Results 1 to 3 of 3

Thread: Profits before patriotism

  1. #1

    Profits before patriotism

    How the Homeland Security bill rewarded corporate tax dodgers.

    - - - - - - - - - - - -
    By Arianna Huffington

    Dec. 3, 2002 | As the war on terror shows troubling signs of becoming a war of error, the Bush administration is waging a far more successful war on behalf of its corporate backers. The latest victory comes courtesy of Congress' 11th hour reversal of a provision in the Homeland Security Bill banning government contracts for companies that move offshore to avoid paying U.S. taxes.

    This vote, shamelessly draped in the American flag, is so hypocritical, so despicable, and such an unmitigated "screw you" to every American taxpayer that it has sent me scrambling in search of a barricade to storm.

    The sleazy backroom maneuvering that yielded this year-end dividend for expat corporations offers a perfect -- and perfectly nauseating -- case study in how Washington works. The same leaders who never miss a chance to be seen tearfully singing "God Bless America" with their hands over their disloyal hearts have allowed profits to trump patriotism, even in a time of war.

    Earlier this year, with the stink of Enron, Global Crossing and WorldCom filling the air, the House and Senate, after sensing -- and exhaustively polling -- the public mood, voted overwhelmingly to keep corporate expatriates from milking and bilking the government at the same time. It was a political no-brainer. A red, white and blue slam-dunk. After all, the sooner the issue was stamped "taken care of," the sooner those bothersome questions about Dick Cheney's serial use of offshore shelters while running Halliburton would fade away.

    And with the dogs of war in full cry, no politicians in their right mind dared come out in favor of allowing tax dodgers to stick their hands in Uncle Sam's pockets. Out on the campaign trail, even the most corporate-friendly campaigners made it clear that they stood foursquare against such unpatriotic behavior.

    "We ought to look at people who are trying to avoid U.S. taxes as a problem," roared President Bush. "I think American companies ought to pay taxes and be good citizens." Trent Lott was equally exercised. "It agitates me that companies will be doing that," he fumed. Cue "God Bless America."

    Then Election Day came and went, and lots and lots of big corporate checks were cashed. It was payback time. And a bipartisan who's who of power lobbyists -- including former Senate Majority Leader Bob Dole, former House Ways and Means chairman Bill Archer, former House Appropriations chair Bob Livingston, and former Senate Intelligence chairman Dennis DeConcini -- made sure that the expat companies' government gravy train was kept running, "Mussolini-style," right on schedule.

    With the public's attention diverted elsewhere -- namely Iraq, and J.Lo and Ben's engagement -- the tax haven crowd found a much more receptive audience in Washington. Operating behind closed doors, and with next to no public debate, the lame duck Congress made an abrupt U-turn and sliced-and-diced the no-contracts-for-tax-cheats rule. And without blinking an eye, the president happily signed the bill into law.

    That barely muffled cheer you might have heard came from the Caribbean-based corporate offices of companies such as scandal-ridden Tyco, Arthur Andersen progeny Accenture, and Ingersoll-Rand, a corporate chicken that, in a show of national mourning and solidarity, flew the coop a mere three months after the Sept. 11th attacks. All have avoided paying tens of millions in taxes by reincorporating offshore while pocketing tens of millions in federal contracts. And now, thanks to their good friends in Congress, they'll continue to do so. Not only do they not have to help pay for homeland security, but they're helping themselves to the spoils of the Homeland Security Act.

    Time and again since 9/11, the president has stressed that patriotism entails more than waving the flag or reciting the Pledge of Allegiance. "Patriotism," he said this summer, "is proven in our concern for others -- a willingness to sacrifice for people we may never have met." I guess the tax exiles and their heavy-hitting lobbyists didn't get the "sacrifice" memo.

    The IRS estimates that corporate émigrés are depriving the U.S. Treasury of around $70 billion a year. Twenty years ago, one out of every six federal tax dollars was generated by a corporation. That has now fallen to about one out of every 10. Meanwhile, the rest of us are being asked to shovel our dollars into the crater left by Bush's tax policies. Maybe that is what the president had in mind when he talked about sacrificing "for people we may never have met": digging a little deeper so corporate execs basking in the sun-dappled glow of tax-free profits won't have to.

    It's bad enough that companies that enjoy all the benefits and protections of operating under the American system are allowed to avoid paying their fair share -- especially when we are told, again and again, that we are at war. But allowing those same companies to suckle at the taxpayer teat -- in the name of keeping our homeland more secure, no less! -- is nothing less than scandalous.

    Our leaders should be ashamed -- and make overturning this dreadful decision the first order of business when the 108th Congress convenes in January. But I won't be shocked if they don't.

