As you know, Burger King will move its headquarters to Canada with its purchase of Tim Hortons, thus evading America’s supposedly onerous corporate tax rates. The talking point here is that the effective federal, state and local tax rate in the United States is 40 percent, highest in the OECD, vs. Canada’s 26 percent. A few…More
Category: Tax policy
The Brookings Institution’s Metro Monitor is out with data for the second quarter, indicating a general slowing among the nation’s 100 metro areas. Energy metros in Texas and Oklahoma held up well. San Jose, heart of Silicon Valley, ranked 4th nationally in its overall recovery score. Brookings reports: “Across the 100 largest metro areas, employment growth softened in the second quarter and the rate of output growth slowed. Unemployment rates dropped in about half of the metro areas but still remained above 6 percent in all but 12 metropolitan areas. Eighty seven metro housing markets reached new lows, reflecting a housing market yet to recover.”
As for Seattle-Tacoma-Bellevue, it ranked 29th overall, up from 33rd in the first quarter. The housing price recovery ranked 14th. Manufacturing (up 7.2 percent) and construction (up 6.5 percent) led in employment gains over the past four quarters.
The monitor has its limitations, measuring only percent employment change, percentage point change in unemployment rate, percent change in gross metropolitan product, and percent change in house prices from recession lows. Thus New Orleans is No. 1 and Phoenix No. 3, even though both have basket-case economies. Phoenix’s showing is driven entirely by house prices rising from a spectacular collapse, and much of that improvement was driven by “investors” and has leveled off. Seattle didn’t fall as far as most metros.More
Once upon a time, I believed the best way to “stick it to the rich” was to maintain relatively low marginal tax rates. This would encourage them to put capital to productive, job-creating uses rather that keeping it in tax shelters. It worked in the Kennedy tax cuts of the 1960s and it could be argued that it worked, to a degree, for Ronald Reagan. Part of George W. Bush’s initial argument for cutting taxes was also defensible: With surpluses forecast in the future after 2000, taxpayers should see some relief.
But as an economic proposition encouraging growth and, especially, the creation and retention of middle-class jobs and rising middle-class incomes, tax cuts have failed. The dogma that taxes must always go down, and 30 years of tax cuts in states, have proven especially toxic. What went wrong?
First, the economy changed. The very rich get a better return by investing in financial plays that are either esoteric gambling far removed from productive activity, or actually destroy jobs and businesses, as with many mergers. Also, outsourcing, offshoring, the rise of China and other low-cost countries draw investment, as opposed to ventures that create jobs for Americans. In a similar vein, “free trade” has made many losers, although the very rich are undeniably winners.More
The Tax Foundation is out with its latest report on state-by-state taxes. Nationally, the per-capita tax burden is $4,160, while in Washington it’s $4,408, 11th in the country. Elsewhere in the Northwest: Oregon, $3,761 (25th) and Idaho, $3,276 (36th). Connecticut at $7,256 ranks first in tax load, while Mississippi at $2,678 is 50th. The numbers come from fiscal 2009.
As a percentage of state income, Washington’s tax burden is 9.3 percent, below the national average of 9.8 percent. In Oregon, it’s 9.8 percent and 9.4 percent in Idaho.
The research organization also ranks states by their overall tax climate as of July 1, 2011. Washington’s overall rank is 7th thanks to its No. 1 ranking in income tax. Otherwise, the state ranks 30th in corporate taxes; 48th in sales taxes (which fall hardest on low-income people); 18th in unemployment insurance taxes, and 22nd in property taxes. Idaho’s overall ranking is 21st, while Oregon’s is 13th.More
Corporate profits are at records and major companies are sitting on enormous piles of cash. Corporate tax rates are at their lowest level since 1972. According to the Wall Street Journal, “total corporate federal taxes paid fell to 12.1 percent of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office.” From 1987 to 2008, the average rate was 25.6 percent.
One big reason is the “bonus depreciation” temporary tax break, supported by both parties. Another, less discussed, is the many ways the biggest companies deploy massive resources to use perfectly legal tax dodges. This might not matter so much if the country didn’t face a $10 trillion deficit, shrinking funding for education and research, and was stuck with a 1970s infrastructure, and that falling apart. So, today’s poll:
Mea Culpa Department: In Sunday’s column on manufacturing, I discussed Henry Ford’s influence on raising wages, also noting he was a crank and no friend of unions. I neglected to note he was also an anti-semite, especially through his writings in the Dearborn Independent, a newspaper he owned. Later, he tried to do a Ron Paul and claim he didn’t know of the vile slanders published in his name. It won’t wash and stains his legacy. Anti-semitism is a special evil that culminated in the Holocaust. No wonder Hitler admired Henry Ford. I regret my omission.
Continue reading to see the week’s links and the haiku:More
Texas’ economy is doing better than most places. According to the president of the Dallas Fed, the state has accounted for 37 percent of all net new jobs created since the recovery began. Not surprisingly, the editorial page of the Wall Street Journal stated this was because of its “free market and business-friendly climate.” This has become a meme.
