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Obama has called “for an end to a corporate loophole that allows companies to avoid federal taxes by shifting their tax domiciles overseas in deals known as ‘inversions’.” Such as statement shows the utter ineptitude that Obama has for understanding a) what inversion actually is and b) how his policies are the cause.
Inversion is not a “corporate loophole” and companies who do so are not “avoiding federal taxes”.
Currently, only the United States taxes American companies on foreign profits as well as domestic. No other major country does this. This policy is non-competitive, stupid, and a major reason why inversion occurs. An American company is being taxed in two jurisdictions.
For instance, if Honda is making cars in the United States, it pays the same taxes as General Motors. But if an American company is in Japan, it has to pay both Japanese taxes and American taxes and therefore has to make an even larger profit just to stay competitive and survive.
If foreign sales grow substantially, a company will find itself paying increased U.S. taxes because it is still incorporated in this country and we tax both foreign and domestic profits. Eventually, a U.S. company may find by moving its incorporation to a different country, it can cease paying U.S. taxes on income that is not generated in the United States — the way every other advanced nation, except for the United States, operates. That extra savings in taxes can be reinvested in the company itself.
Couple this ridiculous tax law with the fact that we also have the highest corporate tax rate in the world as well as a substantial number of stifling regulatory agencies, and it’s small wonder why some companies choose to move abroad eventually.
To call this a “corporate loophole” is exceedingly disingenuous. For some companies to survive, they may have no choice but to move its legal status elsewhere. American companies are in business to make and do things, not to comply with exhaustive tax policy and burdensome bureaucracy. However, the business climate in this country is difficult and to call a company a “deserter” or “unpatriotic” casts the blame squarely in the wrong place — which is a government that over-taxes and over-regulates. That is the problem, and inversion is a symptom of an anti-business environment.
To insinuate that companies who go through the process of inversion are “avoiding federal taxes” entirely omits the reality that this country is the only country who taxes companies both on domestic and foreign profits. Just because we can tax them this way, doesn’t mean we ought to. Reforming the tax code is a better solution.
“Needing to reform inversion” is merely creating another tax grab for Obama — masquerading as fighting against “bad corporations” in order to pander to the rhetoric of the left. The government continues to run chronic deficits and is considering this measure in order to fleece businesses for extra tax revenue. They already face oppressive taxation and burdensome regulation. Attacking them for doing what they might need to do, in order to stay in business, is repugnant.
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State and local governments have been forbidden from taxing Internet access — apparently forever — according to a bill passed in the House on July 15. This measure was a response to updating the Internet Tax Freedom Act of 1996, which had a extension passed in 2007 and was on the verge of expiration.
House Judiciary Chairman Rep. Bob Goodlatte explained that the bill “prevents a surprise tax hike on Americans’ critical services this fall. It also maintains unfettered access to one of the most unique gateways to knowledge and engine of self-improvement in all of human history.
Unfortunately, it is expected to be joined with the Marketplace Fairness Act when it heads to the Senate. That abominable piece of legislation was passed in May 2013; it’s merely a back-door way for states to add additional levies on their citizens under the guise of leveling the playing field, while simultaneously adding undo burden to businesses by expecting compliance with multiple tax jurisdictions. Read more about the Marketplace Fairness Act here.
As for the Internet Tax, it’s a bill to keep track of as it moves through Congress
by | BLOG, BUSINESS, CONSTITUTION, ECONOMY, OBAMA, OBAMACARE, POLITICS, TAXES
The next big case related to Obamacare, Halbig v. Burwell, is sitting in the U.S. Court of Appeals for the D.C. Circuit. The verdict should be announced soon. The crux of the case lies in the wording of the actual bill of Obamacare, which specifically lists state exchanges as a source of subsidies.
There is no mention of federal exchanges in Obamacare. This was created merely by an IRS rule authorizing the subsidies in federal exchanges.
