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Originally posted by Johnmike
reply to post by Leo Strauss
You complain so much when a company leaves your country, when your country cripples them with huge taxes?
Basically at the top end. And there's a direct correlation between high tax rates and economic growth. When we have had our highest tax rates, or when we have higher tax rates, we have a lot of economic growth. And the period of our greatest growth of course is World War II and the post-World War II years when the top marginal tax rate varied between 88 and 92%, which is almost impossible to conceive of nowadays.
And the consequence of that was that, number one, I can't think of any and I can't remember any dynastic families that emerged during that time period. There were no multibillionaires who suddenly -- no John Rockefellers, no Andrew Carnegies, no Bill Gates's, no Phil Knights, no dynastic billionaires who emerged because, you know, 92% tax after 3.2 million bucks, people just became content with 3.2 million bucks, number one.
Number two, you had plenty of money to pay the middle class good living wages to do the work that was actually creating that wealth. And number three, we did not have bubbles, we did not have crashes, and we had an economy that will like the little engine that could -- just nice and steady and strong -- just moved right along for almost 40 years until Ronald Reagan came along with his wrecking ball.
[Larry Beinhart]: Right. Yes, that's a very good summary. Actually, there's also a direct correlation between large tax cuts and a sequence of boom, bubble, and crash. We've had, basically three times we've had large tax cuts, once in the early 1920s coming out of World War I. We had a tax rate of around 70% and then they took it down to in the 20s.
[Larry Beinhart]: And that launched the boom of the 20s and the crash of 29. And then we had the Reagan tax cut which brings us to the crash of 87. And the crashes are fairly similar in that they include lots of bank failures. The difference in the 87 one is that we had a bailout. A huge bailout. And then of course we have this crash with the Bush tax cuts.
[Larry Beinhart]: It's the exact same sequence. And I don't understand why nobody else is making a correlation.
[Thom Hartmann]: Would it be reasonable to guess or to assume or even to assert, Larry Beinhart, that the reason why, when you have tax cuts on the very rich you have bubble, boom, bust economies, is that there is a certain reasonable limit at which people can ingest? You know, it's like trying to drink out of a fire hose. I mean, there's a limit at how fast you can drink, how much water you can put into your body, that there's a limit to how much cash somebody can take and appropriately set aside for investment and so what happens is when you have these huge tax cuts so that the rich get very, very rich, very, very fast, they're looking for a fast rate of return and they start stashing that money in everything from commodities to stocks and bonds and all of that inflates the market for those things which creates the bubble.
[Larry Beinhart]: Yeah. I mean, that's a fair description of it. It's excess liquidity and also part of what happens when you have a low tax rate is an incentive to try to turn money around as fast as possible.
[Thom Hartmann]: How was that associated with a low tax rate?
[Larry Beinhart]: Well, if you're being taxed on profits, right, which essentially a high tax rate is, you're taxed on how much money you're earning, I mean, you're taking out. Okay. So if that tax rate is low, then the quicker you can make your profit and then reinvest it, make another quick profit again, the more money you make.
[Thom Hartmann]: Right. So a low tax rate encourages churn.
[Larry Beinhart]: If at the moment that you take it out suddenly somewhere between 50 and 90% of it disappears...
[Thom Hartmann]: To taxes.
[Larry Beinhart]: Wait a minute, wait a minute. Let me think twice before I take this money out.
[Thom Hartmann]: Right.
[Larry Beinhart]: Okay. Let's see if by keeping the money in here we can build a bigger company.
[Thom Hartmann]: Right.
[Larry Beinhart]: So on paper and in terms of your overall wealth you are in fact growing wealthier but you don't have the cash. So there's a disincentive to take it out. Then what happens is if there's an incentive to take it out and to turn it over quickly, you're looking for quick turnaround things. And then you go into places where you're gambling.
[Thom Hartmann]: Yeah.
[Larry Beinhart]: It used to be common wisdom that the stock market was Las Vegas built large and then we began to convince ourselves that wasn't the case. That putting your money in the stock market was, according to George Bush, more secure than Social Security.
[Thom Hartmann]: Right.
[Larry Beinhart]: And it's not true. You're gambling and suddenly when a lot of money comes to the table
[Thom Hartmann]: The stakes go up.
[Larry Beinhart]: And you're not investing in a bigger piece of property, you're not investing in more production, in more productive capacity, in new industries -- you're betting, you're investing in people investing.
[Thom Hartmann]: Right. When the value of GM stock goes up, that doesn't mean that GM gets any more money. It means that the last guy who owned the stock got more money.
[Larry Beinhart]: That's right.
[Thom Hartmann]: Or you get more money, or whatever.
Larry, you've done this brilliantly with looking over the last hundred years at personal income -- or back to 1913 -- at personal income tax rates. Warren Buffett in his annual report for Berkshire Hathaway, two years ago, I believe it was, maybe three years ago, noted, and I'm quoting now from Berkshire Hathaway Annual Report, "Corporate Taxes are at their lowest level since 1934: 7.4% of all federal tax receipts down from 32% in 1952." In other words, currently 7% of revenue going to the federal government is from corporate taxes. In 1952 it was it was a third, it was 32%. Have you done the research to determine whether there is a identical correlation for corporate tax rates?