  2. #2
    Moderator kate's Avatar
    Join Date
    Jan 2002
    bellevue, wa, usa
    Thanks, JLB. I remember when Arianna Huffington was a Republican, married to that rich guy who tried to buy himself a senate seat in California and lost to Diane Feinstein. How about it, all you Bushie-lovers? Any comment?

  3. #3
    Senior Member mk99's Avatar
    Join Date
    Jul 2001
    toronto, canada
    Kate, fancy meeting you here again. -)

    Before anyone writes me off as a left-wing liberal I would like to state for the record that I am an economist by education. I am a capitalist through and through and believe that "greed is good". I also believe it is the role of government to channel some of that greed into things that benefit everyone.

    I disagree with much of Bush's policies on many different levels. As an economist I think that his HUGE tax cuts in particular are very very bad fiscal policy. Within a few years, 50% of Bush's MASSIVE tax cuts will go to the wealthiest 1% of society. That's right folks, if the Estate Taxes are eliminated, the richest of the rich will inherit more money tax free. This does NOTHING to help stimulate the economy and throws the government into severe financial defecits.

    don't take my word for it. Here is a recent BusinessWeek article:

    The Tax-Cut Recipe for Ruin
    By making 2001's rate reductions permanent and putting Washington on a starvation diet, Bush will burden his successors with a gigantic mess.

    President Bush's top economic policy priority next year will be to make the 2001 tax cuts permanent. And with congressional Democrats both demoralized and outvoted, there's a good chance it will happen -- with potentially stunning consequences.

    Such a step would fundamentally change the federal government. With the tax cuts permanent, Washington's red ink will only grow, and so will pressure to reduce basic Social Security and Medicare benefits. Then the tax system itself would have to be revamped. In many ways, making those tax cuts permanent will result in some of the most dramatic changes in government since the Great Society.

    What the move won't do is help the current economy very much. The White House argues that locking those tax cuts in beyond 2010 -- when they're now due to expire -- will provide an immediate boost to growth. That claim is just silly. No credible evidence shows that cutting taxes in 10 years has any impact on economic decisions today. Even Federal Reserve Chairman Alan Greenspan, who has rarely met a tax cut he didn't like, says the growth argument is bogus. "I know there is a presumption that if you make those tax cuts permanent it will add stimulus to the economy," Greenspan told Congress on Nov. 13. "I doubt it."

    SHRUNKEN SERVICES. Making the '01 bill permanent would lock in several key changes in the tax law. The biggest: lowering individual tax rates and repealing the estate tax. The latter alone would cost in excess of $50 billion a year in 2011.

    If the tax cuts are made permanent, by 2020, the U.S. government will have to shrink. It may well be reduced to doing just four things: paying Social Security benefits, providing health care for the elderly and the poor though Medicare and Medicaid, supporting the national defense, and paying interest on the money borrowed to do the first three. That's it.

    There would be literally no money left for education, law enforcement or homeland security, environmental and consumer protection, highways, air-traffic control, or any of the myriad of other things we've come to expect Washington to provide. Indeed, stripping the government to just that handful of functions would still leave the budget in the red.

    FUTURE SHOCK. To understand why, here are a few numbers. Assume that defense costs remain at about 3% of gross domestic product -- which is well below the average for even the past decade. And figure no changes in Social Security, Medicare, and Medicaid -- not even passage of a Medicare drug benefit. In that case, doing just health, Social Security, defense, and paying interest on the debt is expected to cost roughly 19.5% of the nation's total economic output, according to the General Accounting Office. But tax revenues -- after the '01 cuts are locked in -- would bring in just 19% of GDP. Houston, we've got a problem.

    Admittedly, this debate is somewhat theoretical. Nobody really knows how much revenue the tax system will generate in 10 years or 20 years. It may be a percent of GDP higher or lower. But you get the drift.

    The debate is also a little fuzzy since never in the history of the income tax has the levy remained static for as long as a decade. The tax laws will be changed many times between now and 2010, and many times again before 2020. And, in the end, a permanent, growing structural deficit will be unacceptable. First, the bond market will revolt, pushing up interest rates. Then, the politicians will respond, probably by raising taxes. As the late economist Herb Stein once said, "If something cannot go on forever, it will stop."

    Still, raising taxes is never easy in Washington. Once tax cuts are locked into place, hiking them in the absence of a crisis is a very tough sell. Since the crunch won't come until sometime in the next decade, it will be up to Bush's successors to deal with a tax system that increasingly will fail to bring in enough money to satisfy the demands of voters. Make no mistake: By making those tax cuts permanent, Bush will be leaving future Presidents with an especially nasty budget mess.

    Gleckman is a senior correspondent in BusinessWeek's Washington bureau. Follow his views every Tuesday in Washington Watch, only on BusinessWeek Online
    Edited by Douglas Harbrecht

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts