Senator McConnell couldn’t have made himself more clear to the Republican leadership — let’s please have less drama from the White House so we can get along with our agenda.  Less tactfully phrased, McConnell and his myrmidons such as Representative Mark Amodei (NV2) and Senator Heller (R-NV) isn’t going to do anything about the dolt in the Oval Office until after they get what they want.  They want two things: (1) to return the control of the health insurance market back to the insurance companies; and (2) to dismantle the financial and consumer protections enacted in the Dodd Frank Act, and the Sarbanes Oxley Act.  Not sure about this, then please consider the current push for the Choice Act:

“At a time when too many hard-working American families are still recovering from the devastating impact of the 2008 financial crash, deregulating Wall Street’s biggest firms again makes no sense. Yet the Financial CHOICE Act threatens to do exactly that.

It would allow the biggest Wall Street banks to opt-out of significant financial protection rules, while those banks that remain in the regulatory system would be blessed with watered down versions of once-tough protections, like living wills and stress tests. Perhaps most worryingly, the CHOICE Act would cripple two of the most important post-crash reforms: the Financial Stability and Oversight Council (FSOC) and the Consumer Financial Protection Bureau (CFPB).” [the Hill]

Review: The CFPB was the agency which brought to light, and then levied fines against Wells Fargo for egregious violations of their customers’ privacy and financial interests.  Little wonder the banks aren’t happy with those “bureaucrats.” Less wonder why the Republicans aren’t going to do anything about the President who had to fire his National Security Adviser — until the Choice Act is safely delivered to his desk.

We should also recall that the Republican version of the healthcare reform act is much less about health insurance reform than it is about bestowing tax cuts for the wealthiest among us, to the tune of close to $765 billion over the next ten years.  We can easily conjecture that the GOP will do nothing about the man in the office who fired the US Attorney in the Southern District of New York, and then the emissary from the Department of Justice who warned him about the dangers presented by the presence of General Flynn.  At least nothing will be done, until the Republicans can cut Medicaid to the barest of bones:

His (Trump’s) promise would be violated by House GOP bill, as it seeks to freeze Medicaid expansion money for states in 2020 by withhold funding at the enhanced match rate for any new enrollees after that point. Other beneficiaries are at risk with the more long-term transformation that program stands to undergo under the GOP bill. The legislation would overhaul the program—now an unlimited federal match rate—into a per capita cap system, meaning that states would get a fixed amount of funding per enrollee. The Congressional Budget Office, analyzing an initial version of the legislation, predicted out of the 24 million Americans who would lose coverage under the earlier GOP bill compared to current law, 14 million were due to its changes to Medicaid. [TPM]

Given there is no CBO scoring on the current edition, we can’t be certain that States like Nevada which expanded Medicaid enrollment in order to make health care access affordable, won’t be left in the lurch — Congressman Amodei’s tortured logic to the contrary.  So, nothing is likely to be done about the executive who fired the Director of the FBI who was supervising the investigation of Russian meddling in our elections (and possible Trump connections to that meddling) until Medicaid cuts are also tucked into the President’s portfolio for a signing ceremony.

When will Republicans address the Leaker-in-Chief’s discussions with the Russian visitors to the White House?  Probably not until the budget cuts to the Department of the Interior, the Environmental Protection Agency, Medicare, Health and Human Services, and the Department of Education come to fruition.  Do we have a situation in which the following is true?  If the Trumpian honeymoon isn’t over, it soon will be.

That sentiment was echoed by a prominent GOP consultant I spoke to who asked not to be named to offer a candid assessment of Trump and congressional Republicans.
“The question for Republicans is whether this is the straw that breaks the camel’s back,” said the source. “Forty percent approval is not the issue; an erratic, rudderless, leaderless White House is.” [CNN]

The camel’s back may not bend until the Republicans have seen their agenda realized, their Randian Dreams made true, and their Austerity Government imposed on the American people.   The damage of this administration and the Republicans in Congress who enable and excuse him is only starting to come to fruition.


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Filed under Amodei, Comey, conservatism, corporate taxes, financial regulation, Health Care, health insurance, Heller, income tax, McConnell, Medicaid, nevada health, Nevada politics, Politics, public health

Amodei and the Perils of the Second Question

Amodei 3I lasted for two questions and Amodeian Answers during last evening’s telephone town hall session.  The Second Question I  heard was from “Dorothy from Fernley” asking: “I live in Lyon County, what does the government plan to do to bring jobs…”

The previous post described the nature of any response on offer from Nevada’s 2nd District Congressman, Mark Amodei (R-NV2).  So, imagine the serpentine syntax and the following reply:

Representative Amodei was quick to let the caller know that the House had just passed a Jobs Bill, one that was a “general measure, instead of extending unemployment benefits.”

The Congressman didn’t specify what bill that was, but might have been referring to the Highway Trust Fund bill, or to the Federal Register Act, but those aren’t generally classified as “jobs” bills by the Republican leadership.  The bill to which he was most likely referring was H.R. 4718, amending the IRS code to make bonus depreciation permanent.  The bill “generally” helps businesses, and is an exemplar of Trickle Down in its almost pure form.

The bill passed on an almost  party line vote 258-160. [roll call 404] The Nevada delegation supported the measure. So, what would it do?

One rather brutal way to describe the bill is that it adds some $287 billion to the Federal budget deficit without doing much more than allowing businesses to write off the costs of capital improvements and investments more quickly.  [HuffPo]

If a person is waiting for a job in Yerington, Fernley, or Silver Springs — this bill doesn’t shorten the time. First, the corporation would have to make a capital investment or improvement, and the investment would have to be an expansion, and if it were an expansion, then it would have to expand in Lyon County…. you get the picture.  Describing the bill as “generally” promoting jobs is generous indeed.

More importantly, under the Austerian/Trickle Down Theory of Republican economics this kind of measure is supposed to have an overall stimulative effect.  First, bonus depreciation breaks have been in effect from 2008 to 2013.  Secondly, according to the Congressional Research Service report, (pdf) they weren’t all that stimulative:

“A temporary investment subsidy was expected to be more effective than a permanent one for short-term stimulus, encouraging firms to invest while the benefit was in place. Its temporary nature is critical to its effectiveness. Yet, research suggests that bonus depreciation was not very effective, and probably less effective than the tax cuts or spending increases that have now lapsed.”

It was a bust.  However, it was a tax break and Republicans believe, as an article of faith, that all tax breaks have a stimulative effect on the economy.

Not only was it a bust, but at the moment it is an expensive bust; again according to the CRS analysis:

“If bonus depreciation is made permanent, it increases accelerated depreciation for equipment, contributing to lower, and in some cases more negative, effective tax rates. In contrast, prominent tax reform proposals would reduce accelerated depreciation. Making bonus depreciation a permanent provision would significantly increase its budgetary cost.”

