Kerry- Fiscal Conservative - PhillyBlog

peacemover · #1 (**permalink**) 04-08-2004, 10:30 AM

Here is an OP-ED piece from today's NY Times on Kerry's economic policy. I think Kerry has the right idea about trimming the deficit and getting our economy back on track. We need to get out of this $600 billion hole Mr. Bush has put us in with his gratuitous corporate tax cuts. What do you think?

Quote:

John Kerry, Fiscal Conservative

Published: April 8, 2004

http://www.nytimes.com/2004/04/08/op...08THU3.html?th

Yesterday at Georgetown University, Senator John Kerry delivered a forceful speech on the virtues of responsible budgeting. On top of his recent nuanced proposals on corporate taxes, Mr. Kerry's performance suggested he is starting to hit his stride in thinking and talking about the economy.

This presidential campaign is the latest chapter in the surprising metamorphosis of the country's two major parties when it comes to economic policy. The Democrats have become the balanced-budget advocates, appealing to the electorate much in the manner of old-fashioned Main Street Republicans.

The Kerry speech was a call for a return to the Clinton administration's emphasis on cutting the deficit and public debt as a means of instilling confidence in the American economy, both at home and abroad. Mr. Kerry rightly warned that the Bush administration's deficits threaten to become a "fiscal cancer that will erode any recovery and threaten the prospect of lasting prosperity in our nation."

It's no accident Mr. Kerry would evoke the Clinton years, as he has surrounded himself with such Clinton alumni as Roger Altman and Gene Sperling as his principal economic advisers. Such choices, so soothing to Wall Street, will disappoint the same liberal interests who were shocked in the early days of the Clinton administration when the president famously opted to please the bond markets by attacking the deficit instead of sticking to all of his campaign promises.

Mr. Kerry yesterday signaled he would make the same choice when he said that any new spending would have to be offset with other spending cuts or new revenue. But the senator from Massachusetts will still need to fine-tune his math in the coming months. For all his promises about making the numbers balance, it's hard to imagine how he could combat the deficit, expand health care benefits, increase spending on education and grant middle-class Americans more tax breaks simply by rescinding the Bush tax cuts for those earning more than $200,000.

Mr. Kerry also needs to change the way he engages the politically charged jobs issue. Some election-year silliness is to be expected, like the campaign's pledge to create 10 million new jobs — broken down by state, in a manner that might make even an old Soviet central planner blush.

More worrisome are the protectionist outbursts against the overseas outsourcing of jobs. Neither Mr. Kerry nor his advisers can really believe that outsourcing, as opposed to the cyclical economic downturn and the impressive gains in productivity growth, is primarily responsible for the sluggish recovery in the job market. As Mr. Kerry is fond of saying, the numbers don't lie.

But clearly some of Mr. Kerry's political advisers, on occasion sounding like Pat Buchanan or Ross Perot, believe that making people feel victimized is a winning proposition. High productivity is not as creepy a villain for audiences to cheer against as treasonous C.E.O.'s and scheming foreigners. The danger of such cheap protectionist rhetoric, of course, is that it can ultimately force bad policy choices on the nominee. The Bush administration's disastrous economic record presents such a target-rich environment, Democrats shouldn't be pursuing red herrings.

The most impressive aspect of the speech at Georgetown was that Mr. Kerry was presenting himself to his audience not so much as a primary-season hopeful but as someone who is preparing himself to possibly govern. That, after all, is what this seemingly endless campaign exercise is supposed to be about.

eldondre · #2 (**permalink**) 04-08-2004, 11:50 AM

I want to return to a split government. Dem in executive, R in congress. it forces both sides to have a give and take relationship. right now it seems its all giving. while this article doesn't say much, I think kerry is on the right track. or at elast a better track. however, his plan to reduce loopholes and cut corp tax rates is, while well intended, limp. reducing rates to 33.25% you need a bigger cut thatn that to make a difference. we have some of the highest corp tax rates in the world. they need to be lowered mroe substantially. it's politically unpopular but rather necessary. and besides, corp's aren't people. rich guys still get paychecks just like the rest of us (only a lot bigger). and corp's also pay lots of middle class. people. the problem is you pay too much of a premium to claim your income here. even belgium has a lower rate. I always thought Bush should have just expanded the 10% bracket enough to account for the whole tax cut. that way it helps everyone, rich and poor alike.

chrissayer · #3 (**permalink**) 04-08-2004, 12:05 PM

Eldondre sez:

Quote:

we have some of the highest corp tax rates in the world. they need to be lowered mroe substantially

E - the rates may be high but clearly few, if any of our "wonderful" American companies are paying them. I read recently that corporate taxes now make up the smallest portion of the federal revenues since 1932.

