Taxes

Taxcast: Hurricanes, Disaster Capitalism, Bitcoin and Over-Reliance on Unhelpful Economic Measures

Published by Anonymous (not verified) on Sun, 24/09/2017 - 4:55pm in

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Guest Post, Taxes

On Tax Justice Network's Taxcast, John Christensen and Daniel Mugge weigh in on hurricanes, tax havens, and disaster capitalism.

The Growing Danger of Dynastic Wealth

Published by Anonymous (not verified) on Tue, 19/09/2017 - 4:36am in

This post originally appeared at Robert Reich’s blog.

White House National Economic Council director Gary Cohn, former president of Goldman Sachs, said recently that “only morons pay the estate tax.”

I’m reminded of Donald Trump’s comment that he didn’t pay federal income taxes because he was “smart.” And billionaire Leona Helmsley’s “only the little people pay taxes.”

White House National Economic Council director Gary Cohn, former president of Goldman Sachs, said recently that ‘only morons pay the estate tax.’

What Cohn was getting at is how easy it is nowadays for the wealthy to pass their fortunes to their children, tax-free.

The estate tax applies only to estates over $11 million per couple. And wealthy families stash away dollars above this into “dynastic” trust funds that escape additional taxes.

No wonder revenues from the estate tax have been dropping for years even as wealth has become concentrated in fewer hands. The tax now generates about $20 billion a year, which is less than 1 percent of federal revenues. And it applies to only about two out of every 1,000 people who die.

Now, Trump and Republican leaders are planning to cut or eliminate it altogether.

There’s another part of the tax code that Cohn might also have been referring to — capital gains taxes paid on the soaring values of the wealthy people’s stocks, bonds, mansions and works of art when they sell them.

If the wealthy hold on to these assets until they die, the tax code allows their heirs to inherit them without paying any of these capital gains taxes. According to the Congressional Budget Office, this loophole saves heirs $50 billion a year.

Dynastic wealth runs counter to the ideal of America as a meritocracy. It makes a mockery of the notions that people earn what they’re worth in the market, and that economic gains should go to those who deserve them.

The estate and capital gains taxes were originally designed to prevent the growth of large dynasties in the US and to reduce inequality.

They’ve been failing to do that. The richest 1 tenth of 1 percent of Americans now owns almost as much wealth as the bottom 90 percent.

Many of today’s super rich never did a day’s work in their lives. Six out of the ten wealthiest Americans alive today are heirs to prominent fortunes. The Walmart heirs alone have more wealth than the bottom 42 percent of Americans combined.

Rich millennials will soon acquire even more of the nation’s wealth.

America is now on the cusp of the largest intergenerational transfer of wealth in history. As wealthy boomers expire, an estimated $30 trillion will go to their children over the next three decades.

Those children will be able to live off of the income these assets generate, and then leave the bulk of them — which in the intervening years will have grown far more valuable — to their own heirs, tax-free.

After a few generations of this, almost all of the nation’s wealth will be in the hands of a few thousand families.

Dynastic wealth runs counter to the ideal of America as a meritocracy. It makes a mockery of the notions that people earn what they’re worth in the market, and that economic gains should go to those who deserve them.

It puts economic power into the hands of a relative small number of people who have never worked, but whose investment decisions will have a significant effect on the nation’s future.

And it creates a self-perpetuating aristocracy that is antithetical to democracy.

The last time America faced anything comparable to the concentration of wealth we face now, occurred at the turn of the last century.

Then, President Teddy Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” could destroy American democracy.

Roosevelt’s answer was to tax wealth. The estate tax was enacted in 1916 and the capital gains tax in 1922.

But since then, both have been eroded. As the rich have accumulated greater wealth, they have also amassed more political power, and they’ve used that political power to reduce their taxes.

Teddy Roosevelt, a Republican, helped create a movement against dynastic wealth. Trump and today’s congressional Republicans will not follow in his footsteps. I doubt even today’s Democrats would do so if they had a chance. Big money has become too powerful on both sides of the aisle.

