Democracy Now! had a talk with the author of a new report about the money being held by the super-rich in “offshore” accounts. The amount is mindboggling: $21 to $32 trillion dollars. To get an idea of this amount, $21 trillion is more than what the U.S. and Japan creates in a year added up together. The report was written by James Henry who was the chief economist for McKinsey and Company. He says $10 trillion of that money is held by just 100,000 people worldwide. That’s not the 1%. The 100,000 with the off-shore spoons in their mouths is the .00002%, a much, much smaller number.
If you think it’s just those rotten Swiss and the Cayman Island banks that allow this, think again. According to Henry the big U.S. and British banks are all involved, too. Mexican, Russian or Nigerian money can be parked in U.S. banks without paying a cent in taxes. So it collects there with money routed through the Caymans. Henry says the Caymans “are just conduits to their ultimate destinations” in New York, London and Geneva.
In theory this money could be taxed at a modest rate and bring in hundreds of billions for struggling governments worldwide. In reality it sits in the accounts which can be switched from country to country with a few keystrokes.
This is not enough for the Godzillas of Greed so they are trying another scam. In the U.S. they are trying to get a “tax holiday” for the corporations who have foreign branches. The way the law is now they don’t have to pay taxes on the profits they make in those branches until they bring the money to the U.S. Now the tax rate for the big companies is 35% and they don’t want to pay that much so they just keep the money overseas. Their champions in Congress want to make a deal. Bring back the money to the U.S. and you’d only have to pay 8% or 5% (depending on the proposed law). “Think of all those jobs that would be created if the companies brought the money home”, they say.
There are some problems with this. First companies don’t pay 35% in the U.S. The ten biggest companies paid only 9% in taxes in 2011. “The group includes heavyweights Exxon Mobil, Apple, Microsoft, JPMorgan Chase and General Electric.” The average collected from all corporations in 2011 was 12.1%
Forbes Magazine (which nicknames itself “capitalist tool”) explains in an article by Mark Sunshine that another round of “repatriation tax holiday” for the corporations would just encourage them to send more of their jobs overseas. “If the tax holiday is enacted, the tax burden on foreign earned income by U.S. companies will be close to 0%.” This is because the bills would reduce their tax rate to 8% or 5%. Yet the law already lets the companies deduct what they had to pay in taxes to foreign governments. So in effect the U.S. wouldn’t get any money at all and companies would be encouraged to send more plants to Mexico or Malaysia.
Well, even if the government didn’t benefit, “think of all those jobs that would be created by the companies bringing the cash home”. Not so fast. The companies do what they want with the money.
This tax holiday was tried already in the U.S. in 2004. In a report last year the Wall Street Journal said that the companies that brought back the most money under the 2004 deal cut jobs, by a shade under 21,000. Yes, I wrote cut. And this was before the Great Recession. The job cuts took place during 2004-2007
I suggest we rename the “repatriation tax holiday” act more truthfully. Call it the “Send U.S. Jobs Overseas Act”
What can be done? The president suggests appeasement. He hopes we reject the “tax holiday” and lower the rate for companies from 35% to 28% while closing some tax loopholes. It’s just rearranging the chairs on the Titanic after the ship starts skinking.
Back in 2009 there was a real chance to seize the banks and companies like GM and run them for the public good. Instead the government rescued them with $13 trillion in gifts, and loans. Working people have to stop letting the politicians scam us and demand take over of Wall Street and the Mega-sized corporations. Nothing less will make a difference.