Trump released a one-page list of “bullet points” that was touted by his administration as a once-in-a-generation tax overhaul, but derided by economists as nothing more than a big tax cut for corporations and rich people. What went unnoticed is that by setting the corporate tax rate to 15 percent, Trump would inflict a serious tax hike on a multitude of corporations that currently pay a lot less than that. Many in fact pay less than 0 percent. Is Trump prepared to withstand the backlash from aggrieved companies that see his massive tax hike as a betrayal?
Consider Facebook which paid -$429 million on profits of $1.06 billion in 2012. That’s a tax rate of -40 percent. I highly doubt Mark Zuckerberg is gonna press “like” on Trump’s new 15 percent slam. And what about Southwest Airlines, Texas Instruments, Occidental Petroleum, Duke Energy, Priceline, Corning, Consolidated Edison and the New York Stock Exchange – all of whom had positive net earnings but paid less than zero corporate taxes in 2012? How will these companies continue to exist if they are required to reach the 15 percent threshold?
Then you have General Electric, Verizon, Boeing and Northeast Utilities that paid no federal income tax for five straight years. Hell, GE booked $27.5 billion in profit over five years and paid -$3.05 billion in tax for a rate of -11 percent. If they have to pay taxes, will GE ever bring good things to life again?
Pundits and politicians who bemoan America’s high corporate tax rate of 35 percent never mention that no company with even a half-smart tax accounting department pays anything close to that figure. The juicy loopholes involving inversions, stock options, depreciation, foreign earnings and on and on give corporations a massive toolbox to avoid taxes. Of course it would be irresponsible for a company beholden to shareholders to pay more than their legal requirement – but the solution should focus on the loopholes, not an arbitrary reduction of the top rate.
A one-time Treasury official, Len Burman, summed up the situation well: “In a rational system, a corporation’s tax department would be there to make sure a company complied with the law, but in our system, there are corporations that view their tax departments as a profit center, and the effects on public policy can be negative.” Knocking out the complicated loopholes and setting a rational rate would allow companies to downsize the tax departments, and bring some needed equity to the system.
But there’s no reason for optimism. Loopholes are like weeds – even if Congress eliminated the most egregious of them, within a year corporate lobbyists would succeed in adding back dozens of new ways to game the system.
Meanwhile, rank and file citizens who have few if any tools in their tax-avoidance toolbox are sitting ducks. Most middle class people will see minimal reductions, and many who live in states with high local income taxes may actually see their federal tax burden increase. At least these losers will have the satisfaction of knowing that when they press “send” in Turbotax that someone in GE’s tax profit center will be pressing “receive.”
This Week’s Biggest Asshole
The award goes to Mark Krikorian, executive director of the Center for Immigration Studies – a group that “studies immigration” and concludes there must be less of it. He’s also the author of “The New Case Against Immigration: Both Legal and Illegal” whose cover captures the true spirit of the American dream. I suppose Lady Liberty put her hand up after Krikorian’s ancestors came through Ellis Island.
Unlike most of his anti-immigrant ilk, Krikorian is not a big fan of Trump’s border wall for the simple reason that it won’t work. Nevertheless, he now advocates for it because of its symbolism. “Following through on wall construction is one of the ways that the political class can win back trust on this topic. It’s a tangible thing. You can take pictures of it and imagine it in your head.”
That’s right. You can take pictures of it! And imagine it! In your own head!
That’s pretty stupid, but what makes Mark Krikorian this week’s biggest asshole is his shameless call to spend billions on a worthless piece of shit. He says, “Even if the border wall did no good at all to control immigration, it would be important to build. Even if it did nothing, even if it was completely ineffective, it’s important politically.”
Perhaps in parallel with building the beautiful wall, we should commence a mission to send men to colonize the sun. Even if that was completely ineffective, it would make for some good pictures.
(Sidebar: No doubt picking next week’s biggest asshole will be a contest among the tax-cutting Republicans who will suddenly forget all about the crippling effects of ballooning deficits they harped about for the past eight years.)