But taxing big wealth is necessary if we’re ever to get our democracy back, and make our economy work for everyone rather than a privileged few.

Maybe Gary Cohn is correct that only morons pay the estate tax. But if he and his boss were smart and they cared about America’s future, they’d raises taxes on great wealth. Roosevelt’s fear of an American dynasty is more applicable today than ever before.

The post The Growing Danger of Dynastic Wealth appeared first on BillMoyers.com.

As Children Starve, Rees-Mogg Finds Growth in Food Banks ‘Uplifting’

Published by Anonymous (not verified) on Sat, 16/09/2017 - 7:34pm in

I’ve had to write this response to Rees-Mogg’s fatuous, complacent and quite frankly, evil comments about the massive increase in food banks, because it made me so furious. On Thursday, Mike over at Vox Political reported that the Camborne Pool and Redruth food bank reported that some children in Cornwall are literally starving. This food bank hands out 10,000 meals a month, but states that they know there are many more children that they aren’t reaching.

At the same time, Rees-Mogg, whom Mike describes as the darling of the Tory party, was on LBC radio saying that he found this ‘uplifting’. Mike responded by describing Rees-Mogg as an ignorant, homicidal fool.

http://voxpoliticalonline.com/2017/09/14/food-bank-says-children-are-starving-rees-mogg-finds-that-uplifting/

Yesterday, Mike also put up the news that a food bank in Bath has challenged Mogg to volunteer to work for them, so he can see for himself the hardship that the people coming to these banks are experiencing, and hear their stories. Mike commented that there was fat chance of that, as Mogg hasn’t done a day’s work in his life. But he would be improved by having to work in one, or, better still, having to go to one himself.

http://voxpoliticalonline.com/2017/09/15/after-rees-mogg-said-food-banks-that-couldnt-help-the-starving-were-uplifting-hes-challenged-to-work-in-one/

The I yesterday printed Mogg’s comments in full. Basically, the aristo Tory MP for north-east Somerset said that the amount of generosity shown by people in the expansion of food banks was ‘uplifting’, and then went to claim that state aid could not solve the problem of poverty or provide for all the poor.

There’s nothing new in what he said. Bill Clinton made pretty much the same speech when he was president of the US. Clinton stated that there wasn’t a government programme that could solve every eventuality, and so praised private charity and initiatives in doing so. His speech, and admiration for private charity, was part of his ideological commitment to reducing still further whatever was left of the vestigial American welfare state that Reagan and the Republicans hadn’t already destroyed.

Thatcher, and it seems Young Master Mogg, believed that reducing state aid would result in more people giving to charity. And it’s true that studies in the US have shown that Conservative religious people give more to charity than secular liberals. But this misses an important point:

Private charity on its own is insufficient to tackle poverty. State aid is far better at doing so.

I also found a piece in Lobster’s ‘View from the Bridge’ a little while ago, that quoted a biography of Thatcher. Before she died, Thatcher herself supposedly realized that destroying the welfare state hadn’t made people more generous.

Which completely contradicts what Mogg has said above.

As for Mogg’s own attitude, this is the arrogant complacency of a wealthy aristocrat, who has little understanding of the lives of working people, and who fears them and the state will undermine the position of himself and his similarly entitled monied chums at the apex of British society. Young Master Mogg has voted consistently against increasing welfare benefits for them, and voted for increasing the tax burden on working people. But he’s been dead opposed to increasing the tax burden on people earning over £150,000 a year.

It’s the attitude the complacent British upper and middle classes, that looked with bland equanimity on the grinding poverty and squalor of industrial Britain and saw nothing wrong with it. It’s the same attitude that produced this appalling piece of poetry on the benefits of work to children.

‘Tis proper, Sophy, to be sure,
To pity and relieve the poor.
But do not waste your pity here,
Work is not hard to her, my dear,
It makes her healthy, strong and gay,
And is as pleasant as your play.

from Peter Vansittart, Voices 1870-1914, p. 76.

