International Tax Reform

A May 4, 2009 analysis titled “International Tax Reform” published by Credit Suisse came to me from my broker. Just in case your news source of choice is spending all of their effort on politicizing the issue instead of focusing on the facts, I thought I would worth offer a few tidbits as food for thought….

“If you had been expecting the Administration to try and completely eliminate a company’s ability to defer U.S. taxation on its overseas profits (subjecting worldwide profits to a 35% tax rate whether repatriated or not) the targeted nature of the proposals may come as a relief.” (p.1)

“Three of the proposals are projected to generate $189.6 billion of additional tax revenue from Corporate America between 2011 and 2019.” (p.1)

“So where does one go to get a rough idea as to which companies …the amount of earnings that have so far escaped U.S. taxation. We pulled together the undistributed foreign earnings for each company in the S&P 500 as disclosed in the 2008 10-K’s. It amounted to over $1 trillion. The amounts are highly concentrated among a few sectors, Health Care and Information Technology account for about 41% of the total.” (p.1)

Reform deferral rules

“The Administration is proposing that companies could no longer get the best of both worlds ; they would be required to defer the deduction of expenses (except R&D) on a U.S. tax return that are associated with foreign income until it’s repatriated.”

Close foreign tax credit loopholes

“The Administration is proposing to change that , so companies could only use foreign tax credits from foreign taxes paid on income that is subject to U.S. tax.” (p.2)

Eliminate loopholes for “disappearing” offshore subsidiaries.

“… the “check the box” rules allow the two subsidiaries to disappear (i.e., branch to branch transactions are ignored) and as a result the company avoids…taxation. (p.2)

“In addition to the concentration by industry, there are also a small group of companies that account for much of the undistributed foreign earnings. We found 145 companies with more than $1 billion of undistributed earnings, including the 10 companies in Exhibit 2 where undistributed earnings exceed $20 billion. Those 10 companies have $360 billion of undistributed earnings, more than one third of the total for the S&P 500 companies.” (p.4)


Wonder what can be inferred about “big business”, “special interests” and the “richest 1%” from any of this?

Wonder if the politicization of the issue of tax reform might not be getting spurred on by those with the most to lose from the application of a little fairness? You know, that richest 1% that professes to be looking out for us, American business, for smaller government, family values, and all of that.

While it’s no surprise to see big companies as the ones in the top 10 S&Ps who have the most undistributed foreign earnings, I wonder what conclusions might be drawn from a little speculation about the influence big oil, big drugs, and big banks have in our lives, our government, and through which party?

I wonder if there’s room for discussion about which party has the average citizen’s best interests in mind, which one concerns themselves primarily with the wealthiest among us, and with which party’s constituents might each of us have the most in common – not so much on an ideological level but on a practical level?

At the risk of offending yet again – and believe me that’s not what I’m trying to do, I’m only expressing my opinion – I want to compliment the Republican leadership. Huh? Yes, compliment.

Since the days of Reagan they have, in my humble opinion, done a masterful job of what I would describe in my own limited way as “hood-winking” Americans. The Republican leadership set a course back then and has had a measure of success in getting people to think that the party’s core values and platforms are based on beliefs and ideas that benefit “Main Street Americans.”

Again and only in my opinion, the platform of the Republican party is built on the reddest of herrings.

Issues like….

…the Constitutional right to bear arms includes things like semi-automatic assault weapons. (What’s next, recreational RPGs?)

…a woman’s right to have an abortion should be unlawful. (Why, so we can have our own version of Sharia law but with a Christian twist?)

…we need a Constitutional amendment to define marriage as only between a man and a woman. (Why, so we can then make legal our own unique brand of religiously-based hatred and discrimination? Hey, it’ll give us something in common with radical Islamists! Who knows, it could be the first step in a bridge to better understanding and acceptance between our cultures!)