From the LA Times:

Quote:

US companies pay little or no tax
By Warren Vieth in Washington
April 9, 2004

More than half of US corporations paid no federal income taxes during the boom years of the late 1990s and those that did were able to shelter much of their income, according to congressional accountants.

The report by the General Accounting Office (GAO) raises questions about whether the corporate income tax burden is too light and distributed unequally.

It could undermine arguments that US companies are overtaxed and provide ammunition to politicians and activists who claim companies are using loopholes to avoid paying their fair share.

"This describes a problem in the corporate tax system in which a good many of these companies are avoiding any tax obligation at all," said Senator Byron Dorgan, a Democrat from North Dakota and a former state tax commissioner who requested the GAO study. "We've got a bad tax law that tells ordinary folks, 'You pay up,' and allows some of the largest enterprises to avoid paying."

The share of tax receipts paid by corporations has been declining for decades, US government figures show.

But it had been falling at an even faster rate in many other countries, said Gary Hufbauer, senior fellow at the Institute for International Economics, and any attempt to raise corporate taxes or close loopholes in this country ran the risk of making US companies less competitive.

"When you get a report like this people think, gee, they're getting away with murder," he said. "But most of the murder they're getting away with was deliberately designed by legislatures in response to competitive concerns. This is the result."

The GAO report showed that 61 per cent of US corporations paid no federal income taxes from 1996 to the end of 2000, a period of rapid economic growth and rising corporate profits. The study was based on an IRS sampling of more than 2 million tax returns, most of them from smaller companies.

An estimated 94 per cent of US corporations reported tax liabilities amounting to less than 5 per cent of their total income in 2000. The corporate income tax rate is ostensibly 35 per cent but companies are able to reduce their effective burden by claiming various deductions and credits, in some cases for losses incurred in other years.

US companies paid an average of $11.88 in corporate taxes for every $1000 in gross receipts, the study said.

Small corporations were more likely to avoid taxation than large ones, it showed. About 38 per cent of big companies (those with more than $250 million in assets or $50 million in revenues) paid no taxes during the five-year period.

Foreign-owned companies fared better in some respects than their US competitors. The report found that 71 per cent of foreign-controlled corporations paid no taxes on their US income, while 89 per cent had liabilities of less than 5 per cent of their income.

The GAO didn't attempt to determine why so many companies were able to avoid paying taxes. It said possible explanations included legitimate deductions for current-year operating losses, losses carried forward from previous years, and sufficient credits to offset any tax liabilities.

In addition, it said improper pricing of transactions between US and foreign operations could contribute to tax avoidance.

The findings feed into a broader political debate over taxes. President George Bush and many Republicans have been working to reduce corporate taxes, arguing that tax cuts would make US companies more competitive globally and better able to create jobs at home.

Democratic challenger John Kerry cited the GAO findings on Tuesday during a rally in Cincinnati, expressing outrage that many companies were paying no taxes despite productivity-driven profit gains.

"The burden of the tax share is being shifted to the average worker in this country," Senator Kerry said, eliciting a chorus of boos from his audience.

"It's being shifted to the worker at the expense of fairness in America."

Yet even Mr Kerry has advocated an across-the-board reduction in corporate taxes, although he has called for closing loopholes that may encourage US companies to move jobs overseas.

The percentage of federal tax collections paid by corporations has tumbled from a high of 39.8 per cent in 1943 to a low of 7.4 per cent last year. It ranged from 10 per cent to 11 per cent in 1996-2000, the period studied by the GAO. But, since World War II, the share paid by individual income tax filers has remained relatively stable, bouncing between 40 and 50 per cent.

Most of the difference is explained by higher payroll taxes for social security and Medicare.

"The accounting firms have been very aggressive at marketing shelters to the companies," said Robert McIntyre, director of Citizens for Tax Justice. "I am very hopeful it will be a big issue in the presidential campaign."