And it’s also contemporary in that we’ve had for the past decade or so Tories and Blairites telling us how wonderful work is for the mental wellbeing of the disabled, even when the empirical evidence says the exact opposite.

Mogg’s a complacent, ignorant pratt, who looks on the growth of child poverty due to the free trade policies of his poverty with complete indifference. Get him out. He has no place in politics, and his views will lead to more starvation and suffering.

Paul Krugman: Politicians, Promises, and Getting Real

Published by Anonymous (not verified) on Sat, 16/09/2017 - 3:35am in

Paul Krugman:

Politicians, Promises, and Getting Real, by Paul Krugman, NY Times: On Wednesday Donald Trump demanded that Congress move quickly to enact his tax reform plan. But so far he has not, in fact, offered any such plan...

Meanwhile, 17 Senate Democrats ... have signed on to Bernie Sanders’s call for expanding Medicare to cover the whole population. So far, however, Sanders hasn’t produced either an estimate of how much that would cost or a specific proposal about how to pay for it.

I don’t mean to suggest that these cases are comparable: The distinctive Trumpian mix of ignorance and fraudulence has no counterpart among Democrats. Still, both stories raise the question of how much ... policy clarity matters for politicians’ ability to win elections and ... govern.

About elections: The fact that Trump is in the White House suggests that politicians can get away with telling voters just about anything that sounds good. ...

On the other hand, the ignominious failure of Trumpcare shows that reality sometimes does matter. ... Once the public realized that tens of millions would lose coverage..., there was a huge backlash...

The story of tax reform ... is starting to look a bit similar. ...

In fact, Trump himself seems to be experiencing cognitive dissonance. “The rich will not be gaining at all with this plan,” he declared Wednesday. ... Is he oblivious, lying, or both? ...

The contrast between what he’s claiming and anything Republicans in Congress will be willing to support is so great as to practically invite ridicule and another popular backlash. ...

But is the push for single-payer health care taking Democrats down a similar path?

Unlike just about everything Trump and company are proposing, Medicare for all is a substantively good idea. Yet actually making it happen would probably mean ... a serious political backlash. For one..., it would require a substantial increase in taxes. For another, it would mean telling scores of millions of Americans who get health coverage though their employers, and are generally satisfied..., that they need to give it up and accept something different. ...

Democrats could eventually find themselves facing a Trumpcare-type debacle, unable either to implement their unrealistic vision or to let it go.

The point is that while unrealistic promises may not hurt you in elections, they can become a big problem when you try to govern. Having a vision for the future is good, but being real about the difficulties is also good. Democrats, take heed.