…Christian creationism – now euphemistically called intelligent design and never ever, ever, even with the slightest consideration for what other religions and their beliefs have to say about creationism – should have a place in science curriculum in our schools. (Why, so we can raise a nation of god-fearing Christian xenophobes to the exclusion and peril of all non-believers?)

…the so-called “war on terror” gives us the right to invade sovereign nations at will and regardless of the justification (or lack thereof), and to then violate international law and any shred of decency by torturing people. (Why, because we’re Americans, dammit, and you can love it or leave it!??)

…environmental protection laws and policies aren’t warranted and only hold back American enterprise and energy independence. (Because, after all, climate change is a myth and, besides, we need that additional 3% of our domestic oil consumption hiding in pristine wildernesses like ANWR and the outer continental shelves so we’re no longer dependent on foreign sources who, for some strange reason, seem to hate our guts. Crazy Islamo-facists that they are…)

…the way to feel more secure in the homeland is to do things that make us feel safe like taking off our shoes in airports and building walls on our borders….but only on our southern border. (Why? Isn’t it obvious? All terrorists are Muslims from the Mideast, and everyone knows all those camel jockeys are from desert countries. The soles of their feet are rough from wearing sandals in the sand so they’re easily recognized at airport security. Besides, everyone knows they hate the cold so they’ll never come across the Canadian border.)

Alright, that’s enough of that silliness.

Here’s my opinion. None of this bullshit really matters to the true Republican leadership. It’s a ruse. The neo-conservative-gun-toting-drill-baby-drill-you’re-either-with-us-or-aginst-us-love-it-or-leave-it-mission-accomplished-Minuteman-faux-patriotism-bible-thumping-divisive-focus-on-the-family stuff is only window dressing meant to attract, seduce and lull people into believing that the Republican party has some kind of concern about average Americans.

Hey, it’s just my opinion, but they don’t. I’m not telling anyone what to believe; just expressing my opinion.

In my opinion, it is the oligarchy of the wealthiest 1% who run the Republican party. If they had their way, they’d run every aspect of our lives because of the obscene profit and power in it. They are the Orwellian 1984 force that we need to be worried about, not the supposedly big government-minded Democrats. We are, in my opinion, just another resource to the Republican oligarchy; another raw material from which they become even wealthier and more powerful.

This isn’t, by the way, limited solely to Republicans. Sadly, too many people of power of every stripe exercise their will on others without real regard for their followers or the organization.

I just think that there’s a whole lot more to fear from Republicans than from Democrats. Democrats can’t seem to agree on enough, always seem to be getting each other’s way, and aren’t very good it seems at towing a simplistic party line that everyone in America can understand.

The Republicans, on the other hand, seem to have decided about 30 years ago that they would cast themselves as the ultra-conservative party on social, economic and political issues. Simple message: The party of good old fashioned American values – small government, baseball, hot dogs, apple pie, and church on Sunday – and leave the rest to us and to hell with anyone who doesn’t conform to our beliefs.

Those ideas serve the interests of the wealthy extremely well. Republican dogma is better for a rich oligarchy than ideas and principles that…

….allow for different belief systems and cultural norms

….put restrictions (call them whatever you like; rules, laws, regulations, etc.) on what businesses can and can’t do to make a profit

….keep and strengthen the separation of church and state

….create and fund social programs designed to help the poor and middle class.

Which is why I rail against the Republican party – not you the member of the Republican party – the party’s leadership and the values they profess to stand for and perpetuate in the face of what I see as the reality of who I think they truly have as their core constituency – the ultra-wealthy.

Shit. I probably offended someone with that statement, too. I’m sorry if anyone reading this is a mega-rich member of the RNC leadership.

Believe me, I don’t see the Democratic party as perfect by any stretch. It just seems to me to be more concerned about the average citizen and the issues with which I, on a practical level, have much more in common with than the richest 1%.

Anyone want to get into how the swine flu can be tied to unrestricted greed on the part of American pork producers moving production and jobs overseas because of a lack of regulation? 😉


The Straw That Stirs the Drink!

