Sunday, November 25, 2012

The tax side of the "Grand Bargain" to cut benefits on Social Security, Medicare and Medicaid

Carolyn Lochhead of the San Francisco Chronicle is a very reliable purveyor of the conventional press wisdom. Her articles are like a master script for the CW on whatever subject she's writing. In High tech's course hinges on tax talks: 'Fiscal cliff' decision could help return jobs to U.S. 11/24/2012, she does stenography for tech CEOs pushing for their favorite tax giveaways they hope to see in a Fiscal Cliff/Grand Bargain deal.

The subhead, "'Fiscal cliff' decision could help return jobs to U.S.," gives an idea of her framing. What kind of things would return jobs to the US. Why, not having any taxes at all on foreign earnings of American multinationals! "Democrats argue that the U.S. code encourages corporations to shift jobs overseas by allowing them to defer profits that are held abroad."

But, you know, some people think the moon revolves around the earth, others say the earth revolves around the moon, opinions differ:

Republicans want to fix this problem with a new system that would not levy U.S. taxes on overseas income.

"The United States is the only major country to have a tax on global income," said Brian Toohey, president and chief executive of the Semiconductor Industry Association, a trade group. "It just puts us in a horribly uncompetitive situation."
Let's see, deferring taxes on international corporate profits is said ("Democrats argue") to encourage companies to move jobs oversees. So the solution ("Republicans want to fix this problem with") is to not have any US taxes on international profits at all! The fact that the "Republicans want" position doesn't make jack for sense can't allow our Establishment press to forsake their "this-side-says, the-other-side says" now-standard practice.

But to give more or less equal space, Lochhead does add, "Democrats argue that such a system would only accelerate the shift of jobs overseas."

In the real world, one of the main things the One Percenter lobbies want out of the Fiscal Cliff Farce is just what she quotes lobbyist Brian Toohey saying, that they want to get rid of any taxes on international earnings. Or, failing that, the Republicans can, uh, compromise and agree to only a one-time tax-free repatriation of currently deferred profits.

But the corporate moochers Job Creators that Lochhead talked to want more handouts competitiveness-enhancing tax subsidies than that. Cutting corporate tax rates, for one:

Still, the [Silicon] valley faces intense global competition, and Washington's fiscal cliff - Jan. 1, when a broad swath of the tax code expires and big spending cuts take effect - is seen as a rare opportunity to right the technology ship before it's too late.

The Obama administration and House Republicans agree that corporate tax rates should be cut. They also agree that across-the-board spending cuts - which would reduce federal science funding by as much as 10 percent - must be averted. ...

At 35 percent, the U.S. corporate tax rate is the world's highest, but it is riddled with exemptions. Technology and pharmaceutical companies, which are based on intellectual property that is easily transferred over borders, run schemes through tax havens to avoid U.S. taxes. [my emphasis]
Unfortunately, the "Obama administration and House Republicans" agree on way too much, including their desire to cut benefits on Social Security, Medicare and Medicaid as part of a Grand Bargain.

Ultimately, the current argument to cut corporate taxes rests on the magical assumption that cutting taxes on the wealthiest creates growth, an assumption with no real-world basis.

Corporate Democrat Diane Feinstein has an idea. Rather that cutting loopholes, let's make some more!

Rather than get rid of tax breaks, Sen. Dianne Feinstein, D-Calif., plans to introduce a new one for companies that manufacture high-tech products at home from their own patents, an idea that Rob Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan think tank, is pushing. The "patent box" is used by China and several European countries and is about to go into effect in Britain.
It's at the very end, but as a faithful stenographer of the conventional wisdom, Lochhead reminds us what the whole Grand Bargain nonsense is really about:

But arguing for lower rates or more tax breaks for corporations at a time when Medicare and Social Security are also on the table may be a hard sell.

"Republicans want to cut everything, and Democrats want to give money to poor people," Atkinson said. "The key thing is to have Washington be able to differentiate between spending and investment." [my emphasis]
In Beltway-Speak, Medicare and Social Security are "spending" for losers, moocher and parasites. Tax breaks for billionaires is "investment."

If there were some kind of journalism award for Most Faithful Stenographer Of Washington Beltway Conventional Wisdom, Carolyn Lochhead would be top contender.

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