Tax Cuts For The Rich Help The Rich, Not You

Published by Anonymous (not verified) on Sat, 09/09/2017 - 3:00am in

Above Photo: StockMonkeys.com/Flickr Big money will pull out all the stops to sell you a tax plan that exclusively benefits the wealthy. Don’t buy it. You’ll see images of families flashing across your TV screen while a soothing narrator assures you that the tax plan being debated in Washington really is good for you. The newspapers you read, the social media apps you scroll through, the websites you frequent, and the snippets of radio you catch will all feature ads talking about it. That’s what a marketing blitz looks like, and there’s one coming for the Trump tax plan. It will be well-produced, well-orchestrated, and completely devoid of facts. President Trump started his sales pitch for his tax cutting agenda in Missouri in August, where the assembled audience was treated to a fact-free sermon on the virtues of his plan. Gone were any specifics of what’s in it, or who gets what. Looking at Trump’s tax plan from the campaign, as well as what the Republican majority in the House of Representatives have proposed, we can see the basic outlines of what’s coming. Corporations will see their nominal tax rates drop from 35 percent to 20 or even 15 percent. Individual rates will go down — possibly for everyone, but definitely and most strikingly for the very wealthy. Overall tax revenue will tank, potentially by as much as $10 trillion over ten years. What does all this look like in the real world? On the corporate side, we know for sure that lower corporate taxes do not create jobs. In the ads to come, maybe you’ll see a guy in a hard hat claim that corporate tax cuts will put him back to work. He’s lying. A recent Institute for Policy Studies report looks at 92 profitable companies that already pay an effective 20 percent tax rate, thanks to loopholes. On average they’ve cut jobs, even as the rest of the private sector saw a 6 percent jobs increase. On the individual side, half of the proposed cuts will go to millionaires, according to the Institute on Taxation and Economic Policy. Less than 5 percent go to families with household incomes below $45,000. This is probably the biggest wealth grab in American history by the wealthy, for the wealthy. Selling it as a middle-class tax cut, regardless of the images in the ads you see, is just old-fashioned lying. And finally there’s the revenue. Trump claims his tax cuts will pay for themselves with increased economic growth. That theory’s been debunked many times over and yet remains stubbornly in play. So what happens when trillions of dollars of tax revenue get slashed? Congress currently bans itself from passing bills that increase the deficit in one of their better acronyms — Pay As You Go (PAYGO). That means the tax cuts Trump proposes will have to come out of public programs. No matter how much hype you hear, you’d better believe those cuts are gonna hurt. From food assistance like the Women, Infant, and Children (WIC) program to Head Start, and from clean water protections to unemployment insurance — it’s all on the line. It’s hard to keep an eye on the truth when savvy marketing campaigns are hell-bent on deflecting your attention away from it. Don’t buy it. The Trump tax cut plan is disastrous for working families and for anyone who cares about a fair and just economy.

Beyond the trinity formula

Published by Anonymous (not verified) on Tue, 05/09/2017 - 10:00pm in

labor-income

John Hatgioannides, Marika Karanassou, and Hector Sala are absolutely right: mainstream macroeconomists and policymakers never venture beyond the “holy trinity” of economic growth, inflation, and unemployment.* Everything else, including the distribution of income and wealth, is relegated to the fringes.

This problem, while always serious, has been magnified in recent decades as inequality has grown to obscene levels, particularly in the United States. The labor share (the blue line in the chart above) has been falling since 1960 and, in the past decade and a half, it dropped an astounding 10.2 percent. Meanwhile, the share of income captured by the top 1 percent (the red line in the chart) has soared, rising from 10.5 percent in 1976 to 19.6 percent in 2014.

In order to rectify the problem, Hatgioannides, Karanassou, and Sala propose to bring inequality in from the margins as the “missing fourth statistic.”

They focus particular attention on inequality in relation to tax contributions. But they do so in the manner that departs from the usual discussion, which leaves the discussion at absolute income tax contributions (such as the share of income taxes paid by each economic group). Those are the numbers we often hear or read, which seek to show how progressive the U.S. tax system is. For example, according to the Tax Foundation, the top 1 percent paid a greater share of individual income taxes (39.5 percent) than the bottom 90 percent combined (29.1 percent).

Instead, Hatgioannides, Karanassou, and Sala concentrate on the ratio of the average income tax per given income group divided by the percentage of national income captured by the same income group (what they call the Effective Income Tax contribution), whence they calculate an inequality index (the Fiscal Inequality Coefficient).

What the Fiscal Inequality Coefficient shows is the relative contribution of filling the fiscal coffers for different pairs of income groups.

FIC

In the figure above, they plot the Fiscal Inequality Coefficient based on income shares (they also report a related index based on wealth), of the bottom 90 percent versus the top 10 percent, the bottom 99 percent versus the top 1 percent, and the bottom 99.9 percent versus the top 0.1 percent for 1962, 1980, 1995, 2010, and 2014.

Thus, for example, the Fiscal Inequality Coefficient based on income shares remains relatively constant for all pairs for years 1962 and 1980 but increases significantly by 2010—with the bottom 90 percent effectively contributing 6.5 times more than the top 10 percent, the bottom 99 percent 21.4 times more than the top 1 percent, and the bottom 99.9 percent effectively contributing 89.7 times more than the top 0.1 percent.**

Clearly, the relative income tax burden for those at the top has fallen over time, demonstrating that the U.S. tax system has become less, not more, progressive.

