published Saturday, August 13th, 2011

Romney’s tax doctrine

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A funny thing happened on the way to the Iowa debate Thursday among Republican presidential aspirants. Mitt Romney, the front-runner, standing on a straw bale platform to engage a group of Iowans in an impromptu afternoon debate, shouted out that, “Corporations are people, my friend.”

We’re glad to hear Romney say it. It confirms what so many for so long have said about Romney — that he’s out of touch with ordinary mainstream Americans. He views the world from a privileged corporate perch, like the one he long occupied as co-founder of Bain Capital, the equity firm where he made his millions buying, chopping up and reselling other companies.

His remark came in an exchange with members of Iowa Citizens for Community Improvement, who asked him to back raising taxes on the wealthy and corporations to help support threatened social security programs. The exchange was reported by New York Times reporter Ashley Parker.

A corporatist view

“We have to make sure that the promises we make in Social Security, Medicare and Medicaid are promises we can keep, and there are various ways of doing that,” he said. “One is, we can raise taxes on people,” which he has pledged not to do.

“Corporations,” the listeners shouted back, according to the report. “Corporations are people, my friend,” he shouted back. “No, they’re not,” the crowd retorted.

“Of course, they are,” chuckled Romney. “Everything corporations earn ultimately goes to people. Where do you think it goes.”

There’s the rub. A portion of corporate earnings do go to executives, employees and stockholders — but hardly in proportional shares. Top executives in big corporations make tens of millions of dollars in total compensation, with stock awards, options awards and bonuses, in addition to salaries. Their wildly disproportional take — the U.S. leads the industrial world in income disparities between executive compensation and workers’ salaries — often squeezes or freezes salaries and benefits for ordinary employees’ salaries and benefits.

Legal entities, not people

The problem with looking at corporations as “people,” however, is a much larger issue. Corporations plainly are not people. They don’t breath or bleed.

They are legal entities with no particular purpose or ideology other than their pursuit of business and profits. They are also above many of the rules that apply to individual Americans. For instance, they often can buy their way out of trouble via huge, confidential settlements payoffs of lawsuits.

Just as many fire Americans and offshore jobs, they can also park their headquarters and their earnings — often billions of dollars — offshore, and avoid paying U.S. corporate income taxes. Studies have repeatedly shown, in fact, that most American corporations and foreign corporations that do business in American avoid paying any federal income taxes.

A study released in 2008 by the federal Government Accountability Office, for example, showed that two out of every three US. corporations paid no federal income taxes from 1998 through 2005. The study covered 1.3 million corporations, large and small, with collective sales of $2.5 trillion.

Phenomenal privilege

The privileges accorded corporations, however, are phenomenal. Sen. Bernie Sanders, I-Vt., released last April a list of 10 large American companies that made billions of dollars in profits, that paid little or no federal taxess, or that received money back from the Treasury in tax credits or bailouts, and that in some cases received billions in bailout money, and hundreds of millions to billions of dollars in tax deductions.

A few examples: ExxonMobil made $19 billion in profits in 2009, paid no federal income taxes, and received a $156 million rebate from the IRS. Bank of America made $4.4 billion, received almost $1 trillion in bailout funds, and got a $1.9 billion tax refund. General Electric made profits of $26 billion in the United States between 2005 and 2010, paid no taxes, and received a $4.1 billion refund from the IRS. Most used retained earnings that were spent partly on lobbyists to secure contracts of favors from Congress and tax loopholes from the IRS.

Free speech, secret funding

With last year’s U.S. Supreme Court 5-4 ruling by the conservative majority in the Citizens United ruling, moreover, corporations have now been given higher First Amendment free-speech than ordinary citizens.

They may now spend all the money they wish to fund independent political activities, and do so anonymously and without limits, to influence political elections. Ordinary citizens are not allowed to do that.

With such vast, untaxed wealth and lobbying influence, this nation is trending fast toward an unaccountable corporate takeover of Washington. Indeed, the nation’s richest one percent of households, engorged by untaxed corporate wealth, now holds the largest share of America’s wealth in 80 years.

Romney and his party, by his own words and views — confusing corporations with people to ward off fair taxes on the former — would fatten that margin by dismantling the social security programs that provide a modest safety net to ordinary Americans whose daily labor is the basis for this nation’s wealth.

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timbo said...

The writers views about corporations might be right in regard to the large entities he mentioned along with many others but he is dead wrong about small to medium size corporations. They make up the bulk of the jobs in this country and only get lip service from fancy editorial writers and politicians. We, small corporations, pay the bulk of taxes in this country.

He is also, as usual, inconsistent with his philosophy. He didn't mind a huge bank bail-out to take care of the rich and large corporations. Harry Austin didn't mind billions to bail out GM. He didn't mind billions more for Chrysler. He doesn't mind the local VW "bailout" which costs small business and the tax payer millions. Where was his anti-corporatist view then?

This world is not being taken over by a political philosophy but it is being taken over by large corporations with no borders, no morality, no philosophy except to exploit the rest of us for profit. The politicians allow this to happen because of campaign contributions and cronyism to the detriment of small and medium size business who get no attention whatsoever.

The way out of unemployment won't be by propping up and subsidizing large corporations. Been there done that. It will be by stimulating small business with tax breaks.