Remember how all those major corporations are forever telling us that the are paying the highest corporate tax rate in the Universe and that they can’t compete with other corporations based in foreign lands?  Well, here’s a tax break they can enjoy:

“Compared to a statutory corporate tax rate of 35%, bonus depreciation lowers the effective tax rate for equipment from an estimated 26% rate to a 15% rate. Buildings are taxed approximately at the statutory rate. Total tax rates would be slightly higher because of stockholder taxes. Because nominal interest is deducted, however, effective tax rates with debt finance can be negative. For equity assets taxed at an effective rate of 35%, the effective tax rate on debt-financed investment is a negative 5%. The rate on equipment without bonus depreciation is minus 19%; with bonus depreciation it is minus 37%.”  [CRS pdf]

Someone has to love the part wherein the capital improvements or investments are financed, the interest is deducted, and the effective tax rate can be a negative — what’s not to love? Except:

#1. The tax break was supposed to be a temporary stimulus for business expansion, with a temporary incentive for business spending.

#2. The way the current bill is drafted it’s going to cost the Federal government about $263 billion in lost revenue — from corporations, not the little guys.

#3. The CBPP informs us: ” Under current law, companies pay far less than the statutory 35 percent corporate tax rate on the profits flowing from those investments.  In some cases, they pay nothing and actually receive a tax subsidy.  Bonus depreciation only increases this favorable tax treatment.”

While the residents of Lyon County, Nevada are waiting for some business to expand and start hiring — the accountants at the corporate HQ of Soakem & Runn, Inc.  are tasked with finding yet more ways they can reduce their federal tax liability.  Therefore, the Lyon County residents must wait for the corporation to take its deductions, decide to use the money saved to expand the business, decide to locate the firm’s new improvements in the county, and take the plunge to build or expand operations.  Please do not hold your breath during this process.

Meanwhile, the extension of unemployment benefits, so disparaged by Representative Amodei have a far more immediate stimulative effect on the economy.

When we were discussing the extension of unemployment benefits back in 2011, the Congressional Budget Office estimated (pdf) that the cost of the extension would be approximately $44.1 billion during the first year. [Roosevelt Inst]  Yes, there is a cost, but the money circulates back into state and local economies.  The Congressional Budget Office estimated more recently that not extending unemployment benefits puts an approximate 0.2% “drag” on the overall economy. [CNN]  The percentage may not sound like much but when we consider that our gross national product is $17,268.7 billion [FRED] that isn’t chump change.

Instead of waiting for Soakem & Runn, Inc. to decide whether to use the new tax break for any expansion, and to determine what kind of expansion that will be, and if it will actually be in the county — Lyon County citizens might pin their hopes more realistically on the continued growth in the American GNP:


With all due respect, they’ll have a shorter wait watching the GNP and GDP charts than they’ll have waiting for the corporations to decide how to apply their new tax breaks.  However, there’s more, as Representative Amodei tried to get more specific about Lyon County.

He referred to the need to pass the “Yerington Bill” which would create jobs and passed in the 112th Congress, but not in the present 113th.  Again, we’ll have to speculate that he meant the bill to assist the Pumpkin Hollow Mining operations, [PHM] one which has previously gotten itself mired in partisan politics, wherein an amendment was attached allowing Border Patrol agents to bypass environmental laws they deemed too restrictive.  [LVSun]

Representative Horsford (D-NV4) and Senator Heller (R-NV) are both supportive of the bill so it may have some future… but again the residents of Lyon County will have to wait.   It’s July 16th, and the House is only scheduled to be in session for nine more days until the month long August break, after which the House will have ten working days in September, another two in October, seven in November, and finally another eight working days in December. [House Cal. pdf]  That leaves a total of 36 legislative working days from now until the end of the year.  Again, Lyon County residents might want to just keep watching the GNP and GDP trends.


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Filed under Amodei, Congress, corporate taxes, Economy, Nevada economy, Nevada politics, Politics, tax revenue, Taxation

Here’s An Offer?

Fat Cat 2The Republican members of Congress evidently love taking hostages… Debt Limits, Budgets, and any other victim conveniently available.  Their litany is perfectly predictable: We’ll vote for __________ if YOU will privatize Medicare, privatize Social Security, cut spending for social safety net programs,  give us everything we want in defense spending even if the Department of Defense doesn’t want it, criminalize abortion and birth control, and most importantly — if we can repeal the Affordable Care Act and Patients’ Bill of Rights.

However, there’s a bit more on their wish list. While not as headline grabbing and eye-catching as their well publicized items mentioned above, the Party has talked about “tax reform” in high generalized terms and has concentrated on sound bites, slogans, and simplistic gimmicks.

Underneath their concern for taxpaying Americans lies a commitment to insure that some Americans are not-quite-so-tax-paying.

Exhibit A  As of April 15, 2013 the core of the Republican Party was sitting on a lovely pile of corporate tax breaks:

“The annual cost of corporate tax breaks, including one that eases shifting profits offshore and out of the U.S. taxman’s reach, has more than doubled to $180 billion since 1987, according to a report released on Monday.” [Reuters] (emphasis added)

About 25% of this total comes from corporate tax deferral,  “the potential indefinite postponement of U.S. taxes on profits held offshore,” [Reuters] So, that’s approximately $45 billion per year uncollected by the Internal Revenue Service because corporations have figured out marvelous ways to keep their profits offshore, and their corporate welfare programs domestic.

The March 18, 2013  GAO Report was more specific:

“Corporate tax expenditures span a majority of federal mission areas, but their relative size differs across budget functions. The 80 corporate tax expenditures had estimated revenue losses in 12 of the 18 budget functions in 2011. Of the $181 billion in estimated corporate tax revenue losses, 81 percent was concentrated in the international affairs and housing and commerce budget functions, exceeding federal outlays in those budget functions.”

We can drill down even further:

“The 24 tax expenditures used only by corporations in 2011 provide support intended to encourage certain activities, such as energy production, or provide support for certain entity types, such as credit unions. A corporate tax expenditure may have multiple purposes: one narrowly focused on a specific activity or entity as well as broader or additional purposes pursuing national priorities or other activities. For example, 7 of the 24 corporate-only tax expenditures are aimed at encouraging or supporting specific energy sources and technologies, and these tax expenditures may also have broader national purposes such as promoting domestic energy production and energy security. In examining their narrowly focused reported purposes, one-third of the 24 corporate-only tax expenditures appear to share a similar purpose with at least one federal spending program.”   [GAO] (emphasis added)

It was probably unnecessary to underline the “energy” references in the report.

