How Dumb Do They (We) Think We (They) Are?
I was watching C-Span, again. This would be pretty sad but, I have to tell you, it is better than Ambien. Anyway, C-Span was rerunning a talk between David Wessel of the Wall Street Journal and Representative Dave Camp (R-MI), the Chairman of the House Ways and Means Committee. This talk was conducted at the Wall Street Journal’s recent CFO Network Conference. In general the discussion involved the current budget/debt ceiling negotiations. The attendees, who should probably be considered a friendly crowd, are nonetheless generally intelligent. From the comments he made however, you might believe they were all a bunch of know-nothing yahoos from a sod farm in Saskatchewan.
The thing he said which immediately seized my attention:
On corporate tax reform:
Well we have had a lot of global companies come before the committee, we’ve had a lot of hearings and testimony, we’re actually doing a novel thing. We’re having employers and job creators tell us what they think we aught to do and we’ve had a lot of good testimony…
Either Camp is an idiot or he thinks we (and/or a bunch of corporate CFO’s) are. Last year 11,195 corporate lobbyists, over 20 per legislator, spent a little under three billion dollars last year lobbying in Washington. This amount of money was six-times all other non-corporate groups combined. Maybe Camp thinks it is novel that they actually testified instead of running government from the shadows.
From there he talks about the tried and true half truths which have been the Republican talking points for some time. Individual income tax rates as job creators are one of my favorites. In order to protect big donors I suppose, Republicans have said for years increasing taxes on people who make above a quarter of a million hurts small business job creation. The inference is most small businesses file tax returns as individuals. Mainstream politicians or media sources never seem to want to debunk this myth. Of the 26 million small businesses only around 700,000 pay income tax on an individual return. Of those individual return filers, a smaller percentage make more than the quarter of a million required to pay the tax.
He was also questioned about the elimination of tax breaks or deductions to help balance the budget. He was, of course, opposed to such nonsense. He said it would hurt economic growth. Later however, he advocated reorganizing (that’s Republican for lowering and Democrat for raising) the corporate tax code (rate). In this discussion Camp told us businesses told him they wanted consistency. When asked for an explanation he told the crowd through the years congress had tried to attract different industries and had passed various tax incentives to do so. This yielded, he said, inconsistency which should be fixed so corporations would create jobs and quit shipping good “headquarters jobs” overseas. By this time, I had become confused about what he was trying to sell to whom. It is beginning to take an advanced degree in circular logic to even follow the arguments. I am afraid politicians (not just Camp) are beginning to lose track of reality themselves.
In this environment of spin, double talk, and multiple constituencies, does Congress have enough grip on reality to realize the stakes and do they care?
As we barrel toward another financial Armageddon, I wonder when (if) reality finally dawns on our legislators. From their statements, we already know some like Michelle Bachman (R-MN) and Bernie Sanders (I-VT) are in total denial. In their parallel universe, the principal is the only thing. You can bet bond/currency traders are taking notes when a double dip recession … depression…seem to only be collateral damage on the way to certain utopia. As much as these zealots quote the Constitution, one would think they might understand the kind of compromise required to pass it. With these yahoos, I doubt the Constitution would even make it out of committee. I guess this column shoots my theory on Ambien and C-Span.
10 Responses to “How Dumb Do They (We) Think We (They) Are?”
There is some truth being spoken by both sides. But at least in my opinion, both sides try to speak a grain of truth while trying to shield what we might yield in the harvest.
It is true that if we want to create jobs, we should diminish the tax burdens on business to make them more competitive in the global market place.
However it is also true that by taxing individuals on profits (or wages) we are not doing anything to inhibit the abilities of American businesses to compete.
There is some truth to both sides. We should not increase taxes on businesses based only on that they are engaged in the activity of being in business. Many businesses have a hefty tax bill to pay even if they are losing money. But what about taxing the profits of the individual? If you make little or no profits, you pay little or no taxes. If you strike it rich, you pay your fair share.