And the authors’ conclusion?

In the current era of fiscal consolidation should the rich be taxed more? Our evidence suggests unequivocally yes.

 

*Their paper is discussed in the Guardian by Larry Elliott. The submitted version of their article is available here.

**The results are even more dramatic if one calculates the Fiscal Inequality Coefficient based on household wealth shares: in 2010, the Bottom 99.9 percent contributed 208.9 times more than the Top 0.1 percent, nearly four times more than what it was in 1980!

Tagged: chart, economics, growth, inequality, inflation, macroeconomics, mainstream, taxes, unemployment, United States

Monopoly Rents and Corporate Taxation

Published by Anonymous (not verified) on Fri, 01/09/2017 - 2:48am in

Paul Krugman:

Monopoly Rents and Corporate Taxation (Wonkish): At one level it’s hard to take the Trump administration’s tax “reform” push seriously. A guy gets elected as a populist and his first two big proposals are (a) taking away health insurance from millions (b) cutting corporate taxes. Wow.

Furthermore, Trump is invincibly ignorant on taxes (and everything else) — he keeps declaring that America is the highest taxed nation in the world, which is nearly the opposite of the truth among advanced countries. And his allies in Congress aren’t ignorant, but they’re liars: Paul Ryan is the master of mystery meat, of promising to raise and save trillions in unspecified ways.

But there is an actual interesting question here, even if we shouldn’t give any credence to Republican answers. Who does, in fact, pay the corporate profit tax? Does it fall on corporations, and hence eventually on their shareholders? Or is the ultimate incidence mainly on wages, as the administration claims?

Skipping forward to the punchline:

...much corporate taxation probably doesn’t fall on returns to physical capital, but rather on monopoly rents. ... As long as the local source of profit is some kind of monopoly rent, corporate tax incidence is going to fall on shareholders, not workers. ...

And there’s a lot of reason to believe that market power is an increasingly big deal. ...

This changes the narrative, doesn’t it? Instead of focusing on rising capital mobility as a reason profits taxes might fall on workers, maybe we should focus on rising market power as a reason why profits taxes fall on capitalists.

The point for now is that when someone tells you that changes in the world have made old-style corporate taxes obsolete, be skeptical. Some changes in the world may have made profit taxation a better idea than ever.

