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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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One month ago (in June), the topic of immigration was at 5%.
Today? It’s 17%. According to a Gallup poll released a few days ago, immigration has surged to the top of the list as “the Most Important U.S. Problem”. This replaces “dissatisfaction with government” (16%).
Two other tidbits to glean from this poll: (1) the issue is higher among Republicans (23%) than Democrats (11%); and (2) older Americans (over 50) are more likely than younger Americans (under 50) to cite immigration as the top issue.
So, while this poll shows us what Americans are now talking about, even more importantly is what they aren’t talking about anymore — major scandals such as those involving the IRS, the VA, and even the situation in Iraq, among others (most of those can probably be filed under “dissatisfaction with government”).
The IRS and VA scandals are particularly scathing to the administration. Is it any wonder why, at the very time when the heat began to turn up on these two issues, the immigration surge began. Those very demographics — Republicans and older Americans — who are most likely to be incensed at the IRS and VA scandals are now the ones even more incensed at the immigration issue…so that they are no longer focused on the IRS and VA.
The poll concluded: “the fact that the issue is of particular concern to Republicans and older Americans — both groups that Republicans need to turn out in force in the midterms — could be critical to the outcome.”
The poll is likely correct, but in a different sort of way. Even the IRS scandal and the VA scandal made many Democrats squirm as well as Republicans, so there was no way to pit one group against the other for political gain. With the immigration surge, however, it is a bit more partisan, and creates a better opportunity for the Democrats to target the Republicans on this issue (and vice versa) — precisely in time for election season.
In fact, the Washington Times noted last week,
“Perhaps one particular decision by the White House highlights how concerned the administration is about public reaction: As of now, not a single illegal-alien detainee seems to have been sent to Louisiana or Arkansas, the states bordering Texas that are closest to the site of the border deluge. This is no accident. Those two states have Democratic senators up for re-election who are vulnerable enough to lose, but who might still be able to prevail. The White House appears to have decided not to send any illegals there to avoid the potential for political damage.”
The White House is keenly aware of not “letting this crisis go to waste”. They have carefully chosen not to send immigrants to states with vulnerable Democrat elections so that they will avoid arousing the Republican/elderly electorate on Election Day.
On the other hand, those who are concerned about the immigrant surge are already being painted as “anti-children”, “heartless”, etc. Those sentiments are certain to be repeated during the election cycle.
At least one group thinks that this crisis is contrived. The National Association of Former Border Patrol Officers (NAFBPO), which issued a statement in early June, essentially stating that surge of immigrants, including minors, crossing our border “is not a humanitarian crisis. It is a predictable, orchestrated and contrived assault on the compassionate side of Americans by her political leaders that knowingly puts minor illegal alien children at risk for purely political purposes.”
The immigration surge is less about immigration than it is about deflection. If the Obama Administration can have a large part of the electorate — especially Republicans and elderly — refocus on something big other than the IRS scandal, VA scandal, and more, then they can be out of scrutiny on those particularly damning issues for at least the time being.
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A federal appeals panel handed down a ruling this morning that could be problematic for Obamacare. As just reported, “A judicial panel in a 2-1 ruling said such subsidies can be granted only to those people who bought insurance in an Obamacare exchange run by an individual state or the District of Columbia — not on the federally run exchange HealthCare.gov.” You can read the entire appeal here.
This is the eagerly awaited Halbig case. 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. If upheld, it could affect millions of Obamacare enrollees. The article notes,
“the ruling could lead many, if not most of those subsidized customers to abandon their health plans sold on HealthCare.gov because they no longer would find them affordable without the often-lucrative tax credits. And if that coverage then is not affordable for them as defined by the Obamacare law, those people will no longer be bound by the law’s mandate to have health insurance by this year or pay a fine next year.
If there were to be a large exodus of subsidized customers from the HealthCare.gov plans, it would in turn likely lead to much higher premium rates for non-subsidized people who would remain in those plans, who are apt as a group to be in worse health than all original enrollees.”
The government will most certainly file a full review in U.S. Court of Appeals for the District of Columbia Circuit.