The Los Angeles Times

[/quote]

eldondre · #4 (**permalink**) 04-08-2004, 12:16 PM

yeah chris, I actually read that. I still think corp rates shoudl be reduced. I'd like to see them dropped significantly, to say. 20% and close these loopholes. if the claims are true, then there should be little revenue impact and perhaps a gain. th ebiggest problem with the current structure is its hard to see who is getting what and benefitting from what. Technically, I don't see a problem with no corp tax at all. corporation cannto enjoy money. they are merely legal vehicles that produce income. that income has to ( or at least should have to be) dsitributed in order to be enjoyed. perhaps things like corp jets should not be deductible and most especially, company paid quartersfor heead honchos (though apparently the public sector does this too..just ask the heads of the seaport museum and PCC). anyways, in short, less rules and loopholes, lower rates. as I said, kerry's on the right track, but you need a bigger deduction in rates if you are going to close al those loopholes. our tax rates are too high, hence deductions and other things. i poseted a list of corp tax rates elsewhwere on the blog.

chrissayer · #5 (**permalink**) 04-08-2004, 12:16 PM

Chris Sayer sez:

from the article in the LA times, as well as information on both Lou Dobbs and Lehrer reports:

Quote:

The percentage of federal tax collections paid by corporations has tumbled from a high of 39.8 per cent in 1943 to a low of 7.4 per cent last year. It ranged from 10 per cent to 11 per cent in 1996-2000, the period studied by the GAO. But, since World War II, the share paid by individual income tax filers has remained relatively stable, bouncing between 40 and 50 per cent.

Most of the difference is explained by higher payroll taxes for social security and Medicare.

So, corporations are getting out of taxes while low and middle income people are being forced to pick up the shortfall, through the use of payroll taxes. And since the payroll tax cuts off at somewhere around $80,000 (Bill Gates pays the same in payroll taxes as does a middle-income person), these taxes are considerably more regressive than income taxes.

eldondre · #6 (**permalink**) 04-08-2004, 12:32 PM

Quote:

Originally Posted by chrissayer

Chris Sayer sez:

from the article in the LA times, as well as information on both Lou Dobbs and Lehrer reports:

Quote:

The percentage of federal tax collections paid by corporations has tumbled from a high of 39.8 per cent in 1943 to a low of 7.4 per cent last year. It ranged from 10 per cent to 11 per cent in 1996-2000, the period studied by the GAO. But, since World War II, the share paid by individual income tax filers has remained relatively stable, bouncing between 40 and 50 per cent.

Most of the difference is explained by higher payroll taxes for social security and Medicare.

So, corporations are getting out of taxes while low and middle income people are being forced to pick up the shortfall, through the use of payroll taxes. And since the payroll tax cuts off at somewhere around $80,000 (Bill Gates pays the same in payroll taxes as does a middle-income person), these taxes are considerably more regressive than income taxes.

are you saying that there shoudl be no cut in the corp rates? I'm not sure I follow you. as you know, if it were up to me, there' be no payroll tax and I wouldn;t have to pay into a bankrupt system and hope I can save enough on my own for retirement. If anybody is paying more than they did percentagewise than in 1943 then there is a serious problem. you have to look at postwar years. at any rate, I'm still nto sure I follow. you have to be careful because you don't pay any taxes if you don;t have any income. if corp's were to pay the actual tax burden, there would be far less jobs. so, you have to find a happy medium. in the meantime, we should stop blowing all our borrowed money on bombs and failed programs. and I have to point out that moving the tax burden from the rich to the poor and middle class was not invested by reagan nor even perfected by him (rather greenspan who helped design the system not reagan) but FDR. under whose watch the amount of income tax paid by the wealthiest two percent plummeted. this was made up by extending the income tax from the top two percent to the top 66% and by introducing excise taxes to such luxury items as beer and tires.
http://www.taxfoundation.org/taxfreedomday.html

Quote:

"Despite the dramatically lower tax burden in 2004, Americans will still spend more on taxes than they spend on food, clothing and medical care combined," said Hodge.

eldondre · #7 (**permalink**) 04-08-2004, 01:46 PM

Quote:

John Kerry's Acorn

By STEPHEN MOORE
April 8, 2004; Page A16

Even a blind squirrel finds an acorn now and then, as the saying goes. And so it is with one surprisingly productive idea in John Kerry's otherwise economically schizophrenic new jobs proposal. Best of all, there is a way to improve on the idea now, without even waiting for November.

