Category Archives: Tax

Oil Companies Are Raking In The Profits — And Tax Subsidies

The big 3 oil companies have reported a combined profit of $44 billion for 2012. The New York Times reported that these earnings have actually dropped based on stated expectations earlier this year. They are attributing it to the lower gas prices. They also note that the top five oil companies receive a total of $2.4 billion in tax breaks each year

According to Republicans, in order to balance our budget, they want to cut tax credits and programs that benefit the middle class, i.e., education funding for Pell Grants and public universities, tax credits like the earned income tax credit and mortgage deductions, Meals on Wheels and food subsidies for low-income families, but they absolutely refuse to end these oil and gas industry subsidies.  

The Center for American Progress Action has analyzed Romney’s tax plan and it would actually lower the top five oil and gas companies yearly tax rates by another $2.3 billion. They say this would double what they already receive in tax breaks. 

Think Progress wrote on this subject and they actually listed some of the ways these oil companies are spending their money. 

ExxonMobil:  

– Exxon spent 42 percent — or $10.7 billion — of its 2012 profits buying back its stock, which enriches executives and largest shareholders. 

– Exxon has spent $17 million lobbying for the past 18 months, making it the top spender in the oil and gas industry. It has spent more than $52 million lobbying for the first three years of the Obama presidency, 50 percent more than in the Bush administration. 

– Exxon is sitting on $18 billion in cash reserves. 

– Exxon send federal candidates $1.3 million in campaign contributions so far this campaign cycle, sending 91 percent to Republicans

– Exxon paid just 13 percent in federal taxes last year, lower than the average American family. Right after Mitt Romney, Senate Minority Leader Mitch McConnell (R-KY) is the top recipient of Exxon federal contributions

– Exxon CEO Rex Tillerson received $24.7 million total compensation.

Royal Dutch Shell

– Shell will start drilling in the Arctic this summer, but its oil spill response plan is still behind schedule. It’s off to an inauspicious start in the Arctic, recently losing control of an Arctic drilling rig. 

– Shell has spent nearly $22 million for the past 18 months, making it the second-biggest spender of the oil and gas industry. 

– Shell has more than $17.3 billion in cash reserves. 

– Shell bought back 15 percent of its second-quarter profits, or $900 million. 

– Shell CEO Peter Voser’s compensation more than doubled in 2011 to $15.3 million. His salary increased (in euros) by 113 percent. 

– In its annual report, Shell noted that the number of oil spills increased from 195 in 2010 to 207 during 2011.

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Middle Class Would Find Higher Taxes Under Republican Plan

The Congressional Research Service released a report last month reviewing the Republicans proposed tax reform plan that would broaden the tax base, and what they found was that under their proposal the net result would be cutting taxes on the wealthiest Americans while raising taxes on the middle and lower class. The report was actually prepared by Democrats and they then sent their findings to be reviewed by nonpartisan tax experts including The Tax Policy Center. I have noticed this has received very little attention so I wanted to share some their findings.   

Under the GOP plan, they would replace the current tax structure with a two bracket system (otherwise known as a flat tax) — 25% and 10% — cutting the top tax rate from the current 35% to 25%. This would benefit everyone and result in a reduction of federal tax collection by $4.5 trillion dollars. Now on its face it sounds great, the middle class would pay a 10% flat tax rate. 

Here is the catch — Republicans including their golden boy Paul Ryan want to get rid of special interest tax loopholes and tax shelters. 

The Republicans have declined to specify the exact loopholes they would target, but what we do know is, based on their record, they are united in opposing ending any subsidies for industries such as oil and gas. 

The study found that the biggest loopholes that are currently in the system consist of tax breaks for employer-provided health insurance, mortgage interest, state and local taxes, and retirement savings, and these all disproportionately benefit the middle class. 

According to the Joint Economic Committee, “although households earning $100,000 to $200,000 a year would save about $7,000 from the lower tax rates in the GOP plan, those savings would be swamped by eliminating major deductions.” 