Regardless of the eventual outcome of the case 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 (e.g. 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. That is not a “glitch”. That is disdain.
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. From a tactical perspective, such a scenario is not necessarily good for conservative or libertarians either, because it sets up the sound-byte narratives that conservatives and libertarians are “taking away your health care”, “they hate the poor, etc”, which will most certainly be used ad nauseam by the Democrats. 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 passed by Congress. That most certainly is not okay.
This case perfectly highlights the stupidity and utter contempt for which the Democrats have of procedure and law, as seen in the problems with the entire Obamacare bill.
UPDATE: Allahpundit reminds us that the 4th Circuit upheld the Obamacare subsidies for federal exchange consumers.
So…which is it? Is it the intent of the law or the text of the law? Stay tuned on this one.
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First Lois Lerner’s home computer crashed. Then it was seven IRS employees, many who had important positions. You can read about them here. Now, according to the Daily Caller, the IRS Deputy Associate Chief Counsel Thomas Kane reported in congressional testimony that even more IRS officials succumbed to computer crashes. He estimated that the number was no more than 20. Kane also stated that the IRS does not know yet if those lost emails are backed up anywhere.
Last month in June, the IRS commissioner John Koskinen testified that he did not know of any way to get missing IRS emails back, which was in contrast to his March testimony that IRS employee emails are saved on servers. In that interim time between the two testimonies, it was learned that in September of 2011, the IRS canceled its contract with an email archiving firm after 6 years.
The names of the newest IRS crash victims include: “David Fish, who routinely corresponded with Lois Lerner, as well as Lerner subordinate Andy Megosh, Lerner’s technical adviser Justin Lowe, and Cincinnati-based agent Kimberly Kitchens”.
The IRS computer crashes happened in both Washington DC and Cincinnati. Additionally, it appears that the IRS violated the The Federal Records Act, which required IRS employees to save and also print out all of their emails related to IRS business — in the unlucky event a hard drive crashed or was deleted in an improper data recycling procedure.
UPDATE: Even as the IRS scandal continues to worsen, the IRS brazenly put out a new solicitation on Monday for “media destruction” services to destroy at least another 3,200 hard drives.
You can’t make this up.
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Charles Krauthammer’s Op-Ed in the Washington Post this past week was a succinct and cogent piece of writing on the Gaza-Israeli conflict. Where many news organizations have been wont to blame Israel, Krauthammer calls it like it is.
This piece was so excellent, it is worth it to reprint in its entirety below.
MORAL CLARITY IN GAZA
Israel accepts an Egyptian-proposed Gaza cease-fire; Hamas keeps firing. Hamas deliberately aims rockets at civilians; Israel painstakingly tries to avoid them, actually telephoning civilians in the area and dropping warning charges, so-called roof knocking.
“Here’s the difference between us,” explains the Israeli prime minister. “We’re using missile defense to protect our civilians, and they’re using their civilians to protect their missiles.”
Rarely does international politics present a moment of such moral clarity. Yet we routinely hear this Israel-Gaza fighting described as a morally equivalent “cycle of violence.” This is absurd. What possible interest can Israel have in cross-border fighting? Everyone knows Hamas set off this mini-war. And everyone knows the proudly self-declared raison d’etre of Hamas: the eradication of Israel and its Jews.
Apologists for Hamas attribute the blood lust to the Israeli occupation and blockade. Occupation? Does no one remember anything? It was less than 10 years ago that worldwide television showed the Israeli army pulling die-hard settlers off synagogue roofs in Gaza as Israel uprooted its settlements, expelled its citizens, withdrew its military and turned every inch of Gaza over to the Palestinians. There was not a soldier, not a settler, not a single Israeli left in Gaza.
And there was no blockade. On the contrary. Israel wanted this new Palestinian state to succeed. To help the Gaza economy, Israel gave the Palestinians its 3,000 greenhouses that had produced fruit and flowers for export. It opened border crossings and encouraged commerce.
The Israel Defense Forces released a video on Thursday that they claim shows a tunnel that Hamas militants planned to use to attack Israel.