Exhibit B  Speaking of the energy business…  The energy giants have leases on some 40 million acres on on-shore land, and another 40 million + acres in off-shore drilling leases.  [NewYorker]  Nowhere is this process more evident than in western states with lots of BLM managed land. [DenverPost]  This is all supposed to be acceptable because the oil companies are supposed to be paying the landowners, or the federal government in the case of public lands, for these leases.  But wait… can we say “underpayment?”  A Pro Publica report in August 2013 found that not only were the energy companies deliberately underpaying the federal government, they were also finding multiple and creative ways to underpay royalties due to private land owners.

The GAO had a bit to say on this subject as well, and reported on December 6, 2013:

“In fiscal year 2012, companies received over $66 billion from the sale of oil and gas produced from federal lands and waters, and they paid $10 billion to the federal government for developing these resources according to the Department of the Interior. The federal government seeks a fair return on its share of revenue from leasing and production activities on federal lands and waters through the federal oil and gas fiscal system. Under the fiscal system, companies pay royalties, rents, and other payments–payments generally specified in lease terms– and taxes on profits from the sale of oil and gas produced from federal leases.  In May 2007, GAO found, based on several studies, that the government received one of the lowest percentages of value of oil and gas produced in the world. In September 2008, GAO found that Interior had not evaluated the federal oil and gas fiscal system for over 25 years and recommended that a periodic assessment was needed.”

The Department of the Interior recently initiated a contract for the assessment work necessary to determine if the U.S. taxpayers are, in fact, getting a “fair rate of return.”  That’s the good news. The bad news is that this will be the first such assessment in the last 25 years.

Exhibit C  Oh, to be a hedge fund manager, to be carried by carried interest.  The carried interest loophole in the tax code is a beauty, and even earned a place in the top four  CNN Money’s “Worst Tax Breaks.”   CNN Money explains why it bestowed this ranking:

 “That portion, known as carried interest, represents a share of profits from the funds they manage. They are paid that share even if they were not required to invest their own money in the funds. Carried interest is taxed at the long-term capital gains rate of 20% — well below the top two income tax rates of 35% and 39.6%.”  (emphasis added)

Ah, but gee! Whine the proponents of the loophole, we risk our reputations, our client’s money (not ours)  sometimes in long term investments.  We provide “hands on” money management.  And, precisely there is the problem.   If I were to provide consulting services to you we would be in a “fee for service” situation, and the fees I earn would be taxed as regular income.  If, however, I agree to manage your money, agreeing to be one of your financial consultants, and provide that “hands on” service, I get to collect the fee and pay a lower rate than what you would pay on your regular earnings.

The Republican members of the Congress give every appearance of demanding payment up front for SNAP (food stamp) benefits, for Meals on Wheels, for Headstart funding, for Veterans’ programs, for Job Training initiatives, for OSHA inspection improvements, for implementing EPA standards, for education, for the maintenance of national parks, and for anything else which benefits working Americans.  However, when asked how they would pay for these public services the answer is always Austerity Econ 101 — make CUTS.

Increasing the revenue side of the equation is unthinkable — Raising Taxes!   Whatever taxation reform is suggested it would the THE LARGEST TAX INCREASE IN HISTORY!  Somehow it always is.  However, think what might be done with that $45 billion a year stashed away by corporations indefinitely keeping their offshore profits in hand while bemoaning that “too many Americans don’t pay taxes.”

Or, consider what we could invest in energy research and technology if the oil giants were paying a fair return on the profits from their oil and gas leases on public lands?  And, what if hedge fund managers and other financialists were to pay the same rate of taxation on their income coming from investment earnings as the rate paid by other consultants, advisers, and managers?

“But, but, but…”, sputter the advocates for corner offices — Increasing taxes is Anti-Business and Punishes Success!  Balderdash.  It really doesn’t do to whinge about the “47% who aren’t paying taxes” — because they don’t earn enough income to be liable for federal taxation — while consistently opposing any and all efforts to collect tax revenues from those who are the in best position to contribute, and would be contributing more if they’d not figured out ways to make their creative accounting practices align with  their greed.

Worse still, they’d like their cake and to have the opportunity to chow down on it as well.  Consider the recent illumination of a fast food franchise which supports lower taxation while advising its employees on how to apply for SNAP program assistance [HuffPo], or how both McDonald’s and WalMart have become the new Welfare Queens. [BloombergNews]

So, here’s the offer.  Americans would like (1) improved infrastructure construction, maintenance, and rehabilitation.  They’d like (2) more readily available educational opportunities and job training programs.  (3) They’d like Veterans to get better transition assistance to civilian life.  (4) They’d prefer to have SNAP benefits available for working families.  (5) They’d like to see the day when a college education is a realistic dream for their children. (6) They’d like to see their elderly parents and other relatives retire assured that their medical and social needs are being considered so that they can remain independent as long as possible.

And, we could do all this — IF we’d start talking about how to reform our tax collection system such that those who should pay are paying.   However, it’s very difficult to bargain with people who say, “What is mine is mine, and what is yours is negotiable.”  — John F. Kennedy


Filed under corporate taxes, Economy, energy, energy policy, Politics, Taxation

GOP Phil. E. Buster blocks pro-business bill

Senator Harry Reid (D-NV) made this comment on the Republican blockage of the Small Business Jobs and Relief Act:

“The legislation Republicans blocked was a common-sense proposal that provided small businesses with two tax cuts designed to create jobs. Under our proposal, small businesses would have received a 10 percent tax cut on the amount by which they increase their payrolls this calendar year. And to help them expand, small businesses would have been allowed to write off 100 percent of the cost of any major equipment or software they purchase.

“Unfortunately, Republicans played their usual games of obstruction and opposition. There was simply no reason to oppose this bill on the merits, so Republicans manufactured reasons to kill it out of thin air. Republicans claimed they wanted amendment votes, but refused to take ‘yes’ for an answer when I offered them votes on those very amendments.”

The bill was designed to help truly small businesses, those under the $500K cap to hire employees and purchase business assets and equipment.*

And, the Republicans successfully filibustered the bill. The motion to invoke cloture on S. 2237 went down on a 53-44 vote. [roll call 177]

This is what the Senate GOP rejected:

“Small Business Jobs and Tax Relief Act – Amends the Internal Revenue Code to allow certain employers a tax credit for 10% of the excess (if any) of: (1) the wages and compensation paid to their employees in 2012; over (2) the amount of such wages paid in 2011, up to a maximum amount of $5 million. Extends for one year the 100% bonus depreciation allowance for business assets. Increases the amount of alternative minimum tax (AMT) credits that corporate taxpayers may elect to accelerate in a taxable year in lieu of claiming bonus depreciation.”  [CRS]

Thus, if a business hired more employees in 2012 than they had in 2011 they’d be eligible for a 10% tax credit for the wages and compensation paid; AND, any business asset purchased could be written off in a single year.

