Capitalism, The Best Solution to Poverty

[Tero]

Oops, jobs going abroad. Trump did not read that part. He did not read any of it.
https://m.dailykos.com/stories/2018/1/1 ... y-closures?

[Forty Two]

Oops, jobs going abroad. Trump did not read that part. He did not read any of it.
https://m.dailykos.com/stories/2018/1/1 ... y-closures?

The Daily Kos, that's an unbiased source if I ever saw one. I'm sure you'll be taken to task soon by certain members of the forum who demand only neutral, unbiased sources be linked and referenced. It's dishonest to refer to biased sources, I'm told.

[Tero]

Prove that the taxis NOT cut to half abroad.

[L'Emmerdeur]

From Forbes:

Critics say the tax law will send factories and jobs abroad: "Under the new law, income made by American companies’ overseas subsidiaries will face United States taxes that are half the rate applied to their domestic income, 10.5 percent compared with the new top corporate rate of 21 percent. 'It’s sort of an America-last tax policy,' said Kimberly Clausing, an economist at Reed College in Portland, Ore., who studies tax policy. 'We are basically saying that if you earn in the U.S., you pay X, and if you earn abroad, you pay X divided by two.' What could be more dangerous for American workers, economists said, is that the bill ends up creating a tax break for manufacturers with foreign operations. Under the new rules, beyond the lower rate, companies will not have to pay United States taxes on the money they earn from plants or equipment located abroad, if those earnings amount to 10 percent or less of the total investment."

[Forty Two]

Prove that the taxis NOT cut to half abroad.

[Forty Two]

That's a massive misunderstanding of that particular tax. We're talking about overseas subsidiaries of American companies earning money overseas -- in other jurisdictions. Those other jurisdictions tax that income. So, the US IRS would not double tax the income if it was taxed in another jurisdiction. So, the companies were going overseas to take advantage of lower rates in other countries. The US was at 35% and they could go to an Asian country and pay a fraction of that, AND not pay anything to the IRS.

So, the law establishes a 10.5% minimum tax rate. Companies still get to take a tax credit of 80% of the taxes they pay to foreign governments. But if the total comes to less than 10.5% of income earned abroad, they have to write a check to the IRS for the difference.

Thus, the tax now requires a payment on overseas income to the US government where it did not require that payment before. And, it's structured in a way that companies are paying it to the American government, instead of a foreign government.

[L'Emmerdeur]

That's a massive misunderstanding of that particular tax. We're talking about overseas subsidiaries of American companies earning money overseas -- in other jurisdictions. Those other jurisdictions tax that income. So, the US IRS would not double tax the income if it was taxed in another jurisdiction. So, the companies were going overseas to take advantage of lower rates in other countries. The US was at 35% and they could go to an Asian country and pay a fraction of that, AND not pay anything to the IRS.

That isn't how it worked, according to the Tax Policy Center. A multinational in the US paid no tax on income earned in other countries only as long as that income was not repatriated.

The federal government taxes US resident multinational firms on their worldwide income at the same rates applied to domestic firms; the current maximum tax rate—the rate that applies to most corporate income—is 35 percent. US multinationals may claim a credit for taxes paid to foreign governments on income earned abroad, but only up to their US tax liability on that income. Firms may, however, take advantage of cross-crediting, using excess credits from income earned in high-tax countries to offset US tax due on income earned in low-tax countries.

US multinationals generally pay tax on the income of their foreign subsidiaries only when they repatriate the income, a delay of taxation termed “deferral.” Deferral, the credit limitation, and cross-crediting all provide strong incentives for firms to shift income from the United States and other high-tax countries to low-tax countries.

Suppose, for example, a US-based multinational firm facing the 35 percent maximum corporate income tax rate earns $800 in profits in its Irish subsidiary (figure 1). The 12.5 percent Irish corporate tax reduces the after-tax profit to $700. Suppose the firm then repatriates $70 of this profit and reinvests the remaining $630 in its Irish operations. The firm must then pay US tax on a base of $80 (the $70 plus the $10 in Irish tax paid on that portion of its profits), or $28, but it claims a credit for the $10 Irish tax, leaving a net US tax of $18. If the firm has excess foreign tax credits from operations in high-tax countries, it can offset more (or possibly all) of the US tax due on its repatriated Irish profit. Meanwhile, deferral allows the remaining profit ($630) to grow abroad, free of US income tax until it is repatriated.

The problem for multinationals was that they couldn't use the income earned overseas for paying dividends and buying back stock unless they were willing to pay US taxes when they did so. They found ways around that (using the overseas money as collateral for loans which were then used to pay dividends for instance) but still kept the money overseas, often registering the income in tax havens like Grand Cayman. The US taxes were 'deferred' by doing so; in practice this 'deferral' was indefinite. The multinationals were betting that at some point they'd get a break on the taxes on this income (as they have in the past) and the new tax code did just that, as well as giving them a very large reduction on any offshore income they earn in the future. In effect, this is nothing but an incentive for multinationals to continue to shift investment offshore.

'How the Tax Plan Will Send Jobs Overseas'

As discussed in my previous Atlantic piece, the GOP plan was rumored to use only a 10 percent minimum tax, and to make it worse, would make the minimum tax determination based on the average of a company’s total global profits. What was problematic about this design was that it not only encouraged companies to move profits to tax havens, but it actually encouraged them to simultaneously move jobs and operations such as manufacturing to industrialized countries that had typical tax rates and to shift more profits to tax havens. Why? Because if you had $100 million of profits in Bermuda facing no tax, you might have still had to pay $10 million in U.S. taxes to meet the new global minimum tax. But if you moved a factory to Germany that made $100 million and paid 20 percent in taxes there, you could still pay zero on your profits in Bermuda because the average taxes paid on your global profits (from both Bermuda and Germany) would be the global minimum rate of 10 percent. This perverse design means the more a U.S. multinational shifts jobs and operations to industrialized nations with similar tax rates to the U.S., the more it can get away with shifting more and more profits to tax havens.

