None of the things Robert Reich talks about will actually help the private sector PRODUCE good-paying jobs.
What I advocate in my blog is a revision of the tax code to made a difference in tax rates between corporations that invest their profits in domestic hiring and those that are sending jobs offshore. Companies that are expanding domestic operations and growing their American payrolls year by year should pay a lower tax rate and companies that are laying off Americans while they outsource their work to other countries should pay a higher tax rate.
This will produce an incentive for corporations to hire Americans and will empower growing, hiring companies to grow faster and produce new jobs more quickly.
I would like to hear what others think about this.
First off, we need to understand that there is a difference between wealth creation and wealth extraction. Our corporations and their shareholders no longer create wealth but rather extract it.
Corporate profits are at their all time high, both pre tax and after tax. Wages and benefits for working folks are at their all time low and have been shrinking annually since 1999. We have created net zero jobs since 2000.
Yet, even on top of the fact that corporations are enjoying their best period of profitability ever they are only investing 4% of their pre tax profits in laying the groundwork for future growth and profitability.
When you are only investing 4% of your profits to future growth you cannot and will not create jobs.
If you want to create jobs then penalize companies that reward "short term" wealth extraction (also known as short term shareholder value) over long term wealth creation.
In commemoration of Labor Day, I wanted to post something, anything, to honor American workers. This Robert Reich video was released this weekend - affording me an opportunity for a quick post.
While I agree with you in principle regarding your proposed tax incentives, my only regret is that it has already been tried and failed in the Senate:
“Senate Republicans on Thursday blocked the No.1 item on the president's congressional "to-do-list," refusing to allow a vote on a bill that would give tax breaks for companies that "insource" jobs to the U.S. from overseas while eliminating tax deductions for companies that move jobs abroad.”
“Well, if the economy recovers too strongly before an election, Republicans will lose power. If jobs numbers look too good, people will want to keep the same party. By Republicans blocking all jobs legislation and keeping jobs numbers from improving they believe this is their ticket to power.”
Most regrettably, we are witnessing an era of hyper-partisan gridlock characterized by obstruction, hostage-taking, and legislative nihilism. Apparently, partisan ambition takes precedence over the public interest. In the end, American workers get shafted.
What I have in mind is quite a bit different from what the president is proposing, and I think it would have a better chance of passing. My plan is simpler, more powerful, and easier for the public to understand.
What I am proposing is a permanent change to income tax rates, a replacement of the 35% standard rate most corporations pay. Instead, companies that hire more American workers year by year would pay a lower rate depending on how much their payroll increases. So if a company's American payroll last year was $3,000,000, and this year it is $4,000,000, they might pay 25% in income taxes, while a company that is NOT hiring more Americans would pay a higher rate, maybe 40% or 45%.
Not only would this create a powerful incentive for companies to hire Americans but it will enable those companies that are already growing in the United States to grow faster because they will have more after-tax profits to work with.
While the president's proposal would eliminate tax cuts for companies that are outsourcing jobs to other countries, it doesn't affect the standard rate.
To win in congress, any plan must have public support, and for that it must be based on a very simple concenpt.
First off Hamilton, payroll dollars do not equal hiring. To go from 3,000,000 to 4,000,000 all an owner has to do is pay himself a million dollars more. Or "hire" his wife and she stays home and they get an instant tax cut.
No company pays 35% tax rate, not one. The actual effective tax rate is 12.6%
You are exactly right about hiring ones wife or paying oneself a higher salary. I cover that in my book. Any such loophole that allows manipulation has to be closed. In chapter four, "The Details", I explain that payroll would only be included up to a salary cap limit. The government can set the limit where it wants, but once set, only payrolls within that limit are counted.
So if congress sets the limit at $40,000, only the first $40,000 of a employees compensation would be counted in the payroll total that would be compared year by year to see if it is growing. For an owner to increase his salary beyond that would have no effect on his tax rates. He has to actually HIRE more American workers, year by year, to get a lower tax rate.
I find your term Wealth Extraction both intriguing and succinct in capturing the essence of income inequality trends these past 30 years. The challenge is always in the details, and there are many.
Perhaps we can start with the heresy known as "Trickle Down Economics." Debunked and discredited decades ago; nevertheless, it is a polemic crafted by self-serving plutocrats and one that refuses to be flushed down the toilet of history.
Things we can do as a nation:
Remove all provisions of the corporate welfare system in our tax code - starting with the repatriation of an estimated $2 trillion in corporate assets and $20 trillion of personal wealth that has been deposited offshore in tax-sheltered accounts;
Readjust marginal tax rates to correct imbalances created decades ago;
Reintroduce a form of "jobs insourcing bill" mentioned by Hamilton Bard (above) and proposed by President Obama (blocked in the Senate as noted);
Create a comprehensive infrastructure initiative to create jobs and repair our crumbling roads, bridges, utility systems, and electrical grid;
Initiate a form of Green Energy Marshall Plan to move the country into a non-petroleum future;
Invest more resources on education and job training;
Just for starters ...