LD
“Many businesses have a hefty tax bill to pay even if they are losing money.”
please explain how a business not making a profit pays federal tax?
If you’re referring to sales tax, FICA taxes, SS; that’s the cost of doing business and has been since the 1930s.
Tax breaks on the Federal level for corps are at the lowest rate in terms of GDP since the 1930s, capital gains taxes are lowest since their inception too.
The circular corporate logic that lower taxes means they will hire flies in the face of the economic principle of supply and demand. Demand is down, and no amount of fudging future taxes will ever change that factor.
thanks
Hemmann,
How about the HVUT (Heavy Vehicle Use Tax) that a trucking company must pay even if they lost money?
You’re welcome.
Brave New World.
Serious?
How about rent, lights, and all the other things you and i pay even if we lose our jobs?
My heart does not weep for for companies any more than it does for the laid off workers. The difference here, of course, is that an unemployed worker can’t let one of their kids go just to pay the rent.
Also, I ran a cabinet shop business for 24 years, and reducing my taxes was one of the easier aspects of that business. Keeping demand up by quality work and new ideas was the hard part.
Demand and innovation were the only alternatives for making a profit. Increasing or decreasing taxes did absolutely nothing in terms of these factors.
Anybody who says different is trying to sell you a bill of goods not based upon economic principles.
This is the kind of spin being repeated constantly that is the problem discussed in the post. You may believe it is true. You may have faith that it is true. But it has no real basis in fact in our current economic situation.
Fact, the United States has the lowest corporate income tax burden among the members of the OECD countries, tied with Turkey. Do you believe that further lowering taxes on corporations to improve our competitive position against Turkey is that important?
The people who constantly harp about high corporate taxes always talk about the statutory tax rate, not the effective tax rate, the actual tax burden. This is a sleight of hand that discredits their argument. Yet, you believe it. Why?
Fact, the tax burden on corporate profits is not even one third of what it was in the 1950′s. Yes, times are different now, but the point is that the higher tax burden then didn’t effect the creation of jobs.
Fact, as the OP said, very few small businesses pay their taxes as individual income taxes. They pay them as corporate income taxes. And what are the majority of these small businesses? They are the practices of doctors, lawyers, dentists, accountants, independent insurance agents, architects, engineers, farmers, etc. In other words, individuals registered as corporations (primarily to avoid Social Security and Medicare taxes.) There has to be some close parity between the corporate income tax rate and the individual income tax rate, otherwise we all would become corporations.
Fact, no business is going to add jobs because their tax rates drop. They will only add jobs when the demand for their product increases and they need to increase production. This idea that business in the United States is starved for money, capital, is beyond ridiculous. Large corporations are sitting on two trillion dollars in cash right now. If they won’t create jobs with this money why do you believe they will with the money from the further lowering of their taxes?
merkin
following the current corporate logic, if we dropped the corp tax to zero, we should by default have zero unemployment.
why haven’t we thought of this before?
“Either Camp is an idiot or he thinks we (and/or a bunch of corporate CFO’s) are.”
I’ve probably followed his career longer than most here (we are both from the same town) and feel comfortable suggesting the former possibility is the correct one.
Actually, Merkin, you are incorrect, and you should have known better. Of course tax reform would make our firms competitive.
Now if you had been awake, you would have said that yes, it would enable them to be more competitive, but how? That’s where my own cynicism (not mere sarcasm) enters, and you should have said the same thing: Are the extra jobs that can come from U.S. firms becoming more competitive globally going to be created here or elsewhere by the firms? And how long before the firms claim a “labor shortage” and seek to bring immigrants (at lower pay) in to fill those jobs?
If you want to be a skeptic, at least be skeptical of the right things.
(And, of course, becoming more competitive means the firms can make more profits, but who says it will create new jobs, necessarily? Might firms “invest” in reducing the amount of labor required, or just spend the extra money on dividends, or [nowadays] on bonuses or “performance awards” to top management, say?)