This would result in married couples falling in that income range would pay an additional $2,700 annually to the IRS, on top of the tax increases Bush tax cuts that are set to expire at the end of the year. Households earning more than $1 million a year would get a tax cut of about $300,000 annually (multi-millionaires would receive a huge tax break) while people making under $200,000 will see their taxes rise

Roberton Williams of the Tax Policy Center has reviewed the Committee’s report and he says:

That even though the numbers are rough its conclusions are largely accurate. Even with eliminating fairly major tax preferences, the Ryan tax plan remains regressive. That’s the bottom line. Unless you go after the tax preferences that benefit the wealthy, i.e., capital gains, dividends, tax-free interest on municipal bonds, it’s really hard to undo the regressivity of the rate changes. You’ll be shifting the burden of the tax code toward the middle class

I guess there is a reason why whenever Mitt Romney and his fellow Republicans are asked to give specifics on their flat-tax plan, they refuse and then go to their usual talking points, i.e., we need to broaden the base, let everyone have skin in the game…my favorite….we can’t raise taxes on the job creators, etc. This is yet another example that shows who Republicans are working for…the rich.

Class Warfare — Taxes Hitting Mid/Lower Classes the Hardest

Thanks to Occupy Wall Street the inequalities in our tax system have been at the forefront of our politics. The Republicans are contending that the “job creators” should not have to pay more in taxes and that in fact, if you take into account the state and local taxes, they pay anywhere from 40 to 60% of all tax revenue. The Institution of Taxation and Economic Policy have come out with a state by state breakdown (find your state here) showing who actually pays the most in taxes. They breakdown what the bottom 20%, mid 60%, and the top 20% pay. Not surprisingly every state confirms what the Democrats have been telling us, thanks to the Bush tax cuts, our nation’s rich pay the least.  

ITEP reports: 

Ten states—Washington, Florida, Tennessee, South Dakota, Texas, Illinois, Michigan, Pennsylvania, 

Nevada, and Alabama—are particularly regressive. These “Terrible Ten” states ask poor families—those in the bottom 20% of the income scale—to pay almost six times as much of their earnings in taxes as do the wealthy. Middle-income families in these states pay up to three-and-a-half times as high a share of their income as the wealthiest families. “Virtually every state has a regressive tax system,” noted Gardner. “But these ten states stand out for the extraordinary degree to which they have shifted the cost of funding public investments to their very poorest residents.”

The state with the worst disparity is Mississippi. Their study shows that in the category of Sales and Excise Taxes the bottom 20% whose income is less than $16,000/year pay 8.5% of their income while people earning $39,000 to $70,000 pay 5.6%. The wealthiest in Mississippi earning over $319,000 a year pay JUST 1.2%. When calculating total taxes paid the bottom 20% pay 10.8%, people earning $39,000 to $70,000 pay 9.6%, and the top 1% pay just 6.3%.  

There is class warfare going on, but just in case you were unclear who was waging that war, it is the very wealthy and their Republican figureheads. Cutting entitlement programs like Pell Grants, Medicare, and Social Security, which obviously helps the middle and lower class in our society, while simultaneously cutting taxes on the wealthy and corporations does not work….FACT! We have numbers on our side. We have history on our side. Anyone who tries to convince you otherwise is outright lying.

New Republican Study — Millionaires Receiving Billions In Taxpayer Support

People who are protesting against the wealth inequality and a tax code that grossly favors the 1% now have a new ally, Tom Coburn, Republican Senator from Oklahoma. He has released what he describes as the “first-ever compilation of federal aid for the richest.”  

Let me be the first to say how very surprised I am by this study. Mr. Coburn is known to be a bedrock conservative who has strongly supported the no new taxes mantra, and when someone with his background starts to shine a light into the inequalities in our government I firmly believe he can do more to further the Occupy Wall Street cause than any encampment ever could. 

The study reveals some startling findings. For example, in 2009, $21 million in unemployment insurance was collected by people who earned more than a million dollars. Also, the U.S. Treasury pays out more than $30 billion a yearto people who make more than a million a year. Mr. Coburn says what the study “reveals is sheer Washington stupidity with government policies pampering the wealthy costing taxpayers billions of dollars every year.”   

