Tuesday, July 29, 2014

Tax or Not to Tax

"The federal government still gets a tenth of its revenue from corporate profits taxation," Paul Krugman, a Nobel-prize winning economist writes. "But it used to get a lot more — a third of revenue came from profits taxes in the early 1950s, a quarter or more well into the 1960s. Part of the  decline since then reflects a fall in the tax rate, but mainly it reflects ever-more-aggressive corporate tax avoidance — avoidance that politicians have done little to prevent."

 One tax-avoidance ploy is called “ inversion.” A legal maneuver that allows companies to claim that its U.S. operations are owned by its foreign subsidiary, not the other way around, and uses this role reversal to shift reported profits out of American jurisdiction to someplace with a lower tax rate. The company does not need to move overseas to do this.  It's all done on paper although  it might sometimes involve opening an office somewhere abroad. Walgreen, a thriving pharmacy business in the U.S., for purely tax reasons, is reportedly about to declare itself Swiss, which "will deprive the U.S. government of several billion dollars in revenue that you, the taxpayer, will have to make up one way or another," Krugman writes.

Why does the government not curtail this tax dodge with legislation??

The claim is that taxing corporate profits hurts investment and job creation. Opponents of more strict tax laws argue instead of closing loopholes the US should reform the whole system by which we tax profits, and maybe stop taxing profits altogether. The goal of a corporation is to maximize shareholder profits and by law this is their number one priority. Governments serve the interests of elites, and they always will. It is all about impoverishing the citizens to enrich the few. Expecting government to be benevolent is like hoping cancer has some health benefits.


Janet Surman said...

And see here: http://www.socialismoryourmoneyback.blogspot.com.tr/2014/07/chiding-corporate-defectors-gains.html

Mike Ballard said...

You've nailed it, AJ.

Anonymous said...

The working class in not impoverished by taxation. Taxation is paid by the capitalist class out of surplus value. Which sections of the capitalist class pay and how much is of no matter to the working class.

ajohnstone said...

You are correct but I think the point is really that the burden of the State expenditure whose upkeep is ultimately the tax upon the rich, an unavoidable cost they bear, is no longer being shared equally among capitalists hence there is a cut in welfare provision and that is indeed impoverishing the workers.

Janet Surman said...

More news here on 'immersion mergers':