Will Obama Offer Massive Corporate Tax Cuts to Make "Fiscal Cliff" Deal?
NO ADVERTISING, GOVERNMENT OR CORPORATE FUNDING
DONATE TODAY
 $118,618


  December 31, 2012

Will Obama Offer Massive Corporate Tax Cuts to Make "Fiscal Cliff" Deal?


James S. Henry: Territorial tax being considered that would make offshore revenue tax free
Members don't see ads. If you are a member, and you're seeing this appeal, click here
   


audio

Share to Facebook Share to Twitter



You are an inspiration. Thanks for everything you are doing. - Brenton
Log in and tell us why you support TRNN


biography

James S. Henry is a leading economist, attorney and investigative journalist who has written extensively about global issues. James served as Chief Economist at the international consultancy firm McKinsey & Co. As an investigative journalist his work has appeared in numerous publications like Forbes, The Nation and The New York Times. He was the lead researcher of the recently released report titled 'The Price of Offshore Revisited.'


transcript

Will Obama Offer Massive Corporate Tax Cuts to Make PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to the first in a series of regular reports by James S. Henry, who now joins us from Long Island, New York.

James is an economist, an attorney, investigative journalist. He served as the chief economist at the international consultancy firm McKinsey & Company. As an investigative journalist his work has appeared in numerous publications, including Forbes, The Nation, The New York Times. And he's the cofounder and on the board of Tax Justice Network.

Thanks for joining us, James.

JAMES S. HENRY, ECONOMIST, LAWYER, AND INVESTIGATIVE JOURNALIST: You're very welcome.

JAY: So what caught your attention this week?

HENRY: Well, we have this fiscal cliff situation everyone in the world is talking about. I think the background story that not so many people are focusing on is the attempt by big business to get extra kind of tax cuts for themselves in the form of reduced corporate income tax rates, and maybe even getting the Obama administration to support this. So that's one of the key things this year that we've been focusing at Tax Justice Network on, the role of tax havens in the international economy. And this is just one example of that, because many of the largest companies, it's been revealed, companies like Apple and Google and Pfizer, General Electric, are making aggressive use of offshore havens to transfer their intellectual assets, their brands, and software offshore to places like Bermuda and Ireland, and then pay themselves royalties that don't get taxed. And this is costing upwards of $70 billion a year to the Treasury. So in the course of the fiscal-cliff negotiations, we understand Tim Geithner has been proposing, as a sweetener to the deal to get Republican support, that we have a shift in the U.S. corporate income tax toward a territorial tax, which would really amount to a big tax cut for major multinationals.

JAY: What does that mean, "territorial tax"?

HENRY: Well, it means that all the income that's produced by their offshore activities—for example, GE has 60 percent of its business offshore right now—would not be taxed by the U.S. Treasury. They'd only tax those activities that are deemed within the United States. And so that would just further reinforce this game of shifting intellectual property, which is a big part of the value of companies like Apple and Google, to offshore places and locations, where, you know, actually the property wasn't created. The intellectual ideas and the patents were all derived from U.S.-based design shops. But it would essentially mean a lot of the value of these companies moves beyond the reach of the U.S. tax system. And so that means—.

JAY: What's the current status quo on that type of intellectual property and taxes?

HENRY: Well, right now they've been making increasing use of these offshore haven abuses, and TJN has estimated that they cost the Treasury about $70-90 billion a year. But the offshoring of all activities in addition to intellectual property would be—manufacturing, sales, marketing—that would really make a big hole in the U.S. tax system, especially for small business, which can't take advantage of these international games. And so, you know, that's one of the issues we've been following.

And we put together a coalition here of about 600 organizations in the last couple of weeks that have tried to come out representing small business, ordinary taxpayers, environmental groups, lots of people who are just concerned about tax justice, to fight this sleeper deal.

JAY: I think it should be noted, if my memory serves me right, that the president of General Electric was appointed by President Obama as one of his economic—chairman of one of his advisory committees, I believe, before the last election.

HENRY: Well, he was in charge of the employment, the group that was supposed to fix the unemployment problem, the competitiveness council. Actually, Obama's got quite a few senior people from companies like Honeywell, Google. Eric Schmidt's been very close to the Obama administration. You know, the head of JPMorgan. All these people have entrée to the White House. So we have a kind of moderate Republican as president. I might as well say that. If the Republican Party had not moved itself so far to the right, you know, Obama's policies, I think, on economics look pretty darned conservative here, especially these corporate tax cuts.

JAY: Just to be clear for me, the current state of taxation on intellectual property is what? Like, what are they changing?

HENRY: Well, what they'll really—going to be doing, I think, if they really move to a territorial tax, is that they will generalize what's going on already with the intellectual property activities to all other kinds of corporate activities. So any offshore activity will essentially be for the first time beyond the reach of the U.S. corporate tax system. So it's really that the shifting of intellectual property just becomes a special case of what the big-business community wants for the rest of the corporate tax system.