The whole idea was to establish the model for two states living peacefully and productively side by side. No one seems to remember that, simultaneous with the Gaza withdrawal, Israel dismantled four smaller settlements in the northern West Bank as a clear signal of Israel’s desire to leave the West Bank as well and thus achieve an amicable two-state solution.
This is not ancient history. This was nine years ago.
And how did the Gaza Palestinians react to being granted by the Israelis what no previous ruler, neither Egyptian, nor British, nor Turkish, had ever given them — an independent territory? First, they demolished the greenhouses. Then they elected Hamas. Then, instead of building a state with its attendant political and economic institutions, they spent the better part of a decade turning Gaza into a massive military base, brimming with terror weapons, to make ceaseless war on Israel.
Where are the roads and rail, the industry and infrastructure of the new Palestinian state? Nowhere. Instead, they built mile upon mile of underground tunnels to hide their weapons and, when the going gets tough, their military commanders. They spent millions importing and producing rockets, launchers, mortars, small arms, even drones. They deliberately placed them in schools, hospitals, mosques and private homes to better expose their own civilians. (Just Thursday, the U.N. announced that it found 20 rockets in a Gaza school.) And from which they fire rockets at Jerusalem and Tel Aviv.
Why? The rockets can’t even inflict serious damage, being almost uniformly intercepted by Israel’s Iron Dome anti-missile system. Even West Bank leader Mahmoud Abbas has asked: “What are you trying to achieve by sending rockets?”
It makes no sense. Unless you understand, as Tuesday’s Post editorial explained, that the whole point is to draw Israeli counterfire.
This produces dead Palestinians for international television. Which is why Hamas perversely urges its own people not to seek safety when Israel drops leaflets warning of an imminent attack.
To deliberately wage war so that your own people can be telegenically killed is indeed moral and tactical insanity. But it rests on a very rational premise: Given the Orwellian state of the world’s treatment of Israel (see: the U.N.’s grotesque Human Rights Council), fueled by a mix of classic anti-Semitism, near-total historical ignorance and reflexive sympathy for the ostensible Third World underdog, these eruptions featuring Palestinian casualties ultimately undermine support for Israel’s legitimacy and right to self-defense.
In a world of such Kafkaesque ethical inversions, the depravity of Hamas begins to make sense. This is a world in which the Munich massacre is a movie and the murder of Klinghoffer is an opera — both deeply sympathetic to the killers. This is a world in which the U.N. ignores humanity’s worst war criminals while incessantly condemning Israel, a state warred upon for 66 years that nonetheless goes to extraordinary lengths to avoid harming the very innocents its enemies use as shields.
It’s to the Israelis’ credit that amid all this madness they haven’t lost their moral scruples. Or their nerve. Those outside the region have the minimum obligation, therefore, to expose the madness and speak the truth. Rarely has it been so blindingly clear.
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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
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The Teachers Union in Pennsylvania is putting self-interest ahead of the schools.
A recent article in the WSJ highlights the problems of the Philadelphia school system trying to navigate the process of staff reduction. The unions claim that seniority is the only criteria for cuts, while school administration wants other choices. Pennsylvania is one of a few states that grants teachers a right to strike, so this fight is one which is sure to be long-suffering.
The schools point out to the unions that since “a 2001 state takeover spurred in part by major financial problems and woeful test scores, the system has been governed by the School Reform Commission, a five-member board jointly appointed by the governor and mayor. State law permits the commission to suspend some parts of the school law, including seniority protections for employees”. This is the point of contention with the unions.
While the article is decent, it misses a very important part related to contracts and negotiations. The teacher contracts expired in 2013. Therefore, those teachers who are complaining that there is no right other than seniority — because that right exists in their contract — are operating as if the contract is still valid. It certainly is not. Despite the fact that their contracts expired nearly a year ago, they still claim rights under that contract. This is patently false; when a contract is over, it is over -they have the right to nothing unless it is negotiated in a new contract.