A person doesn’t need to be an accountant to figure out that the last part is an exceptionally good deal.  Every computer, filing cabinet, vehicle, any economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value, [Def] can be “written off.”

The first part of the picnic basket isn’t as stimulative as this second piece.  As has been expounded repeatedly herein, staffing and employment levels aren’t tied to tax incentives — it makes absolutely no business sense to hire employees one doesn’t need just to get a tax break.   Businesses hire people when current staffing levels are insufficient to meet demand or to provide an acceptable level of customer service.

However, if a business wants to get a real break — upgrade the computers your staff has been complaining about — you can write them off in a single year.  Purchase the new back-hoe, an additional truck, a new fork lift, get your construction company a new skip loader or trencher — depreciate it in a single year.    Need new shelving, workstations, desks, storage units, or new computer hardware for the business?  Buy’em and get the 100% bonus depreciation!   What does this do?

Allowing businesses to avail themselves of the 100% depreciation bonus could very easily spur DEMAND.  Increased demand means increased orders, and increased orders may very well mean a need for increased staffing.

And the Senate Republicans filibustered the bill.  WHY?

“Reid acted as the two parties could not agree exactly how to go about using the bill to vote on whether to extend the Bush tax cuts. […] Republicans favor extending the tax cuts, first enacted in 2001, for all income levels. President Obama has proposed extending them only for income less than $250,000, and using the higher tax revenue collected from higher incomes to help close the deficit.”  [WaPo]

Translation: The Senate Republican leadership blocked the small business bill because they wanted to protect the Bush Tax Cuts for millionaires and billionaires.

So, a 100% depreciation bonus for manufacturers, construction companies, accountancy firms, restaurants, drilling companies, retailers, grocery stores, furniture outlets, bakeries, bowling alleys, beauty and barber shops, landscape enterprises, law offices, doctor’s offices, automobile repair garages, photography studios, veterinary clinics, waste disposal companies, … was lost because the Senate GOP was focused on protecting the Bush Tax Cuts for millionaires and billionaires.  In a word? SAD.


See also: “Fact Sheet: Small Business Jobs and Tax Relief Act,” Senate Democrats, March 26, 2012. Cohn, “Tax Cut Legislation Blocked in Senate,” Accounting Today, July 13, 2012. REMI, “Study on S. 2237, Regional Economic Models, Inc.

Previous posts on small business:  H.R. 5297, Small Business Jobs and Credit Act DB July 17, 2010.   Finally someone says it — Demand in the Job Creator, DB December 2, 2011. GOP A Thousand Times No, DB July 30, 2010.   Breaking the Closed Loop, DB April 29, 2011.   Republican Mythology – Small Business Facts and Fantasies, DB May 3, 2012. What’s a Small Business, DB July 16, 2012.  *Original post did not include the $500,000 cap.

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Filed under conservatism, corporate taxes, Economy, employment, Filibusters, McConnell, Politics, Reid, Taxation

What’s A Small Business?

Small businesses are defined in the eyes of the beholder.  A small business seen through the eyes of a large commercial bank any enterprise with less than $20 million revenue is “small.”   The FDIC defines a “small business loan” as one for $1 million or less. The Small Business Administration uses the FDIC definition for its reporting.   [HuffPo]  Programs for small business lending in the Treasury Department are based on different criteria.

The Treasury Department identifies criteria for a small business in two programs.  The one-shot State Small Business Credit Initiative provides for loans not exceeding $5 million to businesses with less than 500 employees. [Treasury pdf] The second program is the Small Business Lending Fund, ” Enacted into law as part of the Small Business Jobs Act of 2010 (the Jobs Act), the Small Business Lending Fund (SBLF) is a dedicated investment fund that encourages lending to small businesses by providing capital to qualified community banks1 and community development loan funds (CDLFs) with assets of less than $10 billion. ” [Treasury]

This is the point at which the IRS definitions can be inserted because for the purposes of implementing the Small Business Jobs Act of 2010 the IRS defines a small business as including a corporation which is not publicly traded, and the owner must have  $50,000,000 or less in average annual gross receipts over the three preceding tax years. [IRS] Those who would like to plow further into these weeds should see IRS publication 334. (pdf)

Just to make matters more complicated the Small Business Administration splits out its definition of a small business into sectors.  The agency makes its determinations based on the average number of employees over the previous 12 months, or on the sales volume averaged from the previous 3 years.   A manufacturing firm can have as many as 1500 employees depending on the product, and wholesaling operations from 100 to 500.   Services are based on revenue, the maximum ranging from receipts of $2.5 to $21.5 million depending on the service; the maximum range for retailing is $5 million to $21 million; construction company receipts are a maximum of $13.5 to $17 depending on the type of construction, special trade construction receipts ‘max out’ at $7 million.  An agricultural small business may be eligible if its receipts are under $500,000 to $9 million depending on the product.

What’s the point?  One point is that both political parties are overly fond of helping Small Business — and no one appears to have determined what that means.

As demonstrated in the opening section of this post, the definition of a small business can easily range from the Bechtel Corporation company to Barney’s Barber Shop.

What matters is how policies are shaped to assist economic growth, and how they define small business operations in terms of economic expansion.   The popular notion of a small business as exemplified by Barney’s Barber Shop, Charlie’s Catering, or Delilah’s Home Designs, is  perfectly acceptable if the policy objective is to promote local economic growth.

If our objective is to encourage the manufacturing of solar panels in the United States of America, then a “small” manufacturing business employing 450 meets the criteria for receiving assistance in lines of credit and in terms of tax breaks for a small business.

If the objective is to encourage financial transactions hedging risk and other financial manipulations, then a 499 person hedge fund can be classified as a small business.

What we have not had to date is a serious public discussion of What small business enterprises we want to encourage.

If our purpose is to promote economic growth in the manufacturing sector, then our public discourse should include proposals for the development of innovative products and technologies.  Merely propounding, for example, that the Trans Pacific Partnership will help small manufacturers find export opportunities isn’t enough.  We’ll need to talk about how to promote small business sales opportunities without having the outcome hijacked by multi-national corporate behemoths who are more interested in facilitating the flow of capital than they are about whether New Tech Innovations, Inc. can find buyers.

If our purpose is to promote small contractors and sub-contractors in their sector of the economy, then we need to ask if we are encouraging such infrastructure projects as will be of interest to and are attainable for those small contractors and subcontractors.  If there is still a surplus of unsold inventory in the single family housing sector, then why promote this kind of contracting when there is a need for affordable multi-family commercial properties?   Perhaps we should be asking questions like: What will be the economic  impact be of the (Fill in the Blank) project for our local contractors and subcontractors? Instead of obsessing on the project costs?