Sen. Kerry would reduce the tax on profits that our companies earn abroad, if they reinvest the capital in job-producing investments back here in the U.S. It's a sensible idea, since an estimated $500 billion of capital owned by U.S. multinational firms -- ranging from Sun Microsystems to Microsoft, to GE -- remains trapped overseas. But these firms are not "Benedict Arnolds," as Sen. Kerry has alleged. They are simply responding to unpatriotic features of the federal tax code that penalize reinvestment in the U.S., at the expense of our own workers.

Under the current IRS law, American multinational firms must pay the business taxes in the foreign country in which they earned the money; and then they are whacked with a second, add-on tax of up to 35% if they reinvest the capital here. We are virtually the only nation in the world that penalizes repatriated capital in this way, with what amounts to a 35% tariff on capital re-imported into the U.S. That gives firms an incentive to build plants, research facilities and technology centers anywhere but here. Jobs are created for other nationalities at the expense of Americans. In this regard Mr. Kerry is right: "We now have a tax code that ships jobs overseas."

Mr. Kerry would chop that tax rate down to a less punitive 10%. He argues correctly that more capital investment is the linchpin to generating good paying jobs in the U.S. And he is also right that reducing tax rates acts as a magnet for international capital flows. After the Reagan tax cuts in the 1980s -- when income-tax rates fell to a low of 28%, from a high of 70% -- that giant sucking sound Americans heard was the global capital investment flowing over our borders into the 50 states. The result: Over the next 18 years, the U.S. was a net importer of roughly $1.5 trillion of investment capital.

The U.S. in the 1980s and '90s was a job-creation machine, with more new jobs created here (36 million) than all the rest of the industrialized world combined. I recently witnessed this job-creation process near Jackson, Miss., where I passed by one of the largest factories -- at least five city blocks long -- I have ever seen. It is a Nissan facility, and it employs more than 5,000 Americans. These are almost all high-paying manufacturing jobs, insourced from Japan.

The good news is that we don't need an election to make the U.S. more hospitable to foreign capital investment and to get laid-off workers back in jobs. Legislation before the Senate right now would cut the tax rate on capital imported back into the U.S. from 35% to 5.25% (way below the 10% rate proposed by Mr. Kerry).

Backed by John Ensign and Gordon Smith, it's a provision of the Jobs Act now under consideration in the Senate. Independent analyses by PricewaterhouseCoopers and Bank of America have predicted that this measure -- known as the repatriation provision -- would produce a windfall ranging from $135 billion to $300 billion of new capital brought to the U.S. To put these numbers in perspective, U.S. taxpayers just sent $85 billion to Iraq to rebuild that nation. The repatriation provision can bring in two to four times that amount for the "rebuilding" of industry and factories here at home. The provision might even gain tax receipts for Uncle Sam, as firms scared off by the old 35% rate, line up to pay the one-time, 5.25% border tax. Hence, we make money on something that we want firms to do anyway: invest their profits in America.

Economists have estimated that creating one modern manufacturing job in the U.S. costs on average about $50,000 of business investment in plant, technology, computers and equipment. By that measure, the repatriation provision could eventually create more than two million new jobs for factory and technology workers. That is the equivalent of 400 new factories the size of the Nissan plant in Jackson. For many economically depressed communities, the provision could be a real financial salvation.

There is an old adage that liberals love jobs but hate employers. John Kerry has devoted his entire Senate career to voting against every tax reduction measure that would have made the U.S. a friendlier place for capital investment and new jobs. Mr. Kerry now complains (rightly) that our tax code discriminates against firms that want to do the right thing and create American jobs. Well, that economic impediment can be lifted in a matter of weeks, if Sen. Kerry and his colleagues will simply support the repatriation provision. The only question is whether Mr. Kerry and his colleagues will put jobs over politics and do the right thing, right now.

Mr. Moore is president of the Club for Growth and a senior fellow at the Cato Institute.

http://online.wsj.com/article/0,,SB1...5Fcommentaries

rlc · #8 (**permalink**) 04-08-2004, 02:42 PM

Quote:

The good news is that we don't need an election to make the U.S. more hospitable to foreign capital investment and to get laid-off workers back in jobs. Legislation before the Senate right now would cut the tax rate on capital imported back into the U.S. from 35% to 5.25% (way below the 10% rate proposed by Mr. Kerry).