In a letter that accompanied the study, Mr. Coburn wrote, “The income of the wealthiest 1 percent of Americans has risen dramatically over the last decade. Yet, the federal government lavishes these millionaires with billions of dollars in giveaways and tax breaks,” as noted in the recent Congressional Budget Officestudy that examined the growing income gap over the last 30 years.  

“From tax write-offs for gambling losses, vacation homes, and luxury yachts to subsidies for their ranches and estates, the government is subsidizing the lifestyles of the rich and famous. Multimillionaires are even receiving government checks for not working. This welfare for the well-off — costing billions of dollars a year — is being paid for with the taxes of the less fortunate.” 

“The government’s social safety net, which has long existed to catch those who are down and help them get back up, is now being used as a hammock by some millionaires, some who are paying less taxes than average middle class families.” 

The following list was compiled by Mr. Coburn showing federal money handed out to millionaires over several years: 

  • $18.15 million in child care tax credits 
  • $74 million in unemployment checks 
  • $89 million for preservation of ranches and estates 
  • $316 million in farm subsidies  
  • $608 million in business entertainment deductions 
  • $9 billion in retirement checks 
  • $21 billion in gambling losses 
  • $28 billion in mortgage breaks for mansions, vacation homes and yachts 

These are powerful findings and they are coming out at a crucial time during which we are debating cutting such vital programs like Medicare, Medicaid, Social Security, Education, etc.

Tax Subsidies — A Total of 56% Go To Just 4 Industries

Darrel Issa, Chairman of the House Oversight and Government Reform Committee, along with his fellow Republicans have been pushing for an investigation into the now bankrupt Solyndra, a solar company that received approximately $500 million in subsidies from the Obama administration. They are saying this has resulted in huge losses for the tax payer. This may turn out not to be true.  

CNN Money reported that during the bankruptcy hearing it was revealed the company had $859 million in assets and $749 million in liabilities at the start of 2011, and as a result there are some in Washington that believe we can actually recoup a big chunk of its cash. 

“The federal government owns the assets of borrowers that default and can manage or sell them,” Mark Muro, policy director at the Brookings Institution’s Metropolitan Policy Program, wrote in an article earlier this week. “It’s conceivable that taxpayers will not lose any money.”  

I think we should be looking at the other industries receiving subsidies from our government. This is something Republicans really don’t want to do as they are some of their biggest contributors. They have been resistant since tax reform has become the main topic in our political debates on ending these subsidies as they consider these to be a form of tax hikes (thanks to the Grover Norquist tax pledge). In all fairness though, Democrats also receive contributions from the very same industries, but they have been very focal at ending these subsidies. 

Citizens for Tax Justice has analyzed corporate tax rates from 2008 to 2010. They have examined over half of the Fortune 500 companies and it should be to no ones surprise that the richest industries are the ones that get the biggest subsidies. They found that 56 percent of the total tax subsidies went to just four industries: Financial, utilities, tele-communications, and oil, gas & pipelines.   

So I ask you, who are the biggest crooks in this system.

Republicans Plan For Reforming Corporate Tax Code — More Tax Breaks

Republicans have made big news this week. First, House Ways and Means Committee Chairman David Camp (R-MI) released his plan on reforming the corporate tax code. The plan calls for cutting the corporate tax rate from 35 to 25 percent and implementing a “territorial system” that would exempt U.S. corporations from paying taxes on money they earn overseas.

Speaker Boehner also mentioned a territorial system while speaking at the Economic Club of New York saying “Republicans are looking seriously at a territorial tax code.” Pat Garofalo’s wrote:  

Currently, U.S. corporations pay to the Treasury the difference between the tax rate of the country in which they earn money and the U.S. rate. (So money earned in a country where the rate is 25 percent would require a corporation to pay 10 percent — the difference between 35 percent and 25 percent — to the U.S.) However, corporations are allowed to defer paying their U.S. share of taxes until the bring the money back to the U.S., giving them every incentive to shift and keep money (and jobs) offshore. 