If our purpose is to promote the efforts of retailers, then do our tax policies and other public pronouncements, benefit small family owned enterprises, or can those enterprises benefit only as a segment of a sector dominated by big box corporations?   Worse still, are we creating a system in which the big box operations are given artificial advantages as they compete with smaller family owned enterprises?  Are we supporting the customers of those grocery, clothing, and other purveyors with “automatic stabilizers’  (food stamps, unemployment insurance benefits) during periods of economic volatility or contraction?

Singing the praises of Mom and Pop companies while promoting policies which give global corporations a leg up, is neither honest nor helpful.  Lauding the efforts of small business owners in 4th of July stump speech rhetoric isn’t productive unless it is backed up with proposals to encourage investment in new economic endeavors, and solicit assistance for local business activities.

We can dream that during this campaign season of specific plans to address equally specific needs in our local economies.   Small business owners are the first to feel the volatility in an economy. They are the first to feel it and too often are the last to recover from it.  They deserve more than to be told “It will all trickle back down on them…someday,” because they may have to make payroll tomorrow.

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Filed under banking, corporate taxes, Economy, employment, financial regulation

Jobs? Romney’s Plan: Trickle Away Economics

When last we left the subject, Governor Romney’s “jobs” plan consisted of “five major proposals” for Congressional action in the first 30 days, one of which was the ratification of the Trans Pacific Partnership agreement — or NAFTA on Steroids.   Romney’s proposed “Open Markets Act” would reinstate the Trade Promotion Authority to facilitate the agreement.  What we see herein is a pattern that will be repeated in the other four elements.

In order to believe that Governor Romney’s proposals will create jobs, one has to accept the premise that promoting the interests of corporations will necessarily cause the generation of wealth which will in turn be invested in the expansion of industrial or commercial enterprises — yielding more employment.  There’s just one problem with this premise.

It hasn’t worked for 30 years.  What we’ve witnessed during the last three decades is the rise of Financialism, and the prospect that ever more wealth will accrete to the financial sector (increasingly trading with and for itself) without necessarily causing more industrial or commercial expansion.

However, fiscal facts notwithstanding the next piece of Governor Romney’s proposal to create more jobs is to cut the corporate tax rate to 25%.

The Tax Policy Center summarized the Governor’s proposal:

“At the corporate level, the Romney plan would make two major changes: 1) reduce the corporate income tax rate from 35 to 25 percent and 2) make the research and experimentation credit permanent, It would also extend for one year the full expensing of capital expenditures and allow a “tax holiday” for the repatriation of corporate profits held overseas. The plan does not specify, however, whether repatriated earnings would face any tax and, if so, at what rate. In the longer run, Gov. Romney would reduce the corporate rate further in conjunction with base broadening and simplification and would move the corporate tax to a territorial system.”  [Tax Policy Center] (emphasis added)

Here we go again.  In order to see this proposal as “job creating” the premise must be accepted that reducing corporate taxes automatically means more hiring.  It doesn’t.   The canard is that if corporations pay lower taxes they will necessarily invest in expansion of their commercial or manufacturing enterprises — they haven’t.

If lower corporate tax rates were the Answer to employment issues then because we now have the lowest corporate tax rates in decades we should be awash in jobs jobs jobs jobs.

The Wall Street Journal noted: “Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That’s the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008.” (2.3.2011) (Emphasis added)

Therefore, what Governor Romney is proposing is nothing more than the voodoo economics of the Bush Era — just more of it.  If the effective corporate tax rate under the current 35% now stands at 12.1% in FY 2011, then how much lower might the corporate taxes be under a 25% proposal?

Let’s look at the next two pieces of Governor Romney’s plan to “create jobs” (1) repatriation and (2) territorial taxes.  [TPC]

Slate explains the repatriation issue, concerning income earned abroad by local or regional sales in foreign countries by U.S. based companies:

“…tax is paid only on American income based on US-based operations. And obviously US-based multinationals are happy to not pay those taxes. The problem arises, however, because in order to use those profits to pay a dividend or acquire a US-based company you would need to bring those foreign profits home and pay taxes on them.”

Want an incentive not to add in foreign income to U.S. corporate balance sheets?  Repatriation!  All one has to do is sit on the cash in foreign lands, wait for a Holiday and then bring it all back in for free.   The Chamber of Commerce fondly cites a study saying the Tax Holiday idea could create 2.9 million jobs and add $360 billion to the GDP, however the study is not without controversy.

First, the money isn’t “just sitting there.”  Edward Kleinbard, corporate tax expert, and former chief of staff for the Joint Committee on Taxation observed: “A large portion of these earnings is kept in liquid investments, and those in turn invariably are in U.S. dollar liabilities of U.S. borrowers, like U.S. bank deposits, commercial paper, and Treasuries. All those investments already are fully at work somewhere in the U.S. economy,” Kleinbard said.

Secondly, there are some serious issues with how repatriation or tax holidays would impact the real economy.

“The Joint Committee on Taxation estimates that a repatriation “holiday” could boost revenue by about $26 billion over the first three years — but lose as much as $80 billion over the next decade.

And the Senate’s permanent subcommittee on investigations, which Sen. Levin chairs, released a report this week that said the 2004 tax holiday resulted in a loss of nearly 21,000 jobs among the top 15 repatriating corporations, and cited other studies which found no evidence that the holiday increased overall employment.”  [CNN money]

“In 2005, corporations were allowed to repatriate their foreign earnings at a tax rate of 5.25 percent. Corporations did indeed bring home over $300 billion in foreign profits that year, five times as much as normal. But very little of that income was reinvested in the United States to create jobs: a National Bureau of Economic Research study suggested that a majority of that income went to shareholders, mostly in the form of share buybacks.” [Brookings]

Thus we have the Chamber of Commerce citing its positive study, and the Joint Committee on Taxation reporting  other studies showed job losses instead of expected gains — one of the problems when ideology meets reality.   Repatriated funds are of no use in boosting employment when the preponderance of them are used to increase stock prices via stock buybacks.

Territorial tax scheming has some interesting and some appalling features.   On the positive side a territorial tax regime could have some benefits:

“…under such a system, foreign-source income would be taxed only in the country where it was earned, and would not be taxed at all by the United States. This approach would reduce the tax burden on American corporations and eliminate the disincentive for corporations to repatriate their foreign profits.” [Brookings]

Good so far. However, there is a really big caveat — this works IF the corporations aren’t allowed to engage in some creative income shifting.  The Brookings paper explains how the income shifting is conducted in corporate America:

“In particular, corporations can fairly easily shift earnings attributable to intangible sources-patents, brand names, or know-how-to tax havens that collect little or no tax. Under a territorial tax system, the U.S. would never collect taxes on that income either.

