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There is often a bit of cognitive dissonance when one finds oneself agreeing with even part of the agenda of ones political opponents. I find myself there, in small part, with the desire of the Republicans to simplify the tax code, at least in some areas. Of course the devil is in the details of what should be simplified and who pays the cost, and there, of course the Republicans and I part ways.

Pretty much everyone is familiar with the Alternative Minimum Tax. It is a tax provision that was put in place to prevent deductions from completely wiping out income tax obligations. It was enacted in its current form without an indexed increase for inflation, so it has been monkeyed with in an ad hoc basis as more upper middle class folks started making more money and running afoul of it.

What you might find shocking in the wake of the news that General Electric is not only paying no tax this year but getting around 2 billion in tax benefits (what a person would call a refund, but not really) is that it applies to corporations too.

In fact the threshold is rather low, with a corporation falling into the Corporate AMT at just $310,000 of income. The problem is that that companies like GE and B of A have all kinds of things they can do to avoid paying this tax.

A big part of it is moving profits off shore. They don’t have to pay taxes on that money until they repatriate it. But another one that makes me completely crazed is that we give them a credit against the AMT for taxes they pay in other countries!

Yeah, you got that right, they pay their taxes and fund some other nation, and we let them write that off against their taxes here! They get all the benefits of being an American corporation but they are not paying for those benefits. In fact is worse than that. They are actively helping other nations fund their infrastructure and social programs while denying that money to the US.

There are other things that allow mega-corporations like GE to skirt the taxes they should be paying. One of them is that this year they will file 7,000 separate tax returns. What makes this a boon to them over all is that some of their divisions will not make a profit this year. In fact some of them are set up to show a loss, and reduce the overall tax the GE pays. This kind of thing must end. It is not right that a company which will have a 4 billion dollar US profit is treated like it lost money over all.

The problem with any AMT is that it is effectively a flat tax. I am not a fan of flat taxes in general. Supporting changes that would make this flat tax more effective just increases the argument that we should have one for individuals as well. However in this case I am ready to say that there should be no way to avoid paying all taxes when you make a profit of over 500 million.

By setting the bar so much higher we get around most, but not all of the talk about it hurting “small business”. As along as giant companies like Bechtel fall into the definition of small business by virtue of their single owner status, we’ll have this problem, but that is for another day.

The tax does not even have to be that high for us to benefit greatly. Right now, in theory, the CAMT is 20%.  Since many of these companies are completely getting around it setting the bar at 10% would still generate 100 million per billion of profit.

By assuring that a business will have to pay at least 10% of their profit as tax, no matter what, we put a lot of the incentives back in the right place. They can work as hard as they like to keep that tax at only 10% but they can not ever receive a tax benefit when they make an overall profit as a company. It would also reduce the benefit of off-shoring income and keeping it in other countries.

If this kind of tax were in place GE alone would be paying 400 million in tax this year. I don’t think that this is an unreasonable level for a company as big as this who made 4 billion in profit. B of A would pay 300 million and the list goes on and on.

Another area we could look at is sitting money. There is 1.6 trillion dollars in corporate cash that is sitting on the sidelines of the economy. It is time that money either works for the economy or some of it goes to the government who will put it into the economy. A 2% annual “sitting money” tax on cash assets over 500 million would go a long way to encourage companies to invest in the economy of the country they are based in.

At a time when we are looking at drastic cuts to government programs we have to be looking to the people and companies that benefit the most from the American system. My Republican friends will say that if we do this we will drive these companies out of the U.S..

To that I have to call BS. They know that they have it better here than they will anywhere else in the world. They benefit from our system of governance that gives them a disproportionate say in the way the nation is run. They benefit from the status of being a company based in the world’s largest economy and they benefit from the good will of the American people. Even companies that have nearly completely outsourced their manufacturing to other nations want to be able to say they are an American company.

I know that this will not be an easy sell. The Dark Lord of Anti-Tax Grover Norquist is never going to allow his thralls to support this idea. Just because it will be hard does not mean we should not do it. The big companies of this nation, like the people in the top 1% of incomes are the ones that benefit the most from being here, it is time for them to pitch in.