Regardless of the outcome of the case (for a primer, click here), here’s the salient point to take away.
When you look at the plain wording of the actual bill, it really doesn’t make any sense (common sense). Here we have a perfect example of the Democrats trying — and ultimately succeeding — to push something through without looking at it or even carefully thinking through the implications of the words and provisions.
Obamacare was drafted badly, and they couldn’t even get it corrected the proper way because of the crookedness by which it was passed. Now we have a stupid mistake that the judiciary is being asked to fix. And that’s the problem.
What the government is asking the courts to do is to ignore the literal wording of the law. On the other hand, if the literal wording is indeed upheld, the immediate effect of a reversal is going to be extremely terrible.
Think about it. The IRS will have to go after people for refunds of tax credits. That will be a messy and slow and heated endeavor. Many people, especially poor people, are going to argue that they wouldn’t have used Obamacare insurance if it wasn’t for the subsidies. Not sure if that scenario is ultimately good for conservative or libertarians either, because it certainly sets up the sound-byte narratives that conservatives and libertarians want to “take away your health care”, “they hate the poor, etc”. Is it worth it?
My heart of hearts wants literal side to win, but at the same time, I’m not entirely convinced that its the best thing in the long run. Yet, if the government wins, it reinforces the precedent we’ve been seeing that it is okay to ignore the actual wording of the law, much in the same fashion that the wording of the Constitution is being ignored in some instances.
This case perfectly highlights the stupidity and utter disdain for which the Democrats have of procedure and law.
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In another laughable, irresponsible, and certainly illegal move (far overreaching any possible regulatory claim), the Equal Employment Opportunity Commission (EEOC) has filed a lawsuit against a private company that fired employees who could not effectively communicate in English. The EEOC lawsuit alleges that this violates Title VII of the Civil Rights Act of 1964, which bans discrimination based on “national origin”.
The EEOC’s logic argues that this includes “the “linguistic characteristics of a national origin group.” The EEOC is in fact saying that a business may not use its own judgment as to whether its employees need to speak English fluently, whether or not there is any evidence of discrimination.
This lawsuit has shades of another ludicrous overreach in June of 2013 by the EEOC that also referenced Title VII “discrimination” in their cases, alleging that,
“BMW manufacturing facility in South Carolina, and the largest small-box discount retailer [Dollar General] in the United States violated Title VII of the Civil Rights Act by implementing and utilizing a criminal background policy that resulted in employees being fired and others being screened out for employment”
These cases appear to have been filed soon after a December 2012 “strategic enforcement plan” was issued by the EEOC “that included targeting background checks as a barrier to employment of minorities”. Within six months, both BMW and Dollar General were sued.
However, the rulings did not go quite the way the EEOC would have liked. Judicial Watch noted that, “U.S. District Court Judge Roger Titus lambasted the administration’s expert data, writing that it was “laughable”; “based on unreliable data”; “rife with analytical error”; containing “a plethora of errors and analytical fallacies” and a “mind-boggling number of errors”; “completely unreliable”; “so full of material flaws that any evidence of disparate impact derived from an analysis of its contents must necessarily be disregarded”; “distorted”; “both over and under inclusive”; “cherry-picked”; “worthless”; and “an egregious example of scientific dishonesty.”
There are simply no facts to support a theory of disparate impact, the judge writes, further stating: “By bringing actions of this nature, the EEOC has placed many employers in the “Hobson’s choice” of ignoring criminal history and credit background, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, on the one hand, or incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers.”