“Although existing tax laws try to prevent such shifting, they are imperfect at best. An IRS study found that U.S. corporations’ subsidiaries in Bermuda reported income in 2004 equal to a whopping 646 percent of Bermuda’s GDP. Presumably, most of that profit was actually earned in a higher-tax jurisdiction; U.S. corporate profits are roughly equal to 10 percent of U.S. GDP.”

No wonder the Republicans are in favor of Territorial tax schemes.   However, all is not lost.  If the Obama Administration’s proposal for an “international minimum tax” is added to the mix, then the Brookings analysis points out:

“Under his proposal, all income of U.S. corporations must be immediately taxed-by the U.S., or some foreign country – at a rate greater than or equal to the (as yet unspecified) international minimum tax rate. So, if a corporation reported profits in a country that collects no corporate tax, the United States would immediately tax those profits at the international minimum tax rate-greatly reducing the appeal of the tax haven.”

Given the All or Nothing attitude displayed in the GOP controlled House of Representatives, putting a territorial system + tax haven disincentives together in one bill will require some extremely heavy political lifting.

We should keep in mind that the territorial proposal without any mitigation from a minimum tax insertion, merely serves to encourage income shifting and the promotion of off shore tax havens.  ‘Just what some folks in the Hamptons would love.

We should also bear in mind that what Governor Romney is calling a “job creation” proposal would more accurately be labeled a tax reduction plan which he hopes might could would should in some idealized ideological world of Trickle Down economics produce the job growth we want IF it works — we’re still waiting for the tax reductions on corporations and wealthy individuals to work from the last round.

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March Madness: Heller’s Repackaging of Old Oil Ideas

Got Gas? Anointed Senator Dean Heller (R-NV) has an idea to lower gas prices…which he will attach to some bill…which may or may not address the global market forces or the pure speculation built into the oil market.  He describes it thusly, with commentary points  inserted:

(1) “Raising taxes and extending failed stimulus programs will do nothing to lower gas prices.  (2) I support closing tax loopholes and reforming the tax code, but most Americans would agree that simply raising taxes will not lower gas prices.  (3) Unlike some in Washington, I believe lower gas prices are a good thing for the American people, and that is what Congress should be working toward.

(4) “My amendment is a commonsense compromise that closes tax loopholes, provides tax relief for every American that drives a car, and allows for the responsible development of our nation’s natural resources to increase supply.  Instead of partisan gridlock, both sides should be working together to find solutions that deliver results for the American people,” said Senator Dean Heller.”  [Heller]

Note to Senator Heller about point number one, only on Planet Norquist does closing off a subsidy for major oil companies count as a “tax increase.”  Yes, the oil giants would have to pay more of their own expenses, but the taxes themselves don’t increase — it’s the taxpayer funded subsidy for major oil firms that gets whacked.  Secondly, Republicans announced that “The Stimulus Failed” even before the ARRA was implemented.  This talking point has moved beyond mere repetition and into the Land of Mantra.  And, how do we know that the ARRA (Stimulus Bill) did some good?  The Wall Street Journal told us: Government efforts to funnel hundreds of billions of dollars into the U.S. economy appear to be helping the U.S. climb out of the worst recession in decades.” (9/2/09)

As to point number two, who said raising taxes would reduce gas prices? Simply inserting a straw man contention doesn’t necessarily improve the argument.  The original bill, S. 2204, isn’t about gas prices — it’s about the questionable use of tax credits and gimmicks which are of benefit to an industry that is highly profitable without government subsidies, and the repeal thereof.   When an American family can end up paying a 28% tax bill while Exxon-Mobil is paying 13.5% something’s amiss.

Senator Heller, as mentioned yesterday, is “all for closing tax loopholes,” IF the plan is part of His Big Picture — which if he follows the Americans for Tax Reform’s lead means enacting the inane Balanced Budget Amendment and the equally improbably Flat Tax that shifts the major tax burden from the exceedingly wealthy to the exceedingly hard working.

Point Three is yet another Straw Man.  The radical right has adopted a line about the Obama Administration and the Secretary of Energy not “concerned about gas prices.”  Some strategic re-interpretations of the Administration’s policy on the development of alternative sources of energy can’t be clipped and re-stated to make it look as though Secretary Chu isn’t primarily concerned about gasoline prices, but it’s a real stretch.  This won’t prevent presidential candidate Newt Gingrich, and his tag-a-longs like Senator Heller from repeating the spurious charges.  The President made his position very clear in a March, 2012 press conference. [MarketWatch]

OK, let’s move along to Point Four, Senator Heller’s actual proposal. [pdf file]  Section 101 reduces the Federal gas tax from 18.3 cents to 17.3 cents.  Aviation fuel is set at 24.3 cents, and ‘other’ diesel is set at 23.3 cents per gallon.  What reducing aviation fuel taxes has to do with what I pay at the gasoline pump escapes me, but this would make the major airlines happy.

Interestingly enough, scrolling down further in Section 101 we find: “EXCEPTION FOR FUEL HELD IN RETAIL STOCKS.—No credit or refund shall be allowed under this subsection with respect to any 1 highway motor fuel in retail stocks held at the 2 place where intended to be sold at retail.” So, how does the Heller Amendment directly benefit immediate stocks of retail gasoline?

Title II of Heller’s Amendment is the Swiss Cheese section — Drill Baby Drill — or whatever one wishes to call it.  Drill in the continental shelf – Fine. Drill in the Alaska National Wildlife Reserve – Fine.  Speed up the permitting process – Fine. I think we’ve heard all this before.  We could easily move along because this section of the Amendment is nothing we’ve not heard many times before from Republican members of Congress.  The reality is that even if we drilled ourselves into Swiss Cheese we still have only a small percentage of the world’s oil reserves and we’re still using some 25% of the world’s supply.  Another reality is that exploration today doesn’t automatically translate into low prices at the pump because — How Many Times Do We Have To Say It? — oil prices are set on the GLOBAL MARKET and if larger supplies from the U.S. or lower demand in the U.S. are offset by higher demand from China, India, or other nations, then drilling here doesn’t necessarily mean lower prices.

There are enough insertions into this amendment concerning EPA reviews and over-rides of Clean Water regulations in coastal areas to make anyone who drinks water or bathes the baby from his or her local sources very concerned. (page 10+)  If you happen to be a fish, this amendment is highly problematic.