I must admit I had no idea what a territorial tax code is. It would exempt U.S. corporations from paying taxes on money they earn overseas. Citizens for Tax Justice reported on this: 

Under a territorial system, the offshore profits of a U.S. corporation would be exempt from U.S. taxes. A recent report from Citizens for Tax Justice explained that this would cause serious problems.   

First, corporations would have a greater incentive to engage in profit-shifting, meaning practices used to disguise U.S. profits as foreign profits. A common example is the manipulation of transfer pricing to shift corporate profits into tax havens (countries that do not tax, or that barely tax, certain types of profits).   

Second, corporations would have a greater incentive to shift actual operations — and jobs — to other countries.  

Our current system already encourages these practices because U.S. corporations are allowed to “defer” their U.S. taxes on their offshore profits. But the incentives would be even greater under a territorial system, in which corporations would NEVER pay U.S. taxes on their offshore profits.  

Other countries that have adopted territorial tax systems are experiencing these problems, and the European Union is considering adoption of a different system to allocate profits among EU member states.  

As CTJ’s report explains, the best alternative would be for Congress to repeal the rule allowing U.S. corporations to “defer” their U.S. taxes on offshore profits. Corporations could continue to get a credit for any taxes paid to a foreign government (just as they do now) which prevents any profits from being taxed more than once.   

Repatriation of corporate profits earned overseas  

Mr. Boehner also spoke on Monday about the possibility of a tax holiday that would allow corporations to bring the profits they earned overseas back to the U.S. without being taxed. During the Bush Administration in 2004, Congress did this and CTJ reported that there were several studies on the results of the 2004 repatriation and they showed the repatriated profits went to shareholders and not to job-creation, despite the promises made by corporate lobbyists. 

Speaker Boehner, during the same speech on Monday, also “demanded that ‘trillions’ be cut from public services — a goal that would be impossible without sharply cutting Social Security, Medicare, and Medicaid. 

In summary, the Republicans GREAT idea on reforming the corporate tax policy will end up lowering even further corporate taxation and incentivizing corporations to shift their operations overseas. At the same time they want to gut the services like Medicare, Pell Grants, Education funding…basically anything that helps the working class. 

These guys really do live in a bubble.

CBO Findings Show Extent Of Wealth Inequality

I have been reading the non-partison CBO (Congressional Budget Office) study showing the trends in wealth distribution since 1979. After I read it, I thought to myself how could there be any question as to why the protesters of Occupy Wall Street took to the streets.

Since the Reagan Administration implemented the trickle-down-economics policies, giving large tax breaks to the wealthy in the belief that with more money in their pockets it will result in job growth, the income gap has reached a level that rivals 1928, a year before the Wall Street crash that marked the beginning of the Great Depression.

CBO findings  

Sources of Income — For Middle Class is Wages/Salaries. For Wealthy is Capital Gains 

Two factors accounted for the changing distribution of market income. One was an increase in the concentration of each source of market income, which consists of labor income (such as cash wages and salaries and employer-paid health insurance premiums), business income, capital gains, capital income, and other income. All of those sources of market income were less evenly distributed in 2007 than they were in 1979.  

The other factor was a shift in the composition of market income. Labor income has been more evenly distributed than capital and business income, and both capital income and business income have been more evenly distributed than capital gains. Between 1979 and 2007, the share of income coming from capital gains and business income increased, while the share coming from labor income and capital income decreased.  

More concentrated sources of income (such as business income and capital gains) grew faster than less concentrated sources (such as labor income). 

Between 1979 and 2007:  

    • For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent.  
    • For others in the 20 percent of the population with the highest income, average real after-tax household income grew by 65 percent. 
    • For the 60 percent of the population in the middle of the income scale, the growth in average real after-tax household income was just under 40 percent. 
    • For the 20 percent of the population with the lowest income, the growth in average real after-tax household income was about 18 percent.  

Growth in Real After-Tax Income from 1979 to 2007

The share of income going to higher-income households rose, while the share going to lower-income households fell. 

The top fifth of the population saw a 10-percentage-point increase in their share of after-tax income.  

Most of that growth went to the top 1 percent of the population.  

All other groups saw their shares decline by 2 to 3 percentage points. 

Shares of Market Income, 1979 and 2007