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ROBERT B. REICH is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fourteen books, including the best sellers “Aftershock”, “The Work of Nations,” and"Beyond Outrage,“ and, his most recent, "Saving Capitalism.” He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, INEQUALITY FOR ALL.
Updated: 1 hour 35 min ago
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WHY CORPORATE TAX DESERTERS SHOULDN’T GET THE BENEFITS OF BEING AMERICAN CORPORATIONS
Apple is only the latest big global American corporation to use foreign tax shelters to avoiding paying its fair share of U.S. taxes. It’s just another form of corporate desertion.
Corporations are deserting America by hiding their profits abroad or even shifting their corporate headquarters to another nation because they want lower taxes abroad. And some politicians say the only way to stop these desertions is to reduce corporate tax rates in the U.S. so they won’t leave.
Wrong. If we start
trying to match lower corporate tax rates around the world, there’s no end to it.
Instead, the President should use his executive power to end the financial incentives that encourage this type of corporate desertion. President Obama has already begun, but there is much left that could be done.
In addition, corporation that desert America by sheltering a large portion of their profits abroad or moving their headquarters to another country should no longer be entitled to
the advantages of being American.
1. They shouldn’t be allowed to influence the
U.S. government. They shouldn’t be allowed to contribute to U.S. political
campaigns, or lobby Congress, or participate in U.S. government agency
rule-making proceedings. And they no longer have the right to sue foreign
companies in U.S. courts for acts committed outside the United States.
2. They shouldn’t be entitled to generous
government contracts. “Buy American” provisions of the law should be
applied to them.
3. Their assets around the world shouldn’t any longer be protected by the U.S. government. If their factories and equipment are expropriated somewhere around the world, they shouldn’t expect the United States to negotiate or threaten sanctions, or use our armed forces to protect their investments. And if their intellectual property – patents, trademarks, trade names, copyrights – are disregarded, that’s their problem too. Don’t expect any help from us.
In fact, their
interests should be of no concern to the U.S. government – in trade
negotiations, climate negotiations, international treaties reconciling
American law with the laws of other countries, or international disputes over
access to resources.
They don’t get to be represented by the U.S. government because they’re no longer American.
It’s simple logic. If corporations want to desert America in order to pay less in taxes, that’s their business. But they should no longer have the benefits that come with being American.
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THE REALITY OF FREE TRADE DEALS
Free trade is figuring prominently in the upcoming presidential election. Donald Trump is against it. Hillary Clinton has expressed qualms.
Economists still think free trade benefits most Americans, but according to polls, only 35% of voters agree.
Why this discrepancy?
Because economists support any policy that improves efficiency and they typically define a policy as efficient if the people who benefit from it could compensate those who lose from it and still come out ahead.
But this way of looking at things leaves out 3 big realities.
1. Inequality keeps growing. In a society of widening inequality, the winners are often wealthier than the losers, so even if they fully compensate the losers, as the winners gain more ground, the losers may feel even worse off.
2. Safety nets keep unraveling. As a practical matter, the winners don’t compensate the losers. Most of the losers from trade, the millions whose good jobs have been lost, don’t even have access to unemployment insurance. Trade adjustment assistance is a joke. America invests less in jobs training as a percent of our economy than almost any other advanced nation.
3. Median pay keeps dropping. Those whose paychecks have been declining because of trade don’t make up for those declines by having access to cheaper goods and services from abroad. Yes, those cheaper goods help but adjusted for inflation, the median hourly pay of production workers is still lower today than it was in 1974.
So if we want the public to support free trade, we’ve got to ensure that everyone benefits from it.
This means we need a genuine reemployment system – including not only unemployment insurance, but also income insurance. So if you lose your job and have to take one that pays less, you get a portion of the difference for up to a year.
More basically, we’ve got to ensure that the gains from trade are more widely shared.
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Why a Tax on Wall Street Trades is an Even Better Idea Than You Know
One of Bernie Sanders’s most important proposals didn’t receive enough attention and should become a law even without a president Sanders. Hillary Clinton should adopt it for her campaign.
It’s a tax on financial transactions.
Putting a small tax on financial transactions would:
1. reduce incentives for high speed trading, insider deal making and short term financial betting.
Buying and selling stocks and bonds in order to beat others who are
buying stocks and bonds is a giant zero sum game. It wastes countless
resources, uses up the talents of some of the nation’s best and
brightest and subjects financial markets to unnecessary risk.
2. generate lots of revenue. Even a one tenth of 1% transaction tax would raise $185 billion over 10 years according to the non-partisan Tax Policy Center. It could thereby finance public investments that enlarge the economic pie rather than merely rearranging its slices. Investments like better schools and access to college.
3. it’s fair. After all, Americans pay sales taxes on all sorts of goods and services, yet Wall Street traders pay no sales tax on the stocks and bonds they buy, which helps explain why the financial industry generates about 30% of America’s corporate profits, but pays only about 18% of corporate taxes.
Wall Street’s objections are baloney.
Wall Street says even a small transaction tax on financial transactions would drive trading overseas since financial trades can easily be done elsewhere.
Baloney. The U.K. has had a tax on stock trades for decades, yet remains one of the world’s financial powerhouses. Incidentally, that tax raises about 3 billion pounds yearly. That’s the equivalent of 30 billion in an economy the size of the United States, which is a big help for Britain’s budget. At least 28 other countries also have such a tax and the European Union is well on the way to implementing one.
Wall Street also claims that the tax would burden small investors such as as retirees, business owners and average savers.
Wrong again. The tax wouldn’t be a burden if it reduces the volume and frequency of trading, which is the whole point. In fact, the tax is highly progressive. The Tax Policy Center estimates that 75% of it would be paid by the richest 5th of taxpayers and 40% by the top 1%.
So, why aren’t politicians of all stripes supporting it? Because the financial transactions tax directly threatens a major source of Wall Street’s revenue. And if you hadn’t noticed, the Street uses a portion of its vast revenues to gain political clout. Which may be one of the best reasons for enacting it.
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