Subtitle C, page 40,  is the Keystone Pipeline approval section.  Why is this perfectly predictable?   Talk about not having any immediate impact on gasoline prices!  There are sections of the pipeline unbuilt, and anyone waiting at the pump for a price reduction based on Keystone’s transportation of oil should probably make arrangements with the station owner for bed space — for several years.  Remember, Senator Heller said that the Administration should be concerned about the immediate impact of gasoline prices on the Nevada and nation economies, but this project is far into the future.

We also might want to remember where the Keystone Pipeline goes.   The one essential point to keep in mind about the Keystone project is that it is an EXPORT PIPELINE.   Oil from Canada is to be shipped to the pipeline terminals in the midwest and the gulf coast. [TransCan] The part about the Gulf Coast is important. Oil transported to Houston and Port Arthur, TX goes to worldwide refineries.  A quick look at the little  map below  shows the ultimate destination of the Keystone Pipeline:

The terminals, shown in the red circle, at Houston and Port Arthur, leave little doubt that the ultimate utility of the Keystone Pipeline project is to facilitate the transportation of  Canadian oil to world markets.

Title III (page 46+) concerns closing loopholes for dual capacity tax payers (read major oil companies.)   Out of 51 total pages of cut the gasoline tax,  Drill Baby Drill, Drill Everywhere, and help the Canadians ship oil to China and India — the Loopholes are closed, sort of, in five quick pages.

What was that definition of madness? Doing the same thing over and over again expecting a different result?  There is nothing new in Heller’s proposal. It’s the same Drill Now, Drill Everywhere scheme the oil companies have been promoting for the last several years, always being careful to avoid telling us that the oil is sold on the GLOBAL MARKET, and no matter how much we pump into the market if the Saudi’s cut production, or the Iranians and Israelis get into a fight, or there’s increased demand in India, or whatever moves the speculators — the price of oil won’t necessarily get any cheaper in the United States of America.  Oil is a global game.

And about the losses to the Highway Trust Fund created by the reduction in the gasoline and fuel taxes?  Senator Heller assures us that these will be replenished from the proceeds of the closure of the tax loopholes.  The CBO doesn’t seem to have scored the bill in this regard.

In short, Heller’s “Gas Price Relief Act” seems to be about everything BUT gas price relief.  It’s more like the American Petroleum Institute Relief Act of 2012.

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Filed under ARRA, corporate taxes, energy, energy policy, Heller, oil companies, oil prices, Taxation

Washington D.C.’s Oil Rush As Seen In Heller’s Big Tax Picture

Senate Republicans, who have turned obstructionism via filibustering into an art form, are allowing S. 2204, a bill to repeal the subsidies granted to major oil companies to come to the Senate Floor, not that they will follow Senator Harry Reid’s (D-NV) lead and enact the measure.  [LVSun]  However, debate on the bill does provide another opportunity to contemplate the almost total disconnect between the Senate Republicans and the reality of the global oil market.

Appointed Senator Dean Heller explains:

“Once again, Washington is doing its old familiar dance — pushing another measure that’s big on talking points but light on solutions,” Heller said in a statement shortly after supporting the procedural motion to take up the bill he doesn’t sound keen on voting for. “The truth is this measure will not help anyone struggling with rising gas prices.” [LVSun]

No, the bill has precious little to do with gas prices yesterday, today, or tomorrow.   Not that Senator Heller wouldn’t like to attack a bill “to reduce American dependency on global oil markets which doesn’t do that,” BUT the junior Senator is crafting a straw man at which to aim his lance.   The bill is about repealing  generous tax subsidies to highly profitable energy corporations who have benefited from American protection without paying their share of the tab.  And, taxes are what Senator Heller wants to discuss:

“Heller argues his position is not about protecting oil and gas companies; it’s about taxes. He’s open to talking about closing loopholes in the context of a larger tax discussion but not to raising taxes on anyone — including oil and gas companies — before then.” [LVSun]

For the want of a better term, let’s call this the Trap Door Argument.  The political expediency of the contention shows when it’s inferred that unless Senator Heller gets to close “loopholes in the context of a larger tax discussion” he’s not amenable to closing any loopholes.   The little devils are, of course, in the details.  What is that “larger context?”

One of the most notable features of Heller’s overall vision for taxation and federal spending is prominently displayed on his campaign website, a call for the adoption of a Balanced Budget Amendment.  For reasons already explained in more detail here, here, and more specifically here,  Senator Heller’s allegiance to Senator Jim DeMint’s (R-SC) Balanced Budget Amendment proposal from the Tea Party adherents in Congress isn’t so much a “larger context,” but an exuberant flight from fiscal reality.

What other proposals shape Senator Heller’s “larger context?”  Grover Norquist’s Americans for Tax Reform has proudly announced that Senator Heller was the first Nevada candidate to sign the No Tax Pledge. [Aft]  What did Mr. Heller sign?

“By signing the Pledge, Heller commits to the taxpayers of Nevada that he will “oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses … and oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.” [Aft]

And by aligning himself with Norquist’s organization, he’s signed into the Flat Tax Society:

“ATR believes that all consumed income should be taxed one time, at one low and flat rate. ATR is neutral as to where this taxation should occur. A flat tax is a consumption tax imposed when money is earned. Various sales taxes like the FAIR Tax are imposed when money is actually consumed. Each has the same consumption tax base. ATR maintains that tax reform should not be an excuse for a net tax increase. Rather, all deductions and credits repealed should be replaced by lower tax rates, new deductions and credits, and/or making existing deductions and credits bigger.” [AFT]

Therefore, the “larger context of tax reform” gives every appearance of being framed by (1) a balanced budget amendment, (2) no reduction in corporate tax loopholes unless matched by spending cuts, and (3) the enactment of a flat tax.   If Class Warfare is the desired outcome, the Flat Tax is the weapon of choice.

An economist from the Strom Thurmond Institute at Clemson University provides this explanation as to why this would be the case:

“…there’s no concealing that the flat tax would radically redistribute the tax burden. Adam Smith, to whom economists always turn to for economic wisdom, observed, “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” The current U.S. tax system consists mainly of taxes on income (personal and corporate), payroll (Social Security), sales, and property. In 2007, these taxes provided 92 percent of federal income and 51 percent of state and local government income. Sales taxes are regressive—they take a higher share of low incomes than higher incomes.”  [USNWR] (emphasis added)

There’s another little wrinkle in the so-called  Fair Tax (Flat) Proposition which may rankle many who still cringe at the income derived from playing the market — as it was played during the Housing Bubble, under the Flat Tax Plan there would be NO tax on interest earnings:

“Not taxing investment income would eliminate the current “double taxation” faced by investors who pay taxes on their income, and then again when that income generates profits. That, too, would benefit the rich more than the poor. (A retired billionaire living solely off interest income, for instance, would pay no taxes at all.) [TP,WP] (emphasis added)

Thus far, Senator Heller’s “larger context” is a Financialist’s  recipe for fiscal irresponsibility as prescribed in the Balanced Budget Amendment, for more (not less) deductions and credits, and for financing the operations of the federal government under a radical redistribution of the tax burden.