If the school administration is struggling financially, there is nothing to stop them from say, offering teachers 15% – 25% lower pay than what they made in previous contracts in order to get back on their feet, but even more importantly, to get them in line with what similarly qualified individuals are earning in the private sector. There is no inherent right to a higher salary or even the same benefits as they had previously earned. The private sector does not operate this way. The public sector cannot either, if it is to remain solvent.
Teachers don’t automatically deserve work rules, pensions, and pay other than what the private sector pays, especially in a down economy. A teacher strike shouldn’t be over a 10-15% assumed increase based on past contracts and situations. The harsh reality is that the schools simply cannot afford the current teacher pay and pension/benefits packages. And it should not have to pay those salaries and benefits – the realities of life, the job market, and the economy have set compensation levels for similarly qualified individuals at substantially lower than Philly teacher levels. It is only teacher union and political cronyism that has allowed this fiasco to exist.
The Pennsylvania school system would do well to be reminded that, because teacher contracts are expired, they are not bound to continue them on previous, overgenerous terms. Their obligation is to provide their services in return for certain compensation and benefits during that time. But that’s it — they are only covered for the period of the current contract.
This point is important because there really can be no part of a negotiated contract that promises any compensation or benefits for services rendered after the end of the contract period; otherwise, a locality (Philadelphia in this case) runs the risk of continuing runaway financial obligations for which it cannot properly budget and it hamstrings future body politics not even in office yet.
Financial difficulties have already plagued the system once, in 2001. Unfortunately, the wake-up call seems to have been missed. Slapping down a $2 cigarette tax for the schools is not going to save the system. It’s merely a band-aid when a tourniquet is needed.
Overhauling the pay and compensation packages of Philadelphia teachers would be thoroughly beneficial. Even though it may be politically difficult and unpalatable, budget reform and deficit reduction will naturally follow once compensation levels have been stabilized and brought in line with their private counterparts.
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Even with record federal revenue, the government has a running deficit of $385 billion though the first nine months of fiscal 2014.
According to CNSNews, “The White House Office of Management and Budget has estimated that in the full fiscal 2014, the federal government will collect $3.001721 trillion in taxes and spend $3.650526 trillion, while running a deficit of $648.805 billion.
The OMB has also estimated that, while running that deficit, the federal government will collect a record amount in inflation-adjusted tax revenues.”
All this confirms is that the government is not short on money (record tax revenue receipts) but is short on cutting spending.
As I noted last fall how irregular circumstances contributed to reducing the deficit last year, it is likely that there will be a similar explanation for the tiny surplus as well.
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After the United Negro College Fund accepted a $25 million grant from Koch Brothers, Inc and the Charles Koch Foundation, The American Federation of State, County and Municipal Employees (AFSCME) sent a letter to the United Negro College Fund (UNCF) yesterday ending their relationship. This includes a paid internship program.
In the letter, AFSCME President Lee Saunders condemned the action as “not only deeply hostile to the rights and dignity of public employees, but also a profound betrayal of the ideals of the civil rights movement.”
He further accused the Koch Brothers of being “the single most prominent funders of efforts to prevent African Americans from voting”.
Needless to say, these accusations are outrageous. A rational view would show that the Koch Brothers support for organizations that enhance individual responsibility and free-market solutions for education and poverty is far superior to the AFSCME policies of cronyisn and increasing the welfare state.
UNCF President Michael Lomax responded with this statement: “While I am saddened by AFSCME’s decision, it will not distract us from our mission of helping thousands of African American students achieve their dream of a college degree and the economic benefits that come with it,”
The $25 million will create a “Koch Scholars” program. In comparison, a AFSCME spokesman noted that the union donates $50,000 to $60,000 a year for scholarships and “hundreds of thousands” of dollars annually.
The libertarian-leaning Koch Brothers have been routinely vilified on the Left. Senate Majority Leader Harry Reid declared in February that “These two brothers are about as un-American as anyone that I can imagine.”
You can take a look at the Koch Brother’s Foundation charitable information here. They have have pledged or contributed $1.2 billion in donations for medical and cancer research, education and science, arts and culture, and public policy.
As for the ASFCME, a politically-correct hit job “is a terrible thing to waste”
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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.
