Comments on: A corporate tax code for a different century http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/ Sat, 23 Mar 2013 13:49:31 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Gordon2352 http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-940 Tue, 17 Jan 2012 17:20:55 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-940 Sorry, I just couldn’t resist this because it proves this point I made in one of my comments above, which a repeat the relevant portion below:

If we dropped corporate taxes in the US, basically two things would happen:

(1) the US corporations, who are already sitting on more cash than they have at any time in our history (but simply refuse to invest it in this country because the returns aren’t high enough), would drop more money to the bottom line on their P&L as profits.

That means they would distribute the extra profit to their shareholders, and/or commence even more stock buybacks than they have been doing, which would increase shareholder value, but in any case no one else would benefit except the wealthy stockholders.

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From an article in Bloomberg today, Jan 17th:

U.S. Market Shrinks Amid Heavy Share Buybacks

By Michael Patterson, Whitney Kisling and Inyoung Hwang – Jan 16, 2012 10:39 PM PT

“Stocks are getting scarcer in the U.S. for the first time since the bull market began as companies cut share sales to the lowest level since 2006 and buy back equity at the fastest pace in four years.

Amgen Inc. (AMGN), Hewlett-Packard Co. (HPQ) and 1,971 other U.S. companies repurchased $397 billion of stock last year, while they issued $169 billion of new equity, data compiled by Birinyi Associates Inc. and Bloomberg show.

The combination reduced the Standard & Poor’s 500 Index divisor, a measure of outstanding shares, by 0.6 percent last quarter, the first drop since March 2009.

Shrinking supply supports prices and shows valuations are so low that executives would rather buy back shares than spend the cash to expand, according to Columbia Management Investment Advisers LLC and USAA Investment Management Co.

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THIS IS PROOF POSITIVE OF MY ASSERTION ABOVE THAT IF WE LOWERED CORPORATE TAXES, THE EXTRA PROFITS WOULD BE SPENT ON STOCK BUYBACKS TO ENHANCE STOCKHOLDER WEALTH — NOT TO CREATE JOBS IN THE US.

PseudoTurtle
CPA/MBA

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By: Gordon2352 http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-937 Tue, 17 Jan 2012 15:50:16 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-937 breezinthru,

Sometimes brevity is a relief.

A “transaction tax” (which I believe is being tried in the eurozone) is far too limited in scope to be of any use, and most importantly it would simply be passed on by the bankers to their customers, and ultimately to the American people.

You are absolutely correct in that “we have to go where the money is”, which means forcing the wealthy to redistribute their ill-gotten gains back to the people they stole it from.

Common sense says they certainly aren’t going to do it on their own, no matter how bad the US economy becomes.

As I said above, that requires Congressional action to reverse ALL the wealthy-oriented legislation passed in the last 30+ years.

Only that action would give the US economy and the American people a shot at surviving what is to come.

Frankly, I think it will be “business as usual” until the economy suddenly “gives way” and collapses, which I believe will be sometime in 2012, at which point it will be too late to do anything.

This is the reason for my urgent tones.

I believe we are about to experience another major collapse as we did in 2008, but the global economy is much weaker and not likely to survive — certainly there is no question of more bailouts because we no longer have any money.

I know I have probably offended many people by my remarks against the wealthy class, but it was not meant to be personal.

It is the steadily increasing corruption of our government by the wealthy class over the past 30+ years that is the direct cause of the US being in serious financial trouble today.

THAT fact is ALL I wanted to point out to people.

Since Reuters seems to be shutting down this site for comments, I will no longer check it for comments.

But I think I have had the opportunity to say what I felt needed to be said.

Truthfully, I am surprised Reuters allowed me to continue to say the things I was saying, and I thank them for that.

I wish more people would speak up.

You state that “We need a lot of money to pay our nation’s operating expenses and a lot more to pay down our national debt. We can’t get a lot of money by taxing the impoverished or the unemployed. We have to go where the money is” sums up very nicely what I have been trying to say in my own way.