Two things small business need desperately, and is the reason there is no job production; are the following. Small business needs access to capital. The rules instituted after the bank bail out have made it almost impossible to get bank financing. That means that businesses have to finance their own cash flow. That takes retained earnings which could have been used to expand and hire.

The second problem is even though the economy is not good, if and when businesses start to make profit, they have to pay huge taxes the first year. They have to write a huge check which comes out of the recovering cash flow and makes another cash flow crisis. All the government has to do is allow small business to be exempt from paying taxes if you leave your money in your business for equipment, hiring, or cash flow. This would increase expansion and hiring in a skinny minute.

The fact is we, small business, will make it without any help but if the government would just get out of the way, we could lead a hiring bonanza.

Alas, this won't happen because although large corporations only account for 20% of the jobs. They get 100% of the attention, press, and government handouts. Pretty sad isn't it.

Why don't you write about that Harry Austin?

August 13, 2011 at 8:27 a.m.
moon4kat said...

Thank you for a perceptive and timely editorial. Corporations are not people, and should not have the same rights as living, breathing human beings. This nation was founded to be a government of, by, and for the PEOPLE. Corporations are not people, have no soul, and should not have the same free speech rights as real people. Giving them the same rights as people distorts our system of government in favor of a legalistic construct that exists mainly so that those behind it can limit accountability for their actions.

August 13, 2011 at 9:53 a.m.
mountainlaurel said...

TPF commentary: “Corporations plainly are not people. They don’t breathe or bleed,”

Excellent commentary, TFP. It’s truly unsettling to listen to politicians like Romney rant about so called “entitlements “ involving unemployment insurance for workers, food stamps for poverty level families, financial aid for students, and Social Security for seniors etc. as they completely ignore the big entitlements granted to the corporate "people" sector.

Indeed, talk about a privileged class of “people” with plush entitlements:

“They are above many of the rules that apply to individual Americans. For instance, they often can buy their way out of trouble via huge, confidential settlements payoffs of lawsuits.”

“The privileges accorded corporations are phenomenal. Sen. Bernie Sanders, I-Vt., released last April a list of 10 large American companies that made billions of dollars in profits, that paid little or no federal taxes or , or that received money back from the Treasury in tax credits or bailouts, and that in some cases received billions in bailout money, and hundreds of millions to billions of dollars in tax deductions.”

"They may now spend all the money they wish to fund independent political activities, and do so anonymously and without limits, to influence political elections. Ordinary citizens are not allowed to do that."

August 13, 2011 at 12:27 p.m.
timbo said...

you people just don't get it . liberalism is definitely some kind of mental illness .

August 13, 2011 at 4:19 p.m.
fairmon said...

timbo..

Good comments. Few people know how business systems operate and what it takes to be successful in any business large or small. Politicians and citizens confuse large corporations management compensation which is often excessive and business profits. Those same people will buy imports instead of American made. American made products price includes legislatively imposed cost where most imports do not.

August 13, 2011 at 6:09 p.m.
fairmon said...

You want to start a business, risk all your personal savings plus borrow money to do it. That is good, I (the government) will be your partner. I won't invest anything but I will provide the rules regarding what you have to do before building a facility, I will charge you for a license plus construction fees and inspections cost, I will tell you all the requirements you must meet when you build, when you hire, how much you must pay and who you have to hire. I will write all the employment rules and help anyone that wants to file a lawsuit do so at no cost. If you make a profit I will take up to 35% of it for all my federal help, the state and local partners (governments) will need to be compensated as well, that is only fair isn't it? If you are really successful and sale the business I get a nice 20% capital gains take from that profit as well, after all we are partners and I will have to accept the new partner. However if you don't sell it and give me the capital gains so you can pass it on to your survivors as your partner always telling you how to run your business I will get 50% of the value and they can sell part of the business or borrow the money to pay my share. Is it not a good deal to have such partners in America. You can't find a deal like that anywhere else in the world. I can't understand why more people aren't willing to take the risk so they can provide people jobs instead of unemployment which is a tax also paid by those in business.

August 13, 2011 at 6:28 p.m.
GMills said...

I am sure that I employ more people than you do, Timbo. You keep saying "we", insinuating that you are a business owner, when in actuality, you are an employee (with a huge ego).

August 14, 2011 at 12:30 p.m.
EaTn said...

Let's be fair about this matter. When you put Romney in the lineup with Perry, Newt, Sarah, Michele and the other right-wingers, he does standout above the rest.

August 14, 2011 at 12:52 p.m.
timbo said...

GMills...."I am sure that I employ more people than you do" and "you are an employee" and I have an ego? Now, which is it? Either you have more employees than me (Implying I have a small business,which I do and said I did) or I am someone's employee. It can't be both you imbecile.

Anyone that REALLY is a business owner, that didn't inherit daddy's money, could never be a liberal. Owning a business and liberal politics are polar opposites. I am sure that you give all your money to your thousands and thousands of employees like a good little socialist.

Why don't you address what I wrote instead of being arrogant by putting someone down that you know nothing about? What part of anything I said was wrong? That's right you can't address that because you just want to bully someone into shutting up. No chance of that.

I just read over what I wrote in the first post on this subject. Since you are "sure" you have more employees than me, you could be one the large entities I am discussing. Also, you didn't mention one thing I wrote, just insults. That is the only ammunition of a liberal. They can't back up anything with facts.

Why don't you enlighten us with your superior intellect about what you would do to create jobs?

August 15, 2011 at 2:24 p.m.
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