Backed by John Ensign and Gordon Smith, it's a provision of the Jobs Act now under consideration in the Senate. Independent analyses by PricewaterhouseCoopers and Bank of America have predicted that this measure -- known as the repatriation provision -- would produce a windfall ranging from $135 billion to $300 billion of new capital brought to the U.S. To put these numbers in perspective, U.S. taxpayers just sent $85 billion to Iraq to rebuild that nation. The repatriation provision can bring in two to four times that amount for the "rebuilding" of industry and factories here at home. The provision might even gain tax receipts for Uncle Sam, as firms scared off by the old 35% rate, line up to pay the one-time, 5.25% border tax. Hence, we make money on something that we want firms to do anyway: invest their profits in America.

Thanks for posting this El. I finally found one thing that I agree with Kerry on and it seems as if we will not need to elect him to get that accomplished as the above snipet suggests. Ensign and Smith are both Republican Senators by the way and their proposal calls for a 5.25% tax as opposed to Kerry's 10% tax.

chrissayer · #9 (**permalink**) 04-08-2004, 04:18 PM

eldondre sez:

Quote:

If anybody is paying more than they did percentagewise than in 1943 then there is a serious problem.

I believe you missed the point. No one's talking about tax rates. Instead, the study shows (and Kerry has pointed out) that corporate taxes made up 39+% of the amount of money brought into the treasury in 1943. By the "go-go" years of the 1990s, that portion had dropped to around 11%. Last year, it had dropped even more to 7.4%. Since the personal income tax contribution has remained constant over that period (between 40-50%), the difference has been made up by increasing the payroll taxes - hitting middle income and poor people hardest.

You decry the corporate tax rate at 35% and say that you hope Kerry will reduce it. The GAO study shows that 94% of American corporations that had tax liabilities paid less than 5% their total income for 2000. And you want to push it lower.

If you could close all the loopholes and get the actual contribution up, then I'd be with you. But, you'll never sell that to American corporations - who want even lower rates and wide loopholes.

So let's hope that Kerry actually begins to get corporations to pay their fair share.

eldondre · #10 (**permalink**) 04-08-2004, 04:31 PM

Quote:

Originally Posted by chrissayer

eldondre sez:

Quote:

If anybody is paying more than they did percentagewise than in 1943 then there is a serious problem.

I believe you missed the point. No one's talking about tax rates. Instead, the study shows (and Kerry has pointed out) that corporate taxes made up 39+% of the amount of money brought into the treasury in 1943. By the "go-go" years of the 1990s, that portion had dropped to around 11%. Last year, it had dropped even more to 7.4%. Since the personal income tax contribution has remained constant over that period (between 40-50%), the difference has been made up by increasing the payroll taxes - hitting middle income and poor people hardest.

You decry the corporate tax rate at 35% and say that you hope Kerry will reduce it. The GAO study shows that 94% of American corporations that had tax liabilities paid less than 5% their total income for 2000. And you want to push it lower.

If you could close all the loopholes and get the actual contribution up, then I'd be with you. But, you'll never sell that to American corporations - who want even lower rates and wide loopholes.

So let's hope that Kerry actually begins to get corporations to pay their fair share.

i think you are right, that remark is off target. hwoever, as evidenced from the rest of my psot, I did not miss the point. if you will note, I do recomend closign loopholes. I don't care if corp's buy into. And yes, Kerry is talking about lowering rates. I'm all for closing loopholes but let's not pretend locking corp's in to restrictive taxes is going to help at all. like this moore character says, we are virtually the only county to do this. why? because it's stupid. why woudl you want to penalize someone for bringing money back home? NJ does this too buy allowing people to deduct philly wage tax from the income tax. Philly ought to consider doing the same.

Quote:

The GAO study shows that 94% of American corporations that had tax liabilities paid less than 5% their total income for 2000. And you want to push it lower.

no, I want rates to go lower not loopholes. please don't use fair, it's so subjective. to me, I'm already paying mroe than myfair share. in fact, there is little fair about it. if it weren't for school as a credit, i'd have really gotten screwed. and I don't make that much money.

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