Regards,

PseudoTurtle
CPA/MBA

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By: breezinthru http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-935 Tue, 17 Jan 2012 13:47:41 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-935 Perhaps I should apologize for my brevity in the wake of such learned and detailed dissertations, but quite simply we should embark on a taxation system that taxes transactions.

It would probably put the high speed algorithm traders out of business, thus the markets would lose some liquidity but I believe its a small price to pay for national solvency.

We need a lot of money to pay our nation’s operating expenses and a lot more to pay down our national debt. We can’t get a lot of money by taxing the impoverished or the unemployed. We have to go where the money is.

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By: txgadfly http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-934 Tue, 17 Jan 2012 02:52:26 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-934 @PseudoTurtle:

With you accounting training you recognize, of course, what concealed assets are and why people conceal them. They are concealed so they do not have to pay their debts.

The US Federal Government holds direct ownership of about 30% of the total land area of the USA. This does not count trust lands, nor the 200 miles from shore owned by the Federal Government as well. That is a massive amount of mineral rich and well located real estate. Although the Russian Government may have more land, primarily in Siberia, it is safe to say that the Federal Government is the richest organization on the planet.

Note that the Government owns all mineral rights to these lands. It collects royalties as it sees fit and as please the politicians in Washington.

And then there are all the structures. None of these items is admitted to in the Federal balance sheet, but you just try to go take control of a tiny bit of it and see what happens.

These assets, alone, are sufficient to meet Federal entitlement obligations for generations. The income alone is sufficient. How about all the Federal buildings and land in the District of Columbia and surrounding States?

The problem is much like the problem a spendthrift who spends more than he takes in using borrowed finds. He will never want to repay debt, only to run up more. Like the spendthrift, the Federal balance sheet must be used to pay Uncle Sam’s debts.

Uncle Sam has developed a very bad war habit, and permits small minorities of his People to start war after war. The reasons to begin are thin. The reasons to continue are thinner. That is where the ax must fall. And the so-called “black” budget that is officially Secret and hidden from the public. We have no idea at all how large it is. It could be even larger then the public “white” budget. The black budget must go.

At any rate, the Federal Government also possesses the right to print as much money as it wants, and to sell as many bonds at whatever rate that it wants. It has huge, huge assets.

Let them pay their debts to the American People and stop trying to fight useless “Hobby” wars fought for the benefit of foreign powers. They have the money. They just do not have the integrity.

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By: Gordon2352 http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-933 Tue, 17 Jan 2012 02:30:52 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-933 txgadfly,

Your assertion that the US government “is the wealthiest organization on the planet” is, unfortunately, completely false.

The US government is completely insolvent at this point and becoming moe so each day, owing far more than the $15 trillion in debt it officially recognizes on its balance sheet.

The REAL reason it cannot pay Social Security, Medicare, Medicaid and Food Stamps (without borrowing more money) is that there is not enough real cash flow coming into the country to pay our bills any longer.

That is one reason why the Congress is presently “gridlocked”. The other is the wealthy don’t want to pay their taxes.

As to the issue of excess military spending, it is probably the major reason for us being where we are today.

PseudoTurtle
CPA/MBA

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By: Gordon2352 http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-932 Tue, 17 Jan 2012 02:20:56 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-932 robb1,

Your answer to your question is very complex — covering a multitude of economic, political and military issues that have occurred since WWII, and the US responses to those conditions — and I cannot do it in this venue in any form where it would make sense. All I can do is answer your specific points as I understand them.

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You state, “a trade war, or at least a more protective trade posture could be implemented if we restore a productive edge, partially lost in the past 30 years. But it does not happen overnight.

I understand your point, which was undoubtedly valid at some point in the past — perhaps several decades ago — when there was still time to take definitive and affirmative action to reverse the course of the US when it first began to seriously deviate off-course.