How President Trump’s Tax Plan Would Really Affect The Middle Class

Published by Anonymous (not verified) on Thu, 31/08/2017 - 11:00pm in

Above Photo: From eff.org President Trump is set to speak in Missouri today where he will reportedly continue to tout his tax plan’s benefits for the middle class even though it would actually concentrate its tax cuts at the top — and could even hurt low- and middle-income families. Over the last two years, the President has released several different tax plans that would deliver trillions of dollars in tax cuts to the wealthiest Americans and corporations but do little to help working families. Yet, he’s consistently promised to help the middle class: in his inaugural address, for example, he said that “every decision” on taxes will “be made to benefit American workers and American families.” In fact, if President Trump’s proposed tax cuts are paid for through the types of spending cuts he has proposed in his budget, low- and middle-income Americans would clearly end up far worse off. 1. President Trump’s tax plan prioritizes the wealthiest, not the middle class. The current Trump tax plan gives far larger tax cuts to the very wealthiest households than to low- and middle-income households, Tax Policy Center (TPC) estimates show (see table). TABLE 1 President Trump’s tax cuts prioritize the top 0.1% over low- and middle-income households Average dollar tax cuts (and % change in after-tax income), 2018 Top 0.1 percent Middle fifth Lowest fifth Average after-tax income under current tax code $7.1 million $57,720 $14,000 Trump tax cuts $1.4 million (19.9%) $1,920 (3.3%) $130 (0.9%) Trump tax cuts and all revenue-raisers* $937,700 (13.3%) $760 (1.3%) $40 (0.3%) Source: Tax Policy Center * Counts all revenue-raising measures that President Trump or his team mentioned during the presidential campaign and under his Administration. Further, as we’ve explained, we estimate that the annual tax cuts for the 400 highest-income families would average roughly $15 million each from two Trump tax plan provisions alone. Thus, despite his promises to workers, President Trump’s tax plan would increase inequality by prioritizing those who are already doing best. 2. President Trump’s tax plans are vague about key provisions that affect low- and middle-income households — and could even raise taxes on some. While the President has been clear about tax cuts that benefit high-income households and large corporations, he’s revealed far less about how his plan would affect middle-income Americans. In fact, the Administration hasn’t clarified whether the plan would raise taxes for many middle-income families. The Trump tax plan doubles the standard deduction, but also appears to repeal personal exemptions, which would raise taxes on millions of low- and middle-income families: taking this into account along with other revenue-raising proposals that the campaign and Administration have mentioned would mean nearly one-quarter of households in the middle fifth of the income distribution would face tax increases averaging $990 apiece, according to TPC. 3. Reversing a campaign promise, President Trump’s plan includes a provision that could lower U.S. workers’ wages. While the current Trump tax plan largely mirrors his campaign plan, one big change is its proposal for a “territorial” tax system, which would exempt the foreign profits of U.S. multinational corporations from U.S. taxes. That change has gone relatively unnoticed: the campaign plan would have required U.S. multinationals to immediately pay tax on their foreign profits at the same rate as domestic profits. If a lower U.S. tax rate on foreign profits encouraged U.S. corporations to move investments offshore, it could hurt U.S. workers’ wages and productivity. As Congressional Research Service tax economist Jane Gravelle told Congress, “[Moving to a territorial system] would make foreign investment more attractive. That would cause investment to flow abroad, and that would reduce the capital which workers in the United States have, so it should reduce wages.” 4. Most Americans would likely lose from the Trump tax cuts, once they’re paid for. Perhaps the most important question about the Trump tax plan for low- and middle-income Americans is who will pay for the tax cuts for high-income people and corporations. The Trump plan doesn’t include proposals to fully pay for the tax cuts by closing tax loopholes or scaling back tax breaks at the top; it would cost more than $3.5 trillion, even counting all the possible revenue-raising provisions that the Trump campaign and Administration have mentioned. Sooner or later, the cost must be offset through some combination of spending cuts and tax increases. If that cost is paid for through the types of spending cuts the President proposed in his 2018 budget, the vast majority of Americans would be net losers, a new TPC analysis indicates (see chart). Households in the middle fifth would lose an average of $1,500 once the costs of paying for the Trump tax cuts are counted. Nearly all — 94 percent — of these households would be “net losers,” losing more from the offsets than they’d gain from the tax cuts. Essentially every household in the bottom two-fifths of the income spectrum would be a net loser, losing an average of more than $2,000 in after-tax income. Meanwhile, the top 0.1 percent of households would gain about $935,000 each on average.

Economics in Wonderland

Published by Anonymous (not verified) on Thu, 31/08/2017 - 10:00pm in

polyp_cartoon_Jobs_Profits

“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master—that’s all.”

Alice in Wonderland (pdf) is the key to understanding much of what is happening in the world today—especially the language of economics.

For example, we’re going to hear and read a great deal about tax reform in the days and weeks ahead. But, based on the proposals I’ve seen, nothing in the way of tax reform is being proposed.

The usual meaning of reform is that it involves changes for the better. Most of the so-called reforms that are being proposed by the Trump administration—including the vague speech by Donald Trump yesterday—are just cuts in the tax rates that will directly benefit wealthy individuals and large corporations.

fredgraph

Supposedly, the rest of us will eventually benefit because of increased investment. However, as is clear from the chart above, both corporate profits and private domestic investment are doing just fine without a cut in tax rates. But the benefits to the rest of us simply haven’t appeared.