It may take 30 years to undo the damage of Trickle Down and restore the middle class to former glory. Regrettably, entrenched ideas do not go away easily, and there is currently no political will to fix the inequality problem.
Oh, yes, it will take AT LEAST 30 years to undo the damage done to our economy by supply side economics/trickle down economics.
When corporate after tax profits are at their highest levels ever (as a percentage of GDP) and the growth of corporate taxes, as a percentage, is greater than the percentage increase annually in our GDP then THAT IS WEALTH EXTRACTION.
Someone elses piece of the pie is getting smaller so that someone else gets a bigger piece.
That is not wealth creation but wealth extraction.
I think the first thing we have to stop and think about is what makes up our economy...what companies. Most of our economic policies and tax policies are written by and for major corporations. Until we begin to think global companies and domestic companies then we should not implement anything.
The Germans and most of the Scandinavian countries do this already. The Germans have SME's and it is a special class of companies that are domestic companies.
When the Germans institute an infrastructure or an industrial program the benefits go to the SME's not their global companies. Thus the tax dollars are 100% spent in Germany. If we did it over half the money would end up going to suppliers overseas..and thus, like the stimulus program which for every one job created in US ended up creating 1.4 jobs overseas.
Yep, we got a lot of work to undo before we can move ahead with anything logical...
"The top 1 percent of U.S. earners collected 19.3 percent of household income in 2012, their largest share in Internal Revenue Service figures going back a century.
U.S. income inequality has been growing for almost three decades. But until last year, the top 1 percent's share of pre-tax income had not yet surpassed the 18.7 percent it reached in 1927, according to an analysis of IRS figures dating to 1913 by economists at the University of California, Berkeley, the Paris School of Economics and Oxford University ...
Last year, the incomes of the top 1 percent rose 19.6 percent compared with a 1 percent increase for the remaining 99 percent."
We welcome civil discourse from all people but express no obligation to allow contributors and readers to be trolled. Any comment that sinks to the level of bigotry, defamation, personal insults, off-topic rants, and profanity will be deleted without notice.
None of the things Robert Reich talks about will actually help the private sector PRODUCE good-paying jobs.
ReplyDeleteWhat I advocate in my blog is a revision of the tax code to made a difference in tax rates between corporations that invest their profits in domestic hiring and those that are sending jobs offshore. Companies that are expanding domestic operations and growing their American payrolls year by year should pay a lower tax rate and companies that are laying off Americans while they outsource their work to other countries should pay a higher tax rate.
This will produce an incentive for corporations to hire Americans and will empower growing, hiring companies to grow faster and produce new jobs more quickly.
I would like to hear what others think about this.
First off, we need to understand that there is a difference between wealth creation and wealth extraction. Our corporations and their shareholders no longer create wealth but rather extract it.
ReplyDeleteCorporate profits are at their all time high, both pre tax and after tax. Wages and benefits for working folks are at their all time low and have been shrinking annually since 1999. We have created net zero jobs since 2000.
Yet, even on top of the fact that corporations are enjoying their best period of profitability ever they are only investing 4% of their pre tax profits in laying the groundwork for future growth and profitability.
http://www.forbes.com/sites/stevedenning/2013/07/29/how-the-worlds-dumbest-idea-killed-the-us-economic-recovery/
THAT is wealth extraction not wealth creation!
When you are only investing 4% of your profits to future growth you cannot and will not create jobs.
If you want to create jobs then penalize companies that reward "short term" wealth extraction (also known as short term shareholder value) over long term wealth creation.
Hamilton Bard,
ReplyDeleteIn commemoration of Labor Day, I wanted to post something, anything, to honor American workers. This Robert Reich video was released this weekend - affording me an opportunity for a quick post.
While I agree with you in principle regarding your proposed tax incentives, my only regret is that it has already been tried and failed in the Senate:
GOP senators block top Obama jobs initiative:
“Senate Republicans on Thursday blocked the No.1 item on the president's congressional "to-do-list," refusing to allow a vote on a bill that would give tax breaks for companies that "insource" jobs to the U.S. from overseas while eliminating tax deductions for companies that move jobs abroad.”
Here is another:
Senate Republicans Block Another Jobs Bill, Face Backlash From American Public:
“Well, if the economy recovers too strongly before an election, Republicans will lose power. If jobs numbers look too good, people will want to keep the same party. By Republicans blocking all jobs legislation and keeping jobs numbers from improving they believe this is their ticket to power.”
Most regrettably, we are witnessing an era of hyper-partisan gridlock characterized by obstruction, hostage-taking, and legislative nihilism. Apparently, partisan ambition takes precedence over the public interest. In the end, American workers get shafted.
What I have in mind is quite a bit different from what the president is proposing, and I think it would have a better chance of passing. My plan is simpler, more powerful, and easier for the public to understand.