But now, even the mere hint of a push-back in US trade policy is likely to generate very severe reaction from our trading partners, all of them.

And our position is that we are literally on the edge of bankruptcy (i.e. defaulting on our debts as Greece is about to do), so half-measures are not a good idea, because it will be seen as a sign of weakness. We must negotiate from a standpoint of strength, or we will end up like Greece, being carved up by our creditors.

And we cannot “restore a productive edge, partially lost in the past 30 years” because it is not “partially lost”. In fact, we have lost 90% of our manufacturing capacity, which we will never get back again — the US no longer has any productive edge on anyone.

That is history, and we need to face the reality of what we have become, a debtor nation with no visible means of support.

You state “we are still among the most productive in the world if not the #1″, which from a production and cost standpoint isn’t even remotely true. We have massive labor costs and an overhead burden that cannot be passed onto anyone in our exports. Thus, we must find a way to either pay it, which we cannot, or devalue it somehow.

One of the major reasons the US Congress is pushing China to let the yuan rise is an attempt to devalue our debt to them, but China will NEVER agree to do that unless it is in their best interest to do so. If we have to negotiate our debt with China, we need to make them see it is in their advantage to do so, otherwise it is a waste of time.

One thing is certain, we CANNOT export our way out of this mess.

“but, e.g., how could we immediately stop buying Apple stuff, if they cannot make them cheap from Asia?”

Good question, but a moot point, since as the US dollar continues to depreciate against the world currency, nobody will be willing to sell to us, at least not at any price we can afford to pay. And I’m talking about food and energy on the global market, not luxury items.

“It would create a huge inflationary pressure and recession, if we cannot (again) adequately supply our needs internally.”

Actually, the US economy is likely to deflate down to its real value, whatever that might be at this point, until we can once again begin to rebuild our industries, mainly because we won’t be able to afford to buy anything on the global market.

“It will take perhaps another 30 years, beyond our generations.”

Probably true, but waiting for disaster to strike is no solution, since our condition continues to worsen daily.

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The only solution, as I see it, is to immediately begin to completely reverse the trade and tax legislation that has gotten us into this mess, and recoup our losses from the wealthy class, which has been the only class to profit from this. Right now, the wealthy class is the ONLY source of revenue to sustain this economy.

That would give us operating capital to get us through what we need to do, and negotiate from a position of strength with our creditors, who were glad to help us get into this mess in the first place.

At this point, there are no easy solutions, but we are already on the precipice and we are out of time.

PseudoTurtle
CPA/MBA

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By: txgadfly http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-931 Tue, 17 Jan 2012 00:22:22 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-931 One thing I do understand:

when someone sells me a financial product and when they use the term “insurance” and when they take my money, I expect the promised services and goods. The only way out of that, for private companies, is bankruptcy. In that process, the bankrupt’s assets are seized and used to pay obligations.

The US Government is the largest landowner in North America. It own a significant percentage of the land area of the country. It pays no taxes on this land and it pays no taxes on a myriad of buildings and other structures. It is the wealthiest organization on the planet.

The US Government has a habit of invading countries which have not attacked us. It could “afford” to fight the Southwest Asian Wars without hesitation. It invaded Afghanistan, attacking its internationally recognized Government, because the head of the country refused an order from the US President. He was ordered to turn over a guest, and refused. We invaded and have been fighting for over a decade now.

“We” can afford capricious and personal wars. But we cannot pay Social Security, Medicare, Medicaid and Food Stamps that were promised, and paid for. “We” charge the recipients of these “entitlements” money for our services. And now “we” find it inconvenient to pay up, in spite of lavish expenditures on unneeded weapons and allies.

The Federal Government should immediately turn over all Federally owned and controlled lands on this planet to a Trust Fund for these entitlements. It should pay a fair market rent for the public assets it uses. If it does not want to pay rent, it should keep out of those properties. This would be more than enough to fund all of the “entitlements” politicians want to default on.