Having recovered from the sting, the EEOC is back spending taxpayer funds to target private businesses with frivolous lawsuits. According to their press release regarding Wisconsin Plastics, Incs “the EEOC’s pre-suit administrative investigation revealed that WPI fired the Hmong and Hispanic employees based on 10-minute observations that marked them down for their English skills, even though those skills were not needed to perform their jobs”
Furthermore, according to the EEOC Chicago Regional Attorney John C. Hendrickson, “Our experience at the EEOC has been that so-called ‘English only’ rules and requirements of English fluency are often employed to make what is really discrimination appear acceptable. But superficial appearances are not fooling anyone. When speaking English fluently is not, in fact, required for the safe and effective performance of a job, nor for the successful operation of the employer’s business, requiring employees to be fluent in English usually constitutes employment discrimination on the basis of national origin — and thus violates federal law”
Wisconson plastics, Inc, on the other hand, maintains that the EEOC claims are “false and absolutely without merit”. The EEOC counters that English language requirements are justifiable only when “ absolutely necessary “for an employer to operate safely or efficiently.” but simultaenously admits that “there is no precise test for making this evaluation.”
The Wisconsin Plastic, Inc explains that there “the layoff decisions at issue in the fall of 2012 were made on the basis of the employees’ overall comparative skills, behaviors and job performance over time. Though the decisions were difficult, they were necessary in order to ensure the ongoing stability of Wisconsin Plastics for the benefit of WPI’s customers, its shareholders, the community and the roughly 275 current company and temporary employees.”
So a company operates to benefit its customers, shareholders, the community, and its employees. This sometimes results in a hard decision to discontinue the employment of an employee or employees whose performance does not positively benefit the company to a company-decided level of satisfaction.
The fact that the EEOC can instead arbitrarily decide it knows the intentions of a company better than a company itself, and moreover, sue that company for discrimination when the company decides to terminate an employee that is just not working out, is utterly outrageous.
Let’s hope that the next judge is as wise as the one who presided over the BMW and Dollar General court cases.
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What’s going on with oil and energy these days?
Last week, SNL Financial noted that,
“Canada’s crude oil producers are looking to markets other than the U.S. to sell increased output amid delays in pipeline expansions, according to the president of the Canadian Association of Petroleum Producers.
“In terms of growth potential, Keystone is obviously bogged down and everything behind Keystone in the queue is bogged down because the regulatory process won’t engage on those other projects until Keystone clears its hurdles one way or another,” Collyer said. “The primary focus for Canadian producers, Canadian governments and Canadian pipeline companies is to look east and to look west.”
Canada is tired of waiting. What else?
Besides the current frustration with our Canadian friends, there is another overlooked consequence stemming from the delays with the Keystone XL Pipeline project: high gas prices.
Although the pipeline (and ANWR, and other major oil projects) have multi-year lead times, when a project of this magnitude has the green light to move ahead, it has an immediate effect on the markets by changing the traders’ expectations of future supply. Having more oil available in the marketplace contributes to lower prices for consumers. So when Keystone was delayed — multiple times — the markets have reacted accordingly.
In fact, it was noted last week that July 4th marked a record 1290 days of gas prices above $3.00/gallon. Gas prices climbed above $3.00/gallon on Dec. 23, 2010, and that streak has continued since then.
Of course, don’t forget what Secretary Chu said back in 2012 about the price of gas: Chu “admitted to a House committee that the administration is not interested in lowering gas prices.
Chu, along with the Obama administration, regards the spike in gas prices as a feature rather than a bug. High gas prices provide an incentive for alternate energy technology, a priority for the White House, and a decrease in reliance on oil for energy”.
This helped to explain why Keystone was delayed. While the White House continues to “figure out” how to balance two of his major constituencies (labor is pro-pipeline and environmental is anti-pipeline), Americans are feeling the price at the pump. But it doesn’t have to be this way.
According to Gordon Ritchie, vice chairman of RBC Capital Markets, Ritchie noted,
“I’m at a loss to understand why the Americans wouldn’t approve the pipeline going down south because of the difference between the Brent price of oil — world price — and the North American combined price of WTI (West Texas Intermediate). “That $5 a barrel is really a subsidy by Canada to American consumers of gasoline and it works out to about $20 billion a year.”