When we talk about shared sacrifice that has to mean everyone or it is meaningless sloganeering. It is time to simplify one part of the tax code and that part is the one that allows you to make billions and still get a billion dollar tax benefit.

The floor is yours.

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Comment Preferences

  •  Tips? Flames? (15+ / 0-)

    A little fire for actual fairness instead of Republican faux fairness?

    Getting Democrats together and keeping them that way is like herding cats that are high on meth, through L.A., during an earthquake, in the rain -6.25, -6.10

    by Something the Dog Said on Mon Mar 28, 2011 at 06:24:09 AM PDT

  •  I agree totally (3+ / 0-)

    as I do with most of analyses and proposals.

    Not to draw attention away from your diary, I can say that I strongly agree with most DKos content related to the Plutocracy, corporatism and The Class War (tm).

    What I would like to see more of, however, is discussion of what to do about it. Not so much individual policy changes or letter-writing campaigns or elections, but a concentrated effort to put the Plutocracy in check and dramatically change the trajectory of the Class War. An effort designed from the outset to succeed.

    A Democrat will only stab you in the back. A friggin' Republican will shoot you in the face! For Pete's sake, vote Democrat! - Democratic Party elevator pitch

    by Words In Action on Mon Mar 28, 2011 at 06:37:08 AM PDT

    •  Well, the problem is that there is nothing (2+ / 0-)
      Recommended by:
      Gary Norton, avsp

      in politics that is guaranteed to succeed and there are a lot of folks who disagree on the path.

      For me it starts by stopping the Republicans, who are the ones actively destroying our system. That means not sniping at the Democrats and undermining the group that is the only fire break for against their lawlessness.

      Then we can work on getting things better, but that is just me and I know that opinions vary. In the end we have to live with the reality of my sig line.

      Getting Democrats together and keeping them that way is like herding cats that are high on meth, through L.A., during an earthquake, in the rain -6.25, -6.10

      by Something the Dog Said on Mon Mar 28, 2011 at 06:40:50 AM PDT

      [ Parent ]

      •  Well, I think there is (0+ / 0-)

        a path to guaranteed success. Not only have we not agreed on it, however, I would argue almost no one has bothered to try and define it.

        Instead, we're pecking at the heels of the plutocrats.

        Stopping Republicans is key, but with a broken system, "stopping" is never more than "slightly slowing." That's been going on for decades and we are losing this war badly.

        We need a paradigm shift that includes non-electoral methods and coming to terms with the politicians we have, not some imaginary progressive pantheon that is not forthcoming in the current system.

        A Democrat will only stab you in the back. A friggin' Republican will shoot you in the face! For Pete's sake, vote Democrat! - Democratic Party elevator pitch

        by Words In Action on Mon Mar 28, 2011 at 06:59:46 AM PDT

        [ Parent ]

  •  The Diarist is not completely informed. (1+ / 0-)
    Recommended by:

    There are about a zillion things wrong with the corporate tax code, but the fact that corporations get a tax credit for foreign taxes paid is not one of them.  In order to get the tax credit, the corporation has to report the foreign income received grossed up by the foreign taxes paid.  This means that if the foreign corporate tax rate is 20% that the US would collect an additional 15% in taxes and that the total tax paid would be equal to the US rate of 35%.

    "Still a man hears what he wants to hear and disregards the rest"

    by HoyaChris on Mon Mar 28, 2011 at 07:04:52 AM PDT

    •  HoyaChris - I agree (4+ / 0-)

      There are many things wrong with the US corporate tax code and unfortunately few of the people who write about it here understand even a small part of it. When they start discussing specific proposals its clear that they have little understanding of the current code. Even the notion of the tax loss carryforward is a concept they don't understand. We all agree that corporations should pay more, but the real answer is to make the code less complex and eliminate many of the writeoffs much like what was done on the personal side in the Tax Reform Act of 1986, although with the goal that the legislation would raise more revenue from corporations.  

      "let's talk about that"

      by VClib on Mon Mar 28, 2011 at 08:37:35 AM PDT

      [ Parent ]

  •  T&R, didn't we have a tax (2+ / 0-)

    on retained earnings once? I thought I was listening to a program where one of the speakers said it should be reinstated.

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