This is going to amount to a major problem for small businesses that have to compete with these multinational companies, because they can't take advantage of many of these offshore games. And, you know, many of the small businesses are actually taxed at individual tax rates because they're LLCs or chapter S corporations. And those are all facing potential tax increases under the president's plan. So this is a major issue. I think it's becoming, in the background, something that the progressive groups are beginning to realize is a real problem with the administration's position.

JAY: And it's being thrown out as if it's a compromise for the Republicans in order to sign the deal. But it sounds like something President Obama's in favor of anyway.

HENRY: Well, it's something that he hasn't really resisted. He talked back in February about, you know, induction in the nominal rate of corporate taxes in the United States from 35 percent to the neighborhood of 20.

But this is a global arms race. I mean, you had Canada cut its corporate tax rate to—federal rate to 15 percent back in January of this year. You had the United Kingdom cut its rate to 21 percent. And you've seen over the last 30 years this kind of arms race going on among major OECD countries, where they're all cutting corporate taxes, so that—taxation, so that today the corporate income tax as a share of federal revenue is already, prior to all these cuts, at an all-time low.

So we have, you know, basically seen the sharp erosion of the corporate income tax already in this country, and Obama's apparently engaged in a discussion to try to actually make it even more limited.

JAY: In his campaign about revitalizing American industry and all the rest during the presidential campaign, I thought he was—one of the things he said is he was going to reduce tax incentives to produce offshore. This sounds like it's the opposite of that.

HENRY: Well, there's been no discussion, really. There's been a series of revelations over the last year about how companies like Apple and Google and Pfizer have been abusing the system. But the administration has done, really, nothing to close this particular class of loopholes. There's a whole film that we produced, Sundance documentary, which I think your viewers can see a link to, called We're Not Broke, which goes into this in a lot of detail. So if you're interested in finding out how the system really works for the truly influential multinational companies, you can take a look at that video.

The bottom line is the Obama administration has been very, I would say, disappointing on this particular front, the corporate income taxation. They seem to be on the brink of giving away the store.

JAY: Alright. Thanks very much for joining us, James.

HENRY: Great.

JAY: And thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.



Comments

Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at contact@therealnews.com

latest stories

Paul Jay On Our Need For Monthly Donors
Trump's Labor Pick is Millionaire CEO Who Blames Workers for Their Poverty
Baltimore City Council members Defend Resolution Condemning Trump's Bigotry
Climate Scientists Speak Out Against Trump's Plans to Cut NASA Funding
Green Party of Canada Adopts Endorsement of Sanctions Against Israel
Political Prisoner Leonard Peltier Facing Potentially Fatal Medical Emergency
New Anti-BDS Bill in Senate Would Criminalize Criticism of Israel
Why Thousands Are Staying in Standing Rock Despite Army Corps's Decision to Halt the #DAPL
The Real News of the Day - Friday, December 9
Trump Nominee for Homeland Security John Kelly Favors Draconian Immigration Policy
New Baltimore Mayor Plans Regional Approach to Problems Like Poverty and Drug Addiction
Vijay Prashad: The Battle for Aleppo is Over
Should the Electoral College Be Abolished?
Trump Picks Leading Climate Denier to Head EPA During Time of Climate Crisis
Following Oakland Fire, Baltimore Evicts Residents of DIY Arts Space
The Real News of the Day - Thursday, December 8
The People's Tribunal on the Iraq War, Day One: Philip Giraldi
Trump Taiwan Phone Call Not an Impulsive Act
There's No Issue More Burning Than Creating Our Global Climate Change Bureau
U.S. Planned to Go to War with Japan and Germany Before Pearl Harbor Attack
The Real News of the Day - Wednesday, December 7
Anti-Government Carson to Lead Dept. of Housing and Urban Development
UN Admits Fault in Haiti's Cholera Outbreak as Country Faces Prospect of Famine
The Real News of the Day - Tuesday, December 6
The People's Tribunal on the Iraq War, Day One: John Kiriakou
The People's Tribunal on the Iraq War, Day One: John Cavanaugh
Austrian Presidential Election Shows How United Front Politics Can Defeat the Far Right
Standing Rock Cautiously Optimistic Following Denial of Easement For Dakota Access Pipeline
Italian Referendum Defeat is No Victory for the Right Wing
The Global Networks of the Resurging Far Right

TheRealNewsNetwork.com, RealNewsNetwork.com, The Real News Network, Real News Network, The Real News, Real News, Real News For Real People, IWT are trademarks and service marks of Independent World Television inc. "The Real News" is the flagship show of IWT and The Real News Network.

All original content on this site is copyright of The Real News Network. Click here for more

Problems with this site? Please let us know

Linux VPS Hosting by Stack Star Hosting