As to foreign trade, I say you cannot measure the outcomes without a dependable and non-calculated measuring stick. Most of the damage to the USA in international markets was done via an overvalued US Dollar. It is intended to be obscure. Intended.

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By: OneOfTheSheep http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-930 Tue, 17 Jan 2012 00:01:25 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-930 @Gordon2352,

You say: “It is important to realize our “backbone” as a nation, was the rise of the middle class after WWII, but it has been steadily eroding for decades as the wealthy continued to seize more legislative power for themselves.”

I’m sure the middle class that existed in the U.S. up to and through WW II would be surprised our nation had no “backbone” back then. It appears impossible to back up that statement with facts. Your whipping boy “the wealthy” is about as well defined in terms of membership and goals as OWS (Occupy Wall Street). Who specifically comprises this predatory economic monolith you so loathe?

I do notice and believe that the legal profession has come to exert an ever-increasing and inappropriate influence on the United States. It is true that if a small community only has one lawyer they will be starving, but when there are two or more they tend to be very well off.

That’s because some local judges “feed” them controversies to milk for extended periods without resolution. As the alternate of Arbitration rose, it, too, became the exclusive province of Attorneys. Now Mediation has gone that route.

In my area there is no longer a government of laws, but of men (local influence) from County Court, District Court, Court of Appeals and the State Supreme Court. The Federal Courts here are even worse. Attorneys discourage us mere citizens who would dare enter there, suggesting that these are more formal (expensive) and hostile to the losers (don’t dare go there if your opponent has more money than you do, they will prevail AT YOUR EXPENSE!). No judge any longer faces any meaningful accountability if they violate their oath to enforce the law as written, or if they apply the wrong law, or apply the right law wrongfully, even if intentionally and their actions or inactions clearly cause financial damage(s).

I believe this is a direct result of the number of lawyers “we, the people” have elected (and continue to elect) to Congress as “our” representatives. It seems they feather the “legal bed” whenever and wherever possible at the expense of our legitimate interests and those (lobbiests, ex-politicians and other lawyers) that “cross their palms” with political contributions. Is it any wonder there is no way to apply “conflict of interest” statutes today in the manner intended when these were originally adopted?

So, perhaps, some of these are your “guilty”? But it would be silly to suggest this bunch as ALL of your “wealthy”.

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By: robb1 http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-929 Mon, 16 Jan 2012 23:41:35 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-929 to Gordon2352: While I agree 100% in theory, I try to be practical.

A trade war, or at least a more protective trade posture could be implemented if we restore a productive edge, partially lost in the past 30 years.

But it does not happen overnight.

We are still among the most productive in the world if not the #1, but, e.g., how could we immediately stop buying Apple stuff, if they cannot make them cheap from Asia? It would create a huge inflationary pressure and recession, if we cannot (again) adequately supply our needs internally.

It will take perhaps another 30 years, beyond our generations.

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By: Gordon2352 http://blogs.reuters.com/david-cay-johnston/2012/01/13/a-corporate-tax-code-for-a-different-century/#comment-928 Mon, 16 Jan 2012 22:41:08 +0000 http://blogs.reuters.com/david-cay-johnston/?p=258#comment-928 robb1

Although international finance can be difficult to comprehend, ONE VERY IMPORTANT THING to remember about trade, is that the concept of “free trade” as originally proposed by Adam Smith in his “Wealth of Nations” was that the very simple truth behind his argument for the capitalist system was that BOTH ECONOMIES SHOULD PROFIT FROM FREE TRADE.

If that is NOT true, then it CANNOT be free trade, but something else.

Has the US profited from 30+ years of free trade, as the wealthy say it has?

That is the real question you need to answer.

If not, then we MUST stop this “faux-free trade” because it is killing our economy.

PseudoTurtle
CPA/MBA

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