Bush's D'oh! Factor
I have a slogan for the Bush administration: "D'oh!"
This President begins every new project, be it foreign or domestic, with the boyish enthusiasm of Homer Simpson. Just let his pals down at Moe's plant the seed of a half-baked notion in his head and George takes it from there.
Enthusiasm is a good thing when exercised by the rational and competent. But when exercised by a dimwit, all that passion and energy can only end with a resounding, "d'oh!"
And so it has come to pass with another of George's economic brainstorms. It all began after a few beers. The fellas at Moe's were discussing how high US corporate tax rates were forcing corporations to hide more and more of their profits overseas. Lenny suggested that maybe we could get that money repatriated if we gave those companies a freebee, let them bring the money back into their own country for practically nothing.
George, sipping his sarsaparilla, bolted upright. "Yeah, great idea. Could create jobs. Would create jobs. Those companies would use that money to create jobs. Billions of jobs."
So, along with his other tax breaks, George added a measure that would allow companies that had hidden profits offshore to repatriate them without paying the full tax, normally around 25%. Instead they would just pay postage and handling, 5.25%.
And it worked. Hell, how could it not work? Five and a quarter percent was even less than the tax havens were charging companies to shuffle all those peas around under shell company accounts. But to get that deal companies had to get all that dough back into the US before the end of this year.
And, as I said, it worked. After all, wouldn't you agree too if it meant being in the 5% tax bracket?
We learned that companies had salted away about $350 billion offshore. At least, that's how much they've admitted to so far. Had those companies paid their fair share of taxes in the first place the US Treasury would be about $90 billion better off than it is now. Instead they were rewarded for their creative tax avoidance by being given a free pass.
Never mind that, George said. The jobs all that repatriated money would create here at home would more than make up for that little favor.
So, how did that idea pan out? Not so much.
According to that left-wing rag, the Wall Street Journal, most of that money is being used by companies to buy back stock in their own companies and pay off old loans and boost executive compensation. But that's not what they were supposed to do with the money.
"Companies aren't supposed to use repatriated funds for stock buybacks, dividends, or executive compensation, but there is no requirement that companies isolate funds or show that spending on approved uses is above what the company would have spent normally." (Oct 5 WSJ)And what of those jobs? Well, one of the companies that dug up its offshore stash was Colgate-Palmolive Co. which hauled home $800 million, for which the company said, "Thank you very much" -- and then proceeded with plans to shut a third of its US factories and eliminate 4,450 jobs.
More Doh! Dough
And how is George's brainstorm going? (That, if we let the rich keep more of their money by giving them fat tax breaks, they will use it to create jobs).
New York Times -- Oct 5: After falling for two years, the share of income going to the richest slice of Americans - the top tenth of 1 percent - grew significantly in 2003 while the share going to 99 percent of Americans fell, tax data released yesterday showed....At the same time, the effective income tax rates paid by the top tenth of 1 percent fell sharply, declining at more than 10 times the rate reduction for middle-class taxpayers, the new report, by the Internal Revenue Service, showed.Only for those Americans in the top 1 percent, the nearly 1.3 million taxpayers who made at least $327,000, did incomes increase significantly more in 2003 than the rate of inflation....The top 1 percent of taxpayers received almost 17.5 percent of all income and paid a third of all income taxes in 2003, the I.R.S. found. The top tenth of 1 percent received 7.57 percent of reported income and paid more than 15.3 percent of all income taxes.
(Please also note that I.R.S. data tends to understate incomes for those at the very top because of different rules for reporting wages and capital gains, meaning the actual disparity was really much larger than the official data show.)
And get this. The data also show that among major world economies, the United States in recent years has had the third greatest disparity in incomes between the very top and everyone else. Only Mexico and Russia, among major economies, have greater disparity.