The Flat Tax hasn’t gotten much play in recent Republican debates since Governor Rick Perry and Herman Cain left the presidential candidate’s field, but the propositions most often offered for a Flat Tax range from 17% to 20%, with no taxation on income earned from investing (or speculating.)  The question at this juncture becomes: Does Senator Heller continue his advocacy of the Tea Party’s Balanced Budget Amendment, and does his adherence to the Americans For Tax Reform’s pledge indicate his adoption of Flat Tax proposals?

If the answer to those questions is “YES,” then the only context in which Senator Heller might be willing to address the reduction of tax subsidies for profitable corporations with an unfortunate history of non-payment of tax liabilities, is a system in which both Exxon-Mobil and a hypothetical middle income taxpayer named “Esther Mobley” are paying the same tax rate.
For additional information see: Robert Reich, The Flat Tax Fraud; Catherine Rampell, “The Rich Get Biggest Break in Perry Tax Plan, NYT 10/31/2011; CNBC, John Harwood, “Perry, I Don’t Care If Tax Plan Helps The Rich,” 10/25/11;  John Cassidy, “Rational Irrationality: Rick Perry’s Ugly Tax Hybrid,” New Yorker, 10/25/11.  Rebecca Leber, “Exxon Mobil’s Tax Rate Drops to 13%,” TP, CTJ 3/26/12.  Robert Pozen, “Gingrich’s Flawed Social Security and Income Tax Proposals,” Brookings, 12/27/11.  Robert Pozen, “Perry’s Harebrained Tax Plan,” Brookings, 11/1/11.

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Filed under 2012 election, corporate taxes, Economy, energy, energy policy, Heller, Reid, Taxation

Mr. 1% Leads in Nevada GOP race by 20%: Foreclosing the Race?

Former Massachusetts Governor Willard Mitt Romney holds a comfortable 20% lead in the Nevada Republican caucus “race,” [USAT] but that doesn’t mean that his message will be very comforting for Nevada voters, consider:

“The last time Romney came here, he told homeowners facing foreclosure that we should stand back and let the crisis “hit the bottom” so investors can come in and make a quick buck. We would rather have a president with empathy for the people who live in those houses, not for the speculators who want to flip them. To the American people, their homes are the places where they live, raise their families and build their futures. To Romney, Americans’ homes are nothing more than Monopoly pieces to trade and make a quick buck.” [LVSun]

Perhaps someone would like to ask the former Governor how he would fix Nevada’s foreclosure problem, or would he as George W. Bush did during the Black Out Binge initiated by Enron in California, sit by and watch The Market Work Its Magic?  Mr. 1%, leading by 20%, seems not to be entirely too alarmed by the fact that 1 out of everyone 177 homes in Nevada received some form of foreclosure notice in December 2011. [RealtyTrac]

Worse still, the Republlican Party isn’t being all that helpful either — House Republicans have declared the President’s plan to assist troubled homeowners is “Dead On Arrival.”   “The loosely-outlined plan would allow homeowners to refinance their mortgages at current low interest rates and would be paid for by a tax on large banks — many of which contributed to the housing bubble and its subsequent burst.” [Think Progress]

That’s right, the GOP would rather NOT help homeowners if it means that the banks which caused the problem in the first place would have to ante up to clean up their mess.   Those would be the same bankers who panicked in late 2008 and said that unless U.S. taxpayers anted up the financial sector casino would go bust.

Let’s see now, Goldman Sachs (now a bank holding company) reported earning $4.44 billion in 2011, US Bancorp earned $4.87 billion, and PNC Financial earned $3.1 billion. [SeekingAlpha] Bank of American earned $2 billion in the 4th quarter of 2011. [USAT] Wells Fargo’s net income was $4.11 billion for the 4th quarter. [ABC]  Citigroup’s profit was $1.6 billion. [ABC]

Heaven forefend House Republicans should ask these banking behemoths to pay any portion of the Clean Up expenses? Or help the middle class  homeowners who lost some 23% of their wealth in the 2008 crash? Or, will Governor Romney be pleased to allow the situation to continue in which “The earth is being held up by the muscular arms of its entrepreneur-plutocrats…” [Atlantic]

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Filed under 2012 election, banking, corporate taxes, Economy, Foreclosures, Nevada caucus, Nevada economy, Romney

One More Chart: Financial Sector Tax Breaks

Some of the names on the list above are household names, such as Wells Fargo which has a substantial presence in Nevada.  Others are less well known. [The Stand] [Citizens for Tax Justice]

Reinsurance Group of America is not exactly a household term, but it is the penultimate multi-national corporation, operating in the re-insurance realm in at least 23 countries.   The number may not reflect the fact that RGA has recently opened an office in Dubai to serve Middle Eastern clients.   It now has approximately $2.6 trillion of life reinsurance in force and assets of $31.2 billion. [RGA]

Put in the simplest possible terms, “reinsurance” is insurance purchased by insurance companies for their own protection.  [Barrons]  This activity paid off handsomely for the 3rd Quarter when RGA —

“…said today its profit increased 15 percent to $147.4 million in the third quarter, compared with a profit of $128.2 million in the prior-year period, thanks to more premiums, a tax break in Canada and favorable exchange rates.

The Chesterfield (MO)-based life reinsurance provider (NYSE: RGA) reported revenue of $1.99 billion for the quarter ended Sept. 30, up 2 percent from $1.95 billion a year earlier.

For the third quarter, consolidated net premiums increased 8 percent to $1.78 billion from $1.64 billion in the prior-year period.”  [BizJournals]

RGA’s intraday market cap is reported to be $3.8 billion, with an enterprise value of $5.19 billion.  Its profitability numbers are impressive, with a profit margin of 7.33% and an operating margin of 10.95%. It has a return on equity of 11.97%.   [YahooFin]

The PNC Financial Services Group, Inc. operates as a diversified financial services company. The company offers retail banking, corporate and institutional banking, asset management, and residential mortgage banking services.”  [YahooFin] The Pittsburgh, PA based company has an intraday market cap of $27.25 billion, and an enterprise value of $52.28 billion.  Its profit margin is reported as 25.72% and its operating margin is 34.06%.  PNC’s return on equity is 9.72%. [YahooFin]

Draw your own conclusions?

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Filed under banking, corporate taxes, Economy, Taxation