[Seabass]

Portugal Dared to Cast Aside Austerity. It’s Having a Major Revival.
At a time of mounting uncertainty in Europe, the country has defied critics who insisted on austerity as the answer to the Continent’s economic and financial crisis.
https://www.nytimes.com/2018/07/22/busi ... erity.html

LISBON — Ramón Rivera had barely gotten his olive oil business started in the sun-swept Alentejo region of Portugal when Europe’s debt crisis struck. The economy crumbled, wages were cut, and unemployment doubled. The government in Lisbon had to accept a humiliating international bailout.

But as the misery deepened, Portugal took a daring stand: In 2015, it cast aside the harshest austerity measures its European creditors had imposed, igniting a virtuous cycle that put its economy back on a path to growth. The country reversed cuts to wages, pensions and social security, and offered incentives to businesses.

The government’s U-turn, and willingness to spend, had a powerful effect. Creditors railed against the move, but the gloom that had gripped the nation through years of belt-tightening began to lift. Business confidence rebounded. Production and exports began to take off — including at Mr. Rivera’s olive groves.

“We had faith that Portugal would come out of the crisis,” said Mr. Rivera, the general manager of Elaia. The company focused on state-of-the-art harvesting technology, and it is now one of Portugal’s biggest olive oil producers. “We saw that this was the best place in the world to invest.”

At a time of mounting uncertainty in Europe, Portugal has defied critics who have insisted on austerity as the answer to the Continent’s economic and financial crisis. While countries from Greece to Ireland — and for a stretch, Portugal itself — toed the line, Lisbon resisted, helping to stoke a revival that drove economic growth last year to its highest level in a decade.

The renewal is visible just about everywhere. Hotels, restaurants and shops have opened in droves, fueled by a tourism surge that has helped cut unemployment in half. In the Beato district of Lisbon, a mega-campus for start-ups rises from the rubble of a derelict military factory. Bosch, Google and Mercedes-Benz recently opened offices and digital research centers here, collectively employing thousands.

Foreign investment in aerospace, construction and other sectors is at a record high. And traditional Portuguese industries, including textiles and paper mills, are putting money into innovation, driving a boom in exports.

“What happened in Portugal shows that too much austerity deepens a recession, and creates a vicious circle,” Prime Minister António Costa said in an interview. “We devised an alternative to austerity, focusing on higher growth, and more and better jobs.”

continued: https://www.nytimes.com/2018/07/22/busi ... erity.html

[pErvinalia]

No surprise really. Everyone with a brain (i.e. not neoliberals) knows that pump priming an economy works.

[Seabass]

My goodness, this can't be right... Could it be that Quadruple Deuce is wrong about trickle down?

Almost half of Americans can't pay for their basic needs
https://www.cbsnews.com/news/almost-hal ... sic-needs/

Four in 10 Americans are struggling to pay for their basic needs such as groceries or housing, a problem even middle-class households confront, according to a new study from the Urban Institute.

Despite the U.S. economy being near full employment, 39.4 percent of adults between 18 and 64 years old said they experienced at least one type of material hardship in 2017, according to the study, which surveyed more than 7,500 adults about whether they had trouble paying for housing, utilities, food or health care.

The findings surprised researchers at the Urban Institute, who had expected to find high levels of hardship among poor Americans but hadn't predicted so many middle-class families would also struggle to meet their basic needs. That may illustrate that a middle-class income "is no guarantee" of protection from hardship, said Michael Karpman, research associate at the Urban Institute's health Policy Center and a co-author of the report.

Against the backdrop of President Donald Trump's boasting about low unemployment and strong economic growth, the research adds nuance to the problems facing American families. Middle-class households tend to struggle with paying their health care bills rather than utilities, for instance. Health care costs have outpaced wages and inflation, pushing more Americans into high-deductible plans, which can backfire when serious health problems arise.

"A lot of people are looking at the fact that wages aren't keeping up with household costs as one reason families are having difficulty making ends meet," Karpman said. "Even for families with health insurance, they may be facing high deductibles that leave them facing high costs."

continued:
https://www.cbsnews.com/news/almost-hal ... sic-needs/

[pErvinalia]

When the US economy crashes hard again, I wonder if that will finally be the death knell for trickle-down economics. Will they finally admit that cutting taxes, not giving wage rises, and deregulation of the financial sector is a failed experiment? I and others had hope that after the GFC that would be the case. But these idiots have no shame.

[Tero]

But you could become an Internet millionaire! Taxes and socialistic healthcare would kill that!

[Hermit]

When the US economy crashes hard again, I wonder if that will finally be the death knell for trickle-down economics. Will they finally admit that cutting taxes, not giving wage rises, and deregulation of the financial sector is a failed experiment? I and others had hope that after the GFC that would be the case. But these idiots have no shame.

Didn't happen in the aftermath of 1929. Nothing's changed since then. Again and again.

[pErvinalia]

Well they did change after 1929. Roosevelt's New Deal was implemented, which was a strong shift to a social democracy approach to the economy. It took 50 years for it to revert to the selfish greedy "wealth creators" nonsense again.

[Hermit]

Well they did change after 1929. Roosevelt's New Deal was implemented, which was a strong shift to a social democracy approach to the economy. It took 50 years for it to revert to the selfish greedy "wealth creators" nonsense again.

True about Roosevelt. Hitler did the same thing, by the way, spending up big on huge projects like the Autobahn with money he did not have. Both were outliers, though. Besides them - and Keynes - what later became known as the Chicago School of economics remained the orthodox theory, failure after failure.