Monday, May 16, 2011

The Big Picture -- Taxing the Top 500

Diving Through the Talking Points

Anyone who watches the "non-editorial" portion of the corporate media's "news fraud" will hear a few often repeated phrases.  Of course, this "non-editorial" portion turns out to still be quite "editorial." 

In contrast, the "pure opinion" side of these broadcasts is always relegated to the "mouth junk" pundits, and this part travels under the legitimizing aura of "openly" being "editorial."  However, the rampant flow of twisted phrases in the "non-editorial" portion are of the most interest here.

Let's look at a few.

Perhaps the most egregious is the phrase "job creators."  It is a favorite foundation for the remnants of Reagan economic state fascism still clinging to the idea of "trickle down" economics where vast sums of tax money are given to the oligarchs to "inspire" them to "create jobs."

Neck and neck with this first phrase, we find "small businesses."  The context will be something along the lines of "small business job creators."  Did you know that engineering construction giant Bechtel is classed as  a "small business?"

MeanMesa visitors already know that this is a "wagon load of day old manure."  Like the annual Peanuts cartoon where Lucy jerks away the football at the last moment, we see a similar "episode" monthly on the larger scale of our national economy.  The oligarchs, constantly complaining about "job killing" regulation, repeat the old mantra which gaseously refers to "setting capitalism loose" as a prelude to restoring "prosperity."

You know, "prosperity" as it is described in the latest frog choking GOPCon booklet, "The Path to Prosperity."

The oligarchic meaning of "setting capitalism loose" actually has almost nothing to do with "unfettering the captains of industry."  In the current US context, "setting capitalism loose" means returning to a "wholly owned" Senate and issuing the order for more looting.

It's neither God's will for the devout nor an exciting, innocent coincidence that the top 500 US companies pay almost nothing in corporate income taxes.  While they are paying "next to nothing," they are complaining about a conveniently high, theoretical US tax rate of 35% -- which none of them actually pay.

Hiding the Corporate Easter Eggs

All this became even more brightly illuminated under the embarrassing light in a recent Congressional hearing where a favorite clutch of domestic "petrogarchs" were charged with making sense of 1.) billions in federal subsidies, 2.) $4/gallon gasoline and 3.) astronomical corporate profits of 35% and better for the 1st quarter of this year.  All the while, the grey haired capitalists on "the bench" continued to complain about the potential loss of their $3 Billion/ year subsidies and the "highest corporate tax rate in the world" which they don't actually pay.

However, not to be distracted by "peanuts" in the petrogarch looting scheme, MeanMesa is actually more concerned with some of the story which was left conveniently unmentioned in the hearings.

This is the part which returns to the previous use of the term "Reagan economic state fascism."  This is also the part of the story which extends even beyond the edges of the corporate petrogarch cess pool.

"Easter Egg-wise" there are three primary channels through which our federal general fund money now flows to the "captains of industry."  The subsidies which were the topic of the hearings represent only one of the three -- in fact, almost always the smallest of the three.

In order of magnitude, we see three, well established drain pipes through which US federal tax funds can descend into the pockets of folks like the unfairly targeted, long suffering "oil queens" who faced that hearing committee.

Tax Incentives
Tax Expenditures

Some Brief Definitions


A subsidy amounts to an actual "check" on the Treasury which the Congress has directed to be paid to an enterprise -- usually to conduct some sort of business activity which is not profitable, and in which the enterprise would, otherwise, have no interest at all.  In most cases subsidies actually amount to the payment  when the government "hires" some company to complete a task which it would, otherwise, that is, without the subsidy, not do.

The mischief usually creeps into the scheme during the process of determining exactly what unmet necessity the government will pay for with the subsidy.  The corporations receiving the subsidy are selected on the basis of "who can perform this vitally necessary work the best among all the choices."  There is plenty of mischief there, too.

Tax Incentives:

These are usually encountered when a corporate "neighbor" needs to be bribed to place a plant in a particular community.  They amount to publicly financed roads, bridges, site development, sewer and water lines and so forth.

Without the tax incentives, the corresponding corporate gang threatens to build a potential corporate building project "somewhere else."  Local communities, already starved for the revenue which will come from such new jobs, are anxious to burden local tax payers with the bill to build all this stuff.

The balance between paying this "price" to get the plant and the jobs into a job-starved town and the income tax revenues collected from the new workers usually settles the question.  We will return to tax incentives after the definitions.

Tax Expenditures:

Tax expenditures are often called "corporate welfare."  To get a tax incentive, an enterprise must get Congress to simply lower its taxes.  We all know how that works.

This process of simply "lowering taxes" lies at the semantic foundation of the Reaganesque economic syllogism "If you want more of something lower the taxes on it.  If you want less of something, raise the taxes on it."

Based on this absolutely solid logical premise, the Congress lowers taxes on "things" that it wants "more of" and raises taxes on "things" it wants "less of."  In the "less of" column we find "things" such as abortions and cigarettes.  However, in the "more of" column we find things like health insurance costs for large companies, electric cars and solar panels, but also an amazingly large collection of all sorts of things -- usually things made by, you guessed it, the exact same people who make campaign contributions.  We will return to tax incentives in the next section.

