Peter G (sinetimore) wrote,
Peter G

The Debt Ceiling Debate -- Guess What's In There?

riiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiing!  Okay, class.  Eyes up front.  Today's lesson:  corporate tax law.  Those of you pissed about Congress and the debt ceiling talks, put on a diaper, because you're about to shit yourselves.

First, let me explain to you about tax repatriations.  US tax law says that companies that make profits on overseas sales do not have to pay taxes on it as long as those profits stay overseas.  It's only if the funds get dumped into a US bank account that they have to pay taxes, generally 35-40%.

In 2004, when the economy was still sputtering from the Tech Bubble Burst and all the stupidity dating back several administrations was coming to bear, corporations and their lobbyists explained that, if they could bring their profits in to the US, the money they saved in taxes would enable them to expand business and prop up the US economy.  Congress and then-President Shrub ginned up a tax holiday, reducing the tax repatriation rate to 5%, and passed it.

What happened to the money?  I don't want to shock the hell out of you, but it went to executive bonuses or was just eaten by the companies.  In fact, many of the companies that lobbied for it had already committed to layoffs and went ahead with them anyway.

The holiday was supposed to be a one-time thing.  But companies have continued to keep their profits overseas, using little tricks like transfer pricing (shifting profits to overseas subsidiaries -- Google has saved $3.1 bil in taxes over the past three years doing this), waiting for another tax holiday to bring it home.

That day may be coming with the Debt Ceiling Debate.

In December of 2010, lobbyists started meeting with President Barack Obama to talk about how, if companies can bring their profits in from overseas, they'll be flush with cash and can help prop up the sagging economy.  Now, people on Capitol Hill are talking about another tax holiday and making it a rider for whatever debt ceiling bill goes through.  North Carolina's Kay Hagan, according to one of her spokespeople, "Senator Hagan is looking closely at any creative, short-term measures that can get bipartisan support and put people back to work. One such potential initiative is a well-crafted and temporary change to the tax code that encourages American companies to bring money home and put it towards capital, investment, and–most importantly–American jobs."

To put this in perspective for you, GE received a $140 bil bailout from the government.  In 2010, they made a profit of $14 bil.  They not only pay no taxes on it, but if the rider goes through, they will receive a $3.2 bil tax credit from the government.
Pay attention to those debt ceiling negotiations.  Remember, it's always the citizens and not the lawmakers who pay.
Tags: did not do the research, haven't we suffered enough, history, hypocrisy, important life lessons, infernal gall, my little pony friendship is magic, news, politics, portents of doom, school of life is in session, stupidity, wtf
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