DeleteWhat I am proposing is a permanent change to income tax rates, a replacement of the 35% standard rate most corporations pay. Instead, companies that hire more American workers year by year would pay a lower rate depending on how much their payroll increases. So if a company's American payroll last year was $3,000,000, and this year it is $4,000,000, they might pay 25% in income taxes, while a company that is NOT hiring more Americans would pay a higher rate, maybe 40% or 45%.
Not only would this create a powerful incentive for companies to hire Americans but it will enable those companies that are already growing in the United States to grow faster because they will have more after-tax profits to work with.
While the president's proposal would eliminate tax cuts for companies that are outsourcing jobs to other countries, it doesn't affect the standard rate.
To win in congress, any plan must have public support, and for that it must be based on a very simple concenpt.
First off Hamilton, payroll dollars do not equal hiring. To go from 3,000,000 to 4,000,000 all an owner has to do is pay himself a million dollars more. Or "hire" his wife and she stays home and they get an instant tax cut.
DeleteNo company pays 35% tax rate, not one. The actual effective tax rate is 12.6%
http://money.cnn.com/2013/07/01/news/economy/corporate-tax-rate/index.html
Even when you add foreign taxes, state taxes, and local taxes the actual effective rate is only 16.9% Corporate taxes only total 2.6% of our GDP.
You are exactly right about hiring ones wife or paying oneself a higher salary. I cover that in my book. Any such loophole that allows manipulation has to be closed. In chapter four, "The Details", I explain that payroll would only be included up to a salary cap limit. The government can set the limit where it wants, but once set, only payrolls within that limit are counted.
DeleteSo if congress sets the limit at $40,000, only the first $40,000 of a employees compensation would be counted in the payroll total that would be compared year by year to see if it is growing. For an owner to increase his salary beyond that would have no effect on his tax rates. He has to actually HIRE more American workers, year by year, to get a lower tax rate.
TAO,
ReplyDeleteI find your term Wealth Extraction both intriguing and succinct in capturing the essence of income inequality trends these past 30 years. The challenge is always in the details, and there are many.
Perhaps we can start with the heresy known as "Trickle Down Economics." Debunked and discredited decades ago; nevertheless, it is a polemic crafted by self-serving plutocrats and one that refuses to be flushed down the toilet of history.
Things we can do as a nation:
Remove all provisions of the corporate welfare system in our tax code - starting with the repatriation of an estimated $2 trillion in corporate assets and $20 trillion of personal wealth that has been deposited offshore in tax-sheltered accounts;
Readjust marginal tax rates to correct imbalances created decades ago;
Reintroduce a form of "jobs insourcing bill" mentioned by Hamilton Bard (above) and proposed by President Obama (blocked in the Senate as noted);
Create a comprehensive infrastructure initiative to create jobs and repair our crumbling roads, bridges, utility systems, and electrical grid;
Initiate a form of Green Energy Marshall Plan to move the country into a non-petroleum future;
Invest more resources on education and job training;
Just for starters ...
It may take 30 years to undo the damage of Trickle Down and restore the middle class to former glory. Regrettably, entrenched ideas do not go away easily, and there is currently no political will to fix the inequality problem.
Oh, yes, it will take AT LEAST 30 years to undo the damage done to our economy by supply side economics/trickle down economics.
DeleteWhen corporate after tax profits are at their highest levels ever (as a percentage of GDP) and the growth of corporate taxes, as a percentage, is greater than the percentage increase annually in our GDP then THAT IS WEALTH EXTRACTION.
Someone elses piece of the pie is getting smaller so that someone else gets a bigger piece.
That is not wealth creation but wealth extraction.
I think the first thing we have to stop and think about is what makes up our economy...what companies. Most of our economic policies and tax policies are written by and for major corporations. Until we begin to think global companies and domestic companies then we should not implement anything.
The Germans and most of the Scandinavian countries do this already. The Germans have SME's and it is a special class of companies that are domestic companies.
When the Germans institute an infrastructure or an industrial program the benefits go to the SME's not their global companies. Thus the tax dollars are 100% spent in Germany. If we did it over half the money would end up going to suppliers overseas..and thus, like the stimulus program which for every one job created in US ended up creating 1.4 jobs overseas.
Yep, we got a lot of work to undo before we can move ahead with anything logical...
A new report issued today (September 10, 2013), Pay Gap Between 1 Percent And Everybody Else Reaches Record:
Delete"The top 1 percent of U.S. earners collected 19.3 percent of household income in 2012, their largest share in Internal Revenue Service figures going back a century.
U.S. income inequality has been growing for almost three decades. But until last year, the top 1 percent's share of pre-tax income had not yet surpassed the 18.7 percent it reached in 1927, according to an analysis of IRS figures dating to 1913 by economists at the University of California, Berkeley, the Paris School of Economics and Oxford University ...
Last year, the incomes of the top 1 percent rose 19.6 percent compared with a 1 percent increase for the remaining 99 percent."