From: Open Left --
Taking Aim At Tax Expenditures--
This Time I Say 'Bravo' To Michael Lind 
by Paul Rosenberg 
(read the article here. )

Why are tax expenditures so darned popular, anyway? (image source)
American poor people love tax expenditures, right? (image source)
 The data shown above is from 2007-2008.  Things have gotten worse since then.

The "Fascist Gimmick"

At first glance, all of this maneuvering may seem to be simply "business as usual," a result of our government's intervening to direct the economy in ways that "normal" free enterprise might otherwise neglect.  However, the sheer scope of the process strongly suggests otherwise.

The "fascism" we're talking about here has nothing to do with "death camps" or "attacking Russia."  Instead, what we see when we view this in the "big picture" context, is a massive case of illicit wealth redistribution to the top from everywhere else.  The "every where else" most likely includes you and me.

Tax Incentives:
Tax incentives allow free enterprise entities to force local communities to compete with each other by providing infrastructure at public expense.  The traditional role of free enterprise entities is to invest what is needed to start their plants and offices, accepting such costs as legitimate operating expenses.

If you want to build a plant or an office somewhere, you should have to plan on spending whatever it takes to get that done.  Such expenses become a part of your business plan.  The profits you hope to make after your investment starts to return should include paying for all these start up costs.

However, when you can get a local community to start paying for all of this under the threat that you will take your enterprise somewhere else, that local community becomes a "partner" in your enterprise -- except, it's not really a partner at all.  In fact, it is not only "not a partner," it remains a "hostage" even after your business is rolling along happily in the future.

The tax paying citizens in the community benefit from the jobs you have created and the revenue from taxing the income of your employees, but they have no say in the conduct of your business -- not at first or later.  The goal of the local government which  used to be looking after the needs of the community becomes split.  It must now look after the needs of your business -- starting with paying for all the roads, sewer and water lines, etc. but never being actually "paid back" for having financed any of them.

This process began in earnest during the Reagan years, and Republicans have kept it going at a greater and greater level since then.  It is "at the heart" of the exportation of jobs and factories to other countries where not only are labor rates lower, but locally financed tax incentives are even higher than here.

What had previously been "national socialism" has become "international socialism" with conservative American GOPCon "capitalists" at the helm.

Tax Expenditures:

When we turn our attention away from the "fascist" term to the "national socialism" term, we see the basis for the comment during the Bush bail out of banks and brokers.  "Capitalize the profits, but socialize the losses."

These wealth redistribution gimmicks amount to the same thing except that they are "pre-emptive."  They occur before the losses even have a chance to happen.  Further, especially in the case of tax expenditures, the money never reaches the Treasury so it never suffers from the public "outing" of the other instruments such as subsidies and tax incentives.

When we conclude that the cost of running the government is more or less stable, the prospect of enterprises "dodging" part or all of their tax burden means that the cost is being distributed to lower percentile tax payers.  We not only pay into the profit coffers of these giants when we buy their products, we also pay into them when we effectively pay their taxes.

A traditional "free enterprise" entity pays its own way and makes its profits when its sales revenue exceeds its expenses.  When part of those profits come from having us pay its taxes, the model becomes, well, much more shady.  In such cases, the government has stepped in, diverting our tax money to its private profit.  We pay the taxes, and the corporation moves what would have been its tax payments into the profit column.

Why would "our" government do something like that?

Easy.  It's no longer "our" government.

Campaign contributions to win elections.  

Lobbying jobs after losing elections.

The fascist part comes from the fact that once these oligarchic interests have successfully penetrated what would have otherwise been a representational democracy, the primary goal of the government becomes split between taking care of the needs of the country and taking care of the needs of the oligarchs.  The more complete the corrupting saturation becomes, the more "pressing" the needs of the oligarchs become and the less "pressing" the needs of the American population become.

Now that the country is essentially broke, we have to look for where the money actually went.  The figures are big ones.

In the next two years, we will "spend" $125 Billion on top of the $3 Trillion already "spent" on high income tax breaks.  We will "spend" $200 Billion a year to pay the interest on the money we "borrowed" to pay for the wars and tax breaks.  We will "spend" roughly $400 Billion per year on tax expenditures which have been written into our on-going tax codes by sympathetic Congressmen and Presidents in the past.

All this together would pay off all of the national debt in less than ten years.
Instead, GOPCons are trying to sell reductions in Social Security benefits and the destruction of Medicare as the "only way out" of the mess they have made.

What would be needed to make this happen?  American businesses who actually pay their own expenses before they start taking profit from their revenues and counting on us to "make up the difference."

The result of all this is what we have now -- a suffocating collection of businesses which are fundamentally unable to pay their own expenses while still making the outrageous profits their sponsors demand.  These "businesses" can neither establish themselves in the first place without onerous local tax incentives nor operate afterwards without generous tax expenditures.  The outright subsidies are little more than the "frosting on the cake."

It's no wonder that a quiet drift toward national socialism looks so appealing to these "captains of industry."

There is an election coming in 2012.

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