Moreover, as I have explained before, U.S. corporations are not losing out in the competitive battle with foreign corporations because they face tax rates that are much too high.

And, no, as I have also explained, repatriating corporate profits will not lead to more investment, government revenues, and jobs.

In fact, as Patrician Cohen makes clear, the whole idea of repatriating profits held abroad makes no sense.

That’s because repatriation is not really about geography. Most of the money is not stashed in some underground vault overseas, but already in American financial institutions and capital markets. Repatriation is in effect a legal category that requires a company to book the money in the United States — and pay taxes on it — before it can be distributed to shareholders or invested domestically.

The whole notion of earnings trapped offshore is misleading, Steven M. Rosenthal, a tax lawyer and senior fellow at the Urban-Brookings Tax Policy Center. “The earnings are not ‘trapped,’” he said. “They’re not offshore. They’re not even earnings. They’re accounting gimmicks that allow earnings to be shifted abroad.”

What’s more, companies already get something akin to tax-free repatriation by borrowing against those funds, with the added bonus of being able to deduct the interest paid on those loans from their tax bill.

What if corporations are induced to book their overseas profits in the United States? We probably won’t see much if any increase in private investment, since corporations aren’t facing any kind constraint in profits or their ability to borrow beyond their current profits. What is much more likely is some combination of more mergers and acquisitions, more stock buybacks, more payouts to shareholders, and more compensation distributed to CEOS.*

And that’s going to lead to even more inequality in the United States.

Alice surely would have seen through the meanings of all these misleading words concerning tax reform.

 

*AT&T is a good example of a company that already passes a low effective tax rate by exploiting tax breaks and loopholes. However, according to Sarah Anderson,

Despite the enormous savings AT&T has realized, the company has been downsizing. Although it hires thousands of people a year, the company, by our analysis at the Institute for Policy Studies, reduced its total work force by nearly 80,000 jobs between 2008 and 2016, accounting for acquisitions and spinoffs each involving more than 2,000 workers.

The company has also spent $34 billion repurchasing its own stock since 2008, according to our institute report, a maneuver that artificially inflates the value of a company’s shares. This is money that could have gone toward research and development or hiring.

Companies buy back their stock for various reasons — to take advantage of undervaluation, to reward stockholders by increasing the value of their shares or to make the company look more attractive to investors. And there is another reason. Because most executive compensation these days is based on stock value, higher share prices can raise the compensation of chief executives and other top company officials.

Since 2008, [AT&T CEO Randall] Stephenson has cashed in $124 million in stock options and grants.

Many other large American corporations have also been playing the tax break and loophole game. Their huge tax savings have enriched executives but not created significant numbers of new jobs.

Boeing is another good example. As Justin Miller explains,

Boeing has received a tax refund in five of the past ten years. It saves itself $542 million a year using a special domestic manufacturing tax break, and $1.8 billion in further cuts thanks to a research and development tax credit. Boeing also benefits from the immensely favorable depreciation schedules on capital that has saved it billions of dollars over the past decade.

Boeing also entered into a $9 billion tax incentive deal with Washington state back in 2013—the largest corporate subsidy ever—to “maintain and grow its workforce within the state.” But, as Michael Hiltzik points out in the Los Angeles Times, the company has since cut nearly 13,000 jobs (about 15 percent of its Washington workforce) as it sets up shop in cheaper states that offer incentives of their own.

It still manages to enrich its shareholders though. On the same day that it announced a production slowdown in December, Hiltzik notes, Boeing also announced a 30 percent increase in its quarterly dividend and a new $14 billion share-buyback program.

Tagged: corporations, inequality, investment, profits, reform, tax cuts, tax reform, taxes, Trump, United States

Will Disappointing Tax Reform Puncture the Stock Market Bubble?

Published by Anonymous (not verified) on Mon, 28/08/2017 - 11:55pm in

Why the Trump tax reform is likely to be a damp squib.

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