Don’t Blame the Borrower – How a Republican Congress Helped to Create the Current Economic Crash and Continues to Erode the Middle Class

As I see it, the reality is that our current economic problems stem directly from deregulated financial markets. We can thank Alan Greenspan, appointed by Reagan, and the pro-business, deregulatory belief system of the Republican party for that.

Let’s start with the mortgage crises since that seems to be something most people can agree is at the root of our current economic problems. The notion that we should blame the person applying for a mortgage that they can’t afford versus the people and systems that are supposed to screen applicants and then say, “No” is just silly, but that seems to be the position of social and fiscal conservatives.

Let’s see where the argument for blaming the applicant takes us……

  1. Let’s say I go to a bank or lender and apply for a mortgage suspecting – or even knowing – I can’t pay it back.
  2. The bank decides not to check me out and deny my application. Why? They know they won’t be holding my loan very long. Why not? Because they don’t have to and aren’t motivated to thanks to the Gramm-Leach-Bliley Act, a law passed in 1999 while Clinton was president but Congress was controlled by Republicans. Remember that it is, after all, Congress who makes law, not presidents. GLBA was authored by Republican Senator Phil Gramm and Republican Representative Jim Leach, with contributions from Republican Rep and House Commerce Committee Chairman, Tom Bliley. It effectively removed regulations on banks created in 1933 by the Glass-Steagall Act which, itself, was a response to conditions not at all unlike today that caused the Great Depression – an unregulated financial services industry.
  3. Because sufficient regulations no longer exist thanks to the GLBA, lenders of all kinds – including banks – can now package and sell my loan with thousands of others to someone else and wash their hands of the initial risk of lending me money. No reason to deny my application if they aren’t worried about me paying it back – that’s someone else’s worry now.

So what should we expect will happen? No one will deny my loan application because there’s money to be made quickly by writing the loan and selling the now infamously “toxic asset” to someone else. Well, here’s what will and did seem to happen…

  1. I and lots of people will get mortgages we don’t qualify for
  2. The re-packaged investments will be sold to someone else
  3. Those packaged securities will become worthless because not enough people can pay them back, and
  4. The financial services companies who used to be regulate banks but who no longer fall under enough regulation and scrutiny will go crying to the very same government who stopped regulating them in the first place to now bail them out.

The Rich make and pass laws to benefit the Rich, and when things go bad we as citizens pay for it through weaker markets and inflated government debt. If we were real Capitalist, we’d let them all fail just like Bear Stearns and Leahman Brothers, but that would create complete anarchy…..actually, it would mean a lot of rich people would lose a lot of money, and that will NEVER happen.

So if you’re blaming Clinton for perpetuating the idea of broader home ownership as the reason for our current problems, you really need to look at the simple truth of the matter.

If you’re somehow trying to make a connection between broader home ownership and too many unqualified loan applicants, then you really have to blame GLBA and greed for that. Home ownership is still a great idea for our society, but deregulating the lenders and blaming the borrower doesn’t make sense.

Plain and simple, the current economic problems can be traced back to when Republicans had a Congressional majority and could create laws that allowed their supporters and constituents in big business and especially big finance to maximize return and minimize risk. As a result of GLBA, their big money supporters were able to create Bank of America, Citigroup, and J.P. Morgan Chase.

Pretty soon, financial markets were a free-for-all, just as they had been before the Great Depression. Firms that had once been regulated so that they wouldn’t fail were now buying and selling every imaginable type of security without rules, including mortgages that never would have been approved to begin with which are now re-packaged as some kind of investment vehicle.

The American Middle Class once again allowed themselves to be duped by the wealthy and powerful. It’s not the borrowers fault if they are lent money they can’t repay. The lender is supposed to say, “No” if they know the only way they make money is if the borrower pays them back. The lack of regulation allowed – hell, encouraged – those loans to written and then sold off as investments so that the rich could get richer off of the transaction without any regard for the borrower or the affects that so much failed lending could have on everyone and the economy.