[Larry Beinhart]: No. I haven't and I haven't done it for capital gains, all of which I think go into the mix.
[Thom Hartmann]: Yeah, and I'm guessing they're all going to work out the same way.
[Larry Beinhart]: Right. You know, I'm not an economist. I was just listening to all of our politicians saying, "tax cuts, tax cuts, tax cuts." In fact I heard it again today. And Tom Herbert's column in the New York Times started out with, "You don't want to have tax cuts that are going to slow down--you don't want business tax hikes that are going to slow down the recovery."
[Thom Hartmann]: Right. Which is so wrong.
[Larry Beinhart]: OK, which is, exactly, I mean, you know, and this is a big forum and Tom Herbert's generally a really good liberal guy.
[Thom Hartmann]: Yeah, Bob Herbert. Yeah.
[Larry Beinhart]: Yeah. Right. Sorry.
[Thom Hartmann]: Yeah. You're absolutely right. I mean this meme, this thought virus, which, as I said, was relatively unknown before the 1980s. As a consequence of these giant think tanks, the Heritage Foundation, the American Enterprise Institute, the Cato Institute, and all of these libertarians and Republicans and, you know, four generations, or two generations, four decades now of the very rich basically buying public opinion have come to be believed to be conventional, you know, to be true, that if you cut taxes you stimulate the economy and, in fact, it's the opposite.[ex/]
Originally posted by j2000
You guys are sooooo wrong. These tax shelter compaines only take the profits from you. You just don't get it. Try to buy stock in an offshore company.
The profit you see in the 401k's and such is just what stays in the main company. These offshore one's, most of the stock is owned by the rich elite, not the main company. What, did you really think that these profits where for all to enjoy? hahahaha
That's why this practice needs to stop. The take the profits offshore, leave the main company in a wreck, we bail that main company out, while they are still pulling profits to the offshore companies.
Originally posted by EarthCitizen07
Originally posted by j2000
Privatise profit and nationalise debt, right? In all honesty though this financial crisis goes way deeper and mistakes were made at various levels. I refuse to accept that somehow it was all ONE GIANT SETUP!
Just seems a little too "sci-fi"...
Originally posted by DimensionalDetective
Offshore 'Tax Havens' of The U.S. Corporate Elite
rawstory.com
(visit the link for the full news article)
Tax money for tax cheats.
It's hard to otherwise describe the continuing federal bailouts that major US companies are enjoying in this woeful era of fiscal disaster, especially when--as a scandalous new report reveals--many of the key players aren't paying taxes.
The Government Accountability Office (GAO), Congress' investigative watchdog, has found that "a majority of America's largest publicly traded companies and the U.S. government's largest federal contractors use multiple subsidiaries in offshore tax havens to conduct business and avoid paying U.S. taxes," writes Carol D. Leonnig for The Washington Post.
Originally posted by mmiichael
I generally avoid this kind of thread because it's often more yelling than inteligent discussion.
Originally posted by mmiichael
Economics are often complex and parameters constantly in flux.
Originally posted by mmiichael
Places like Britain decided in the past to put the thumbscrews on corporations and high earners by taxing their earnings as high as 90%. You know what happened - these people and companies just went somewhere else. Ones you'll remember are Mick Jagger who moved to France and John Lennon who moved to New York - just to avoid excessive tax levels.
Originally posted by mmiichael
I'm not a defender of tax avoidance (tax evasion is when it's illegal) - but in the past governments often make it impossible for companies of any size to make large upfront investments in new companies and show profits. The tax levels became so high it was more advantageous to move elsewhere. When the incentive to start up businesses and employ people is gone, the econony shrinks.
Originally posted by mmiichael
Any government has to work out a balance so that new investment is made stimulating the economy, putting more into the system in the hopes of making a profit in the process.
Often the choice is to permit offshore tax havens. Eliminate this and just watch companies pull out stakes and move on to where it's allowed.
If someone here can offer a solution to this Catch 22 - let's hear it.
Mike F
Originally posted by Saf85
Who can blame the big corporations?
If you had the choice between zero, ZERO! Income tax and no such thing as capital gains tax OR Excessive taxes and a rip off 40% odd capital gains tax, what would you choose?
You have no one but yourself to blame as a country, too many greedy folk, asking for too much in return for their crappy governence.
Sure the banking cartel is an underlying issue, they have everyone in their web of debt and enjoy rapeing you all for more and more. But the main reason your economy is going belly up is the average joe, has no balls to stand up for his/her country and rights anymore!
Enjoy your fall into the new dark ages America, the world will not really miss you, but will miss your movies maybe ;P.
Originally posted by EarthCitizen07
Most companies don't move their base of operations. They simply create subsidiary shell companies in second or third world countries to pay less taxes; bahamas, liechenstein(spelling correct?), luxembourg, switzerland, monrovia, cyprus, malta, etc. ...
Permitting offshore accounts only worstens the problem because the government losses tremendous revenue. A much better solution is to substantially lower the domestic tax rates and thus be competitive with these offshore tax havens. It is better to collect less than to collect nothing. Don't you agree?