It isn’t the lower tax rates that are making Big Business and Wall Street euphoric over the Trump/Republican Tax Plan (many large corporations have been paying little to no taxes for many years – see reprint of my 2013 article below), it’s the repatriation of off-shore profits provision that is causing so much bliss in the Fortune 500. Both the House and Senate versions provide for large companies who are holding trillions in profit overseas to bring that money back to the US at a mere 12% tax rate for cash and as low as 5% for other assets such as real estate.
President Trump and the supporters of his tax plan are trying to sell the American people on the idea that these companies will then invest their new found cash hordes into job creating enterprises here at home. Hogwash. We’ve been down this road before. The large corporations who are the beneficiaries of this tax break will most likely spend that money in stock buy-backs and dividend increases. Any investment in job creation will be to create jobs overseas.
Past behavior is the best predictor of future behavior. In 2004, large coporations got a “tax holiday” tax rate break to encourage them to bring overseas profit back the U.S. They didn’t put it into job creating capital expenditures and investments, they spent almost all of it on stock buybacks and dividends. See For the last 13 years, corporations have been buying back thier own stock at record breaking rates. This increases the wealth of top management and the biggest stockholders (the very wealthy). Top executives get most of their compensation from stock or payments based on the value of the stock. Stock buy backs increase the value of a company’s stock in the short term (long enough for top executives to cash out while the stock price is inflated) but they kill the company’s ability to make long term capital investment in the growth of the company and they divert money from research and other development that keeps the company competitive and viable for the future (a dismal future the executives who benefited from the stock buy backs they implemented will not be around to face).
Large coporations and Wall Street should pay their fair share of the costs to maintain this country. They benefit from the security, infrastructure, and political/social system of America. A tax plan that throws a short-term benefit to 99% of Americans but enshrines permanent and underserved breaks to the 1% is a sham. Call your Senators and your Represenative in Congress. Tell them if they vote for this plan, you won’t be voting for them.
The Article Below is Reprinted from the St. Augustine Record
March 9, 2013
Guest column: Part of sequester
solution is having corporations pay taxes
by Carlton “Duke” Fagan
How to handle the “Sequester” is the news of the day. The question is, “What steps do we do to lower the federal deficit?” Raise taxes or cut expenditures?
On the expenditure side, there is no argument that we need to cut wasteful spending. The disagreement is over which expenditures should be considered “wasteful.”
As to the revenue (tax) side, it would be helpful to ask, “Where might we find some additional sources of income?” Most ordinary citizens have been paying their fair share. In fact, the fair share that ordinary citizens pay increased on Jan. 1.
What about the large corporations that are so often heard to complain that they are over-burdened with taxes? Are they paying their fair share? Here are some interesting numbers:
- From 2005 through 2010, General Electric made $26 billion in profits. Their federal income tax paid for that same period? Zero.
- Bank of America made $4.4 billion in profits in 2010. To date, they have received more than $1 trillion (that’s trillion with a “T”) in bail out money, federal loan guarantees, and 0 percent or near 0 percent interest loans from the Federal Reserve. How much federal income tax did Bank of America pay on its $4.4 billion in profits? Zero.
- In 2010, Citigroup made $4 billion in profits. To date, they have received more than $2.5 trillion (again, that’s trillion with a “T”) in bail out money, federal loan guarantees, and 0 percent or near 0 percent interest loans from the Federal Reserve. Their federal income tax paid on that $4 billion? You guessed it: zero!
- In 2009, Exxon made $19 billion in profits and Chevron made $10 billion. Neither paid a dime in federal income tax on those profits.
The Internal Revenue Code is now over 72,000 pages long. Inserted into that code are special privileges for large corporations that allow them to escape paying their fair share of income taxes. These laws were put there in return for donations made by large corporations to the campaigns of our Senators and Congressmen. This is not a partisan issue. Republicans and Democrats, liberals and conservatives, are equally responsible.
It is clear that we are no longer a government of the people, by the people and for the people. We are a government of the corporations and wealthy interests who control our political process.
The question is, “What are we going to do about it?” The time for that discussion is now
Carlton ‘Duke’ Fagan is a trial lawyer and writer in Jacksonville.