The lack of regulation on the banking industry is the classic fox in charge of the hen house. It’s easy to see that a few very smart and very rich people understood how to make a great deal of money out of the house of cards that was the real estate bubble.

The lack of regulation actually brings us to Mr. Smaller Government himself, Ronald Reagan, and his fed chairman, Mr. Greenspan, who convinced us that smaller was better. No need to regulate banks as had been done since the Depression and the Glass-Steagall Act of 1933. This is America, land of free markets! Let the markets decide! (Translation: Let Rich Republicans Decide)

Yes, this is America and so that means we have only ourselves to blame or thank for who we elect, the markets we create, and the consequences of our decisions. So if anyone is going to go back and blame Clinton for wanting more people to own homes, we must go back just a little further to Ronald Reagan.

Reagan ballooned the federal deficit to it’s largest amounts ever (to that point in time) after getting elected on the “government’s not the answer to the problem, government is the problem” fable. Clinton left office with a federal surplus which W proceeded to totally squander by giving it to the rich in the form of tax cuts. Remember, too, the invasion of Afghanistan and Iraq have never been accounted for in the federal budget. The piper isn’t even close to being paid when it comes to the federal deficit.

So who really is the party of fiscal responsibility? Make no mistake, Republicans talk a grass-roots, family values game but that’s a ruse intended – and seemingly working extremely well – to convince middle America that they are the Republican party core. Wrong. The wealthy is the real Republican party core. The religious-right, pro-life, Creationist, white-bread American is just the uniformed and ill-advised pawn in their game. They are easily convinced that so-called tax-and-spend liberals, job-stealing illegal immigrants, and unfair (meaning unregulated) foreign markets and labor practices are to blame for our troubles.

We only have ourselves to blame.

When it comes to foreign and domestic markets and labor, we only need to look in the mirror. Consider the goods and services we consume, how that affects the economy, and what it means to domestic and overseas markets and societies, including China.

Any business is in business to do something profitably. Businesses who outsource everything possible to overseas markets like China do so in order to lower operating expenses and maximize profits on the goods and services they sell and we buy from them.

Hey, we don’t want government to tell them or us what we can and can’t do, right? No need to regulate business, right? This is America, land of the free and free markets! Let us as producers and consumers drive the market!

So if we as consumers….

  1. weren’t always encouraging businesses to lower costs by constantly demanding and buying cheaper and cheaper goods (the WalMart affect)
  2. were more willing to elect leaders who put the needs of the American middle class worker ahead of the corner office CEO maybe with proper tariffing and changes to NAFTA – George H.W. Bush’s baby, by the way, and
  3. stopped believing red herrings like illegal aliens taking all of the good paying jobs (yeah, like picking vegetables and raking lawns) thrown at us by right-wing news sources like Fox, Rush Limbaugh, Michael Savage and Quinn and Rose as the cause of our economic problems,then maybe we wouldn’t be in such a mess.

In a democracy, we have some power by virtue of our ballot. So long as we allow ourselves to be fooled into thinking that the Republican party in this day and age is anything but a party of the rich, we’ll keep going through cycles where they come to power every so often, make changes that only benefit the rich like deregulating markets and cutting taxes for the wealthy under the total lie of Reagan’s failed “smaller government” and “trickle-down economics” theories, and we’ll be stuck once again holding the short end of the stick.

It really is something to see – middle class Americans somehow thinking that Republicans are in our corner. I don’t get it. The past 3 Republican administrations – Reagan, Bush 41, and especially the last 8 years under W have proved that to me. Look at how W took Reagan’s failed philosophies – and the deficit – to heights unimaginable. When were we last really prospering? Wasn’t it under Clinton?

For now it seems the majority of Americans have awoken from the nightmare of Republican dogma and are at least willing to try something different. After all, you know the definition of insanity, right? – doing the same thing over and over and expecting different results.