To add insult to injury, a new report is out that shows the highway trust fund is losing money due to to more fuel efficient cars, which Obama had repeatedly championed. Additionally, the high prices have kept Americans from traveling as much. The highway trust fund will go from a budgeted $50 billion to around $34 billion. The Highway Trust Fund receives roughly 18 cents on every gallon of gasoline sold in this country.
Meanwhile, Canada gets antsy, gas prices are high, the Highway Trust fund is being depleted. Will the Obama Administration finally move forward with Keystone?
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Yesterday the Senate Majority Leader, Harry Reid, painted a picture of class warfare, claiming his side does not have any billionaires.
“The decisions by the Supreme Court have left the American people with the status quo in which one side’s billionaires are pitted against the other side’s billionaires,” he said this morning on the Senate floor. “Except one side doesn’t have any billionaires.”
Here’s the video:
Seems Harry Reid conveniently forgets:
George Soros
Tom Steyer
Ann Cox Chambers
Irwin Jacobs
Ron Burkle
Marc Benioff
Penny Pritzker
James Simons
David Shaw
Jon Stryker
Haim Saban
Who are we missing? Fill in the comments section below!
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This is a tad worrisome:
Nonfarm business sector labor productivity decreased at a 3.2 percent annual rate during the first quarter of 2014, the U.S. Bureau of Labor Statistics reported today, as hours increased 2.2 percent and output decreased 1.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The decrease in productivity was the largest since the first quarter of 2008 (-3.9 percent).
And this:
In the first quarter of 2014, nonfarm business productivity fell 3.2 percent, a greater decline than was reported in the preliminary estimate. The revised figure reflects a 1.4 percentage point downward revision to output and a 0.2 percentage point upward revision to hours.
You can read the whole report here
No one else seems to be reporting on the revised numbers, which mirror that of the 1st quarter of 2008 (-3.9).
Couple this with the report last week that the “economy in the U.S. contracted for the first time in three years from January through March as companies added to inventories at a slower pace and curtailed investment”.
It will be interesting to see what the unemployment numbers show on Friday.
Friday update: Unemployment stays flat
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The NYT reported that the IRS made yet another law clarification this past week:
“Many employers — some that now offer coverage and some that do not — had concluded that it would be cheaper to provide each employee with a lump sum of money to buy insurance on an exchange, instead of providing coverage directly.
But the Obama administration raised objections, contained in an authoritative question-and-answer document released by the Internal Revenue Service, in consultation with other agencies.
The health law, known as the Affordable Care Act, builds on the current system of employer-based health insurance. The administration, like many in Congress, wants employers to continue to provide coverage to workers and their families”.
However, it seems that the real issue is less about continuing coverage and more about getting as much tax revenue for the government as possible:
Christopher E. Condeluci, a former tax and benefits counsel to the Senate Finance Committee, said the ruling was significant because it made clear that “an employee cannot use tax-free contributions from an employer to purchase an insurance policy sold in the individual health insurance market, inside or outside an exchange.”
If an employer wants to help employees buy insurance on their own, Mr. Condeluci said, it can give them higher pay, in the form of taxable wages. But in such cases, he said, the employer and the employee would owe payroll taxes on those wages, and the change could be viewed by workers as reducing a valuable benefit”.
The ruling comes as the IRS seeks to finish establishing the plans and programs for employer coverage that starts in 2015.
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Oh, the hypocrisy!
In February, it was announced that retired hedge-fund billionaire Tom Steyer, has committed $100 million of his own money to “to make climate change a priority issue in this year’s midterm elections.”
How can this possibly be? First, Steyer made his millions as a hedge-fund operator — which is typically and universally denounced as a greedy profession. But if he spends his greedy millions on items considered tolerable and suitable to the political Left, it’s becomes okay.
That same political Left decries the Koch Brothers who are accused of funding groups with their obscene amounts of money to promote policy positions. The Koch Brothers made their money as businessmen, which clearly is repugnant. It begs the question: why does Harry Reid go after the Koch Brothers and turns a blind eye to Steyer’s tactics?