The reality is more complicated. Texas remains a petroleum superstate even 40 years after the continental United States entered peak, as well as the entry point for much imported oil and a powerhouse of refining and chemicals. It’s an urbanized state with three of the nation’s largest cities, two of which, Dallas and Houston, have numerous corporate headquarters. Austin is a high-tech mecca and Houston is one of the world’s top medical centers. Texas has benefited most among the states from NAFTA and trade with Mexico.
Government plays a big role, too. The state’s powerful congressional delegation sends home the money, whether dominated by Democrats or Republicans. Houston’s status as a major city was in no small part because of the decades of federal funding steered its way by every Texas leader from LBJ to the Bushes (e.g., the Houston Ship Channel, federal grants for research, the headquarters of NASA). San Antonio’s economy enjoys a stable foundation of big military installations. The state’s universities, especially UT-Austin and Texas A&M, receive huge federal support, as well as consistent state backing even in bad times. The state used tax increases to take UT-Austin from a football mill to a world-class university. Dallas has built one of the nation’s most popular light-rail systems thanks in part to Uncle Sam. Texas’ oil and agriculture sectors enjoy big tax breaks and subsidies.More
So let me get this straight: Big corporations nominally based in America want a “repatriation holiday” for the vast profits they have parked overseas. Microsoft alone has $29 billion. Under the plan being pushed by big business interests, the government would drop the tax rate from 35 percent to 5.25 percent. It’s being billed as a “stimulus” because it would allegedly give the government at least a short-term boost in revenue.
Many things are wrong with this idea. When it was tried under the Bush administration, almost all the profits went to stock buybacks and dividends. Far from using the money to hire Americans, as the current proposal is being sold, the corporations last time were busy cutting U.S. payrolls and hiring overseas.
In addition, large corporations have huge departments whose only job is ensuring that they pay as little in taxes as possible, as detailed in David Cay Johnston’s must-read book, Perfectly Legal. As a result of these evasion schemes, a General Accountability Office study found that between 1998 and 2005, 55 percent of large corporations paid no tax at all. Few pay the statutory 35 percent. General Electric, whose CEO Jeff Immelt is President Obama’s economic advisory panel, paid no federal taxes last year. (GE Capital was one of the biggest beneficiaries of the TARP bailout, with much fewer strings than were placed on banks).More
The Dow is now below 12,000 with the longest decline since 2002. Maybe that will refocus us on things that matter, instead of Anthony Weiner’s unmentionables. Quickly, before the next, “Hey, America, look over here!” distraction, here’s a rundown of some things you might have missed while Weinergate … carefully choosing word for a family newspaper … *removed* the oxygen from the room:
President Obama and any real liberals in power have folded like a cheap suit on extending the Bush tax cuts for the wealthy. Now they are trying to spin it as a second “stimulus.” We’ll see. The Bush tax cuts, targeted to benefit the richest Americans, produced few jobs. There’s little evidence the money went into creating productive new enterprises here, even as the wealthiest Americans gained an even bigger share of national wealth.
It was disingenuous to characterize the expiration as a “tax increase.” The original Bush plan was sold as a 10-year deal. If anyone ever wanted certainty, this was it. And, remember, Obama never intended to let the tax cuts on the middle class expire. The reduced rates on high earners would have remained the same as well, up to $250,000 — at earnings $250,001 and beyond, the old Clinton rate would have applied. But the “tax increase” meme is a brilliant tactic, too. Thus, taxes can never go up, only down. And notice how the deficit hysteria has gone away now? Yet all the money to pay for this $801 billion “stimulus” must be borrowed in an unsustainable fiscal trap.
Advocates of maintaining the Bush rates further maintained that it’s bad policy to “raise taxes during a recession.”More
The Bush tax cuts will be extended another two years, which means they will probably be extended forever until the next tax cut. What this means for the economy is difficult to tell. After all, the Bush presidency saw the creation of only 3 million net new jobs, compared with 23 million under Clinton, 2.5 million under George H.W. Bush, 16 million under Reagan and 10.5 million under Carter (!). So job creation is not the forte of these tax rates.
It seemed to work under Reagan, but back then the United States was a manufacturing powerhouse and the world’s largest exporter, with less industry consolidation, fewer jobs being sent overseas and a more dynamic economy. The old middle class was still intact. Yet Bill Clinton slightly raised tax rates on the rich and saw even more jobs created.
By the time George W. Bush saw his cuts passed, the economy was unhealthily deregulated, globalized, consolidated and financialized. The wealthiest Americans, who most benefited from the tax cuts, had far more options as to where they could invest for high returns. Much of it had little to do with sustainable, productive enterprise that creates real jobs in America. Now with the worst recession since the Great Depression, companies aren’t hiring much; more than a few used the downturn as an excuse to slim down, and record profits are coming with fewer workers.More