Extremes

Back in the 1980s President Reagan signed an income tax treaty with China in Beijing so as to prove his trip a success.  The treaty was a mess:  Treasury negotiators had orders to produce a treaty for him to sign, and they did — with huge giveaways to corporations that artificially routed transactions through China.  See http://ia600409.us.archive.org/16/items/preparedstatemen1185ogle/preparedstatemen1185ogle.pdf.

But signing does not a treaty make.  The Senate must approve it.  The most liberal Senator, Howard Metzenbaum of Ohio, put a hold on the treaty for allowing giveaways to multinational corporations;  the most conservative Senator, Jesse Helms of North Carolina, put a hold on it for being too lenient with Red China.  Those holds stopped the treaty in its tracks.  Treasury went back, renegotiated, and eliminated the loopholes.  Eventually, the repaired treaty came back to the Senate and sailed through.

Now the most liberal and the most conservative members of the U.S. House of Representatives join forces against the status quo.
Barney Frank and Ron Paul propose legalizing marijuana. http://ca.news.yahoo.com/lawmakers-introduce-bill-legalize-marijuana-225335489.html.  Time will tell how this turns out.

 

Advertisements

Foreign aid — to corporations

The American public views foreign aid as the kind of spending the Government should cut.  I’ll venture that few understand the aid that the Tax Code supplies for the foreign operations of U.S. companies.  This aid is exemplified by General Electric’s manipulation of the Code to use foreign operations to reduce its U.S. tax bill. It is explained in great detail in Edward D. Kleinbard’s “Stateless Income,” downloadable at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1791769.

Here’s the antipathy to foreign aid, from http://www.economist.com/blogs/democracyinamerica/2010/04/economistyougov_polling:

Corporate taxes aren’t so high

Folks like to point out that the USA has an unusually high corporate tax rate (35 percent).  But they don’t mention:

(1)  Some say our corporate taxes paid as a percentage of GDP are about average.  See http://www.oecd.org/dataoecd/48/27/41498733.pdf (Table B); that’s thanks to loopholes — or call them special rules.  Bruce Bartlett says ours are the lowest among developed countries.  http://economix.blogs.nytimes.com/2011/05/31/are-taxes-in-the-u-s-high-or-low/

(2) We don’t have a VAT.  All other developed countries do.

Keep the Liquor Monopoly

North Carolina Governor Bev Perdue has come out against selling the State liquor monopoly.  Good for her.  Selling income-producing assets to plug revenue holes looks shortsighted.  What’s next, selling Mount Mitchell State Park, http://www.ncparks.gov/Visit/parks/momi/main.php?  Jockey’s Ridge, http://www.jockeysridgestatepark.com/?  Hanging Rock, http://www.ncparks.gov/Visit/parks/haro/main.php?

Yes, we need to clean up the mess in the ABC system, but the free enterprise theoreticians who want private choice to rule supreme always and everywhere shouldn’t cause us to confuse the baby with the contents of the bathtub, be they water or gin.  The profit motive is a powerful force, and we the people have the power and the duty to channel it.  (That’s my opinion.) Continue reading Keep the Liquor Monopoly

A harsh view of our tax system

Lee Sheppard, one of America’s top tax journalists, writes:

Congress is completely corrupt, much as it was in the late 19th century, except that we have no Theodore Roosevelt to fight the corruption. The recent Supreme Court decision in Citizens United cements the obvious corporate control of the political process. It is ironic for the president to complain about it, when he, like his opponents, has been bought and paid for by the banks.

The corruption is not just financial but philosophical. The entire ruling class, regardless of party affiliation, has been persuaded to see the world through the eyes of the investor class. The shorthand for this is “free markets,” but markets are never really free, and investors prefer to have them rigged in their favor. And as the meltdown has shown, it is not true that what benefits the investor class benefits everyone else.

The investor class dislikes taxation of investment income or gains, inflation, regulation, and renegotiation of failed debts. The investor class likes deregulation, captive central bankers, and the unfettered flow of capital across national borders.

We are not talking about low taxes. We are talking about no taxation whatsoever, guaranteed by bilateral treaties and foolish practices like respect for paper corporations that allow income to be shifted wholesale to tax havens.

Excerpted from http://www.taxanalysts.com/www/40thpub.nsf/Web/06A5E6CBB0D33888852577FC00765F59?OpenDocument

++++++++++++++++++++++++++++++

That may not be a mainstream view.  But here are some thoughts in reaction:

G.K. Chesterton said when people stop believing in God, the problem is not that we believe in nothing, it’s that we believe in anything.  Now we believe in something like free markets:  I might say instead the profit motive, because (despite what anyone says) we do regulate markets some, but many of us believe in the invisible hand (and want to harness it via incentives, public and corporate, or disincentives, like excise taxes).

As for treaties, some folks defend loopholes against overrides as if some question of national honor were involved — as if all Americans had a duty to sacrifice to show respect for and deserve respect from other countries.  Or something.  See N.Y. State Bar Ass’n Tax Section, “Comments on the Proposed Denial of Treaty Benefits for Certain Related-Party Deductible Payments” 10-11 (May 22, 2010),available at http://www.nysba.org/AM/Template.cfm?Section=Home&CONTENTID=38538&TEMPLATE=/CM/ContentDisplay.cfm.  That might be true if the loophole were bargained for or anticipated, but those aren’t the ones Congress overrides.

IRS verbiage

OK, this is nitpicking, but http://www.irs.gov/pub/irs-pdf/f1023.pdf has this:

User fee increases are effective for all applications postmarked after January 3, 2010.

1. $400 for organizations whose gross receipts do not exceed $10,000 or less annually over a 4-year period.

================

They could have said

$400 for organizations whose gross receipts do not exceed $10,000 annually over a 4-year period.

or $400 for organizations whose gross receipts are $10,000 or less annually over a 4-year period.

A virtue of bureaucracy is (or was) to have enough eyes look at drafts to prevent this kind of redundancy.  My faith is the Service is still great enough that I think I may be missing something.