In reality, what Tom Steyer is doing is much worse. Steyer is essentially telling a political candidate, “if you take this position, I will give you money”. Isn’t this line of thinking exactly what the Supreme Court was trying to stop? How is this okay? Because it works for the Left.
Steyer’s game proved effective in 2013 when his NextGen Climate Action Super Pac spend $2.5 million to target conservative-leaning coal areas of Southwest Virginia on behalf of Democrat gubernatorial candidate Terry McAuliffe. Coupled with Mayor Bloomberg’s Independence USA Super PAC which spent roughly $2 million on ads in Virginia to target Republican candidate Ken Cuccinelli’s position on gun-rights, the two out-of-staters helped lead the Democrat to victory.
Steyer’s next plan is to influence the 2014 midterms. His money is planning on being spent on “attack ads during the election, including the Florida governor’s race and the Iowa Senate race.
Clearly, Steyer’s actions are appropriate for the 2014 elections, because political candidates with the “proper positions” are able to benefit from Steyer’s “generosity”. Yet in contrast, other organizations are called out for being “tainted” by the Koch Brothers for merely promoting various policies that the Left deems unacceptable. Either it’s okay for both, or for neither.
The double standard prevails.
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Bernie Sanders recently chose to test the waters of a possible Presidential campaign by weighing in on the deliberations regarding the Post Office. Thankfully, we have this Op-Ed so early on, because it reveals Sanders’ complete and utter inability to comprehend basic economics and accounting.
Bernie argues two main points: 1) the Post Office is not broke and 2) those who believe it is are “anti-government”, “wealthy special interest”, profit-seeking, or all of the above. These points rest entirely on his premise that pre-funding health benefits to postal workers is a very bad thing.
Sanders actually believes that planning for future promised benefits is not a fiscally sound practice. If he feels this way about the Post Office, surely he feels the same about Social Security and Medicare (two programs who have trillions in future liabilities). Does Sanders know that his type of accounting would land any business executive in jail?
Sanders says that if we didn’t have to pre-fund future benefits, than the Post Office would make a profit. Simple, right?
What he fails to mention that if we didn’t pre-fund benefits, the Post Office would merely be sloughing off paying its promises to some future nebulous day and time for some other taxpayers else to take care of –only when its liabilities were astronomical and the finances were on the edge of a precipice.
That result is precisely what we are facing programs like Social Security, Medicare, and many defined benefits plans across the country: politicians made future monetary promises without planning for them, and now the economic pressure has ballooned into severe fiscal instability. Sanders belongs to the ‘spend first, fix (maybe) later” group of bureaucrats who refuse to follow basic accounting practices like any business would be required to practice.
With the Post Office, we actually have an quasi-government entity following good, non-gimmick accounting so taxpayers can see first-hand the true financial picture (current and future) of the post-office. Pre-funding benefits to account for future and current liabilities is a proper and healthy way to do business. And if the Post Office cannot turn a profit while protecting its current and future liabilities, than it must make changes to its business operations
By repealing the legislation to pay for future liabilities, Bernie Sanders is ostensibly demanding someone in the future — your kids and grandkids — to clean up the mess of his government and his generation’s deliberately poor financial planning.
Which bring us two his second point. Bernie Sanders does what the Left does best, which is resort to name calling, straw-man arguments to build up his weak ideas. Sanders actually thinks that those who wish to pass on a health economic future while practice basic and principled accounting practices are anti-government, bought-and-paid-for, or profit-mongers. No, Mr. Sanders, we only wish for the government and its entities to practice the same kind of accounting standards that any other business or family is required to do.
Watch out, America — Bernie Sanders is just more of the same. Another bureaucratic imbecile who refuses to face economic and financial realities when it comes to the Post Office — or any big government program which deals with current and future liabilities. Sanders would rather pass the buck to the next generation in order to save a few union jobs.
