Mercury Rising 鳯女

Politics, life, and other things that matter

Corporate Profits Soar As Jobs Falter. Honeywell CEO’s Solution: Give Us Even MORE Money!

Posted by Phoenix Woman on June 1, 2012

Today I saw this:

The Bureau of Labor Statistics brings bad news for the Obama Administration, as the spring slowdown we’ve seen for the last two years appears to be the same mode for 2012 as well. The economy added only 69,000 jobs in May, and worse, the totals for March and April were revised downward a total of 49,000. So on net, that’s just +20,000 jobs, which is barely positive and not nearly enough to keep up with population.

And then I saw this:

The terrible jobs report should be matched with another set of data to point out that this is the economy that corporate executives have wanted for a long time. Because they are not suffering in a time of weak demand. They’re actually thriving. Corporate profits are soaring. The chart above shows corporate profits as a percentage of GDP, and you can see that they are now back above pre-recession levels, well over 10%. Felix Salmon notes that this has never happened before.

And then, later, this:

Honeywell CEO David Cote said yesterday – when his goons weren’t yanking the microphone away from a labor reporter asking a question – that the ideal corporate tax rate should be zero percent:

SORKIN: David, I have a tax question for you. What do you think the ultimate effective tax rate should be on corporations?

COTE: Zero.

SORKIN: Zero?

COTE: The problem is from a fairness perspective, nobody would be able to stand it. But at the the end of the day, jobs come from companies and if we wanted to create the most effective foreign direct investment pipeline you’ve ever seen, we would have the lowest rate possible.

So the only barrier to a 0% corporate tax rate, in Cote’s mind, is that the plebians might have a problem with it. Otherwise, it’s race race race to the bottom.

Bear in mind that America’s greatest prosperity for all came when we taxed the living bejeezus out of corporations and the rich.

9 Responses to “Corporate Profits Soar As Jobs Falter. Honeywell CEO’s Solution: Give Us Even MORE Money!”

  1. Mark Gisleson said

    I’m not recommending it, but a zero rate for corporations could be very effective at exposing entrenched wealth to taxation.

    It would have to be done correctly, and obviously that would never happen, but here’s one way of doing it.

    Eliminate corporate taxes but in the same bill insert the Sabo rule on CEO pay not exceeding 20x or 25x the pay of the lowest paid employee. Totally forbid outsourcing and bringing in temps with HUGE fines for violations. Give incentives to companies to increase pay and benefits. Aggressively challenge the corporate charters of violators (I would argue that states should not be allowed to issue corporate charters for interstate businesses so as to eliminate the Delaware frauds where states have zero incentive to decharter a corp.) Audit the hell out of corporations and tax unused money. Then, after profitable corps have been forced to declare healthy dividends, tax the hell out unearned income and capital gains.

    Whether we tax corporations or not is really a coin toss. The issue is whether or not we tax the wealthy, and how effectively we do so. The truth is close to what the Republicans always say: corporations can always dodge taxes, but it’s harder for the rich to evade taxes when the trail (dividends) is well documented.

  2. jo6pac said

    Mark
    Honeywell doesn’t pay taxes now and in fact got money back in 2011, so right now they pay less then 0. Then they use public owned services or the vendors/employees do and pay out nothing for the upkeep. The landing fees for the ceo private jet do not pay for the up keep of the airports it use or the roads the limo on. Why must it be on the backs of us little people to pay these fees for the wealthy?

    http://www.ctj.org/taxjusticedigest/archive/2011/11/tax_dodger_honeywell.php

  3. Charles II said

    Mark says, “Whether we tax corporations or not is really a coin toss. The issue is whether or not we tax the wealthy, and how effectively we do so. The truth is close to what the Republicans always say: corporations can always dodge taxes, but it’s harder for the rich to evade taxes when the trail (dividends) is well documented.”

    Is that where the rich get most of their money, from dividends? I don’t think so. Dividends are around 2%, not really enough to keep up with dividends. You can probably do better in Treasuries.

    Where the rich make their money is from private companies, from financial games like heightening market volatility and milking suppliers/end users (who have to buy insurance against volatility through options), from capital gains based on insider trading (Cf. Facebook), from gaming the tax system or outright tax fraud, and so on.

    So, while I think you’ve identified the problem as one of collections, the rule for tax collection is that you spread it over many different revenue sources to diminish the incentive to cheat on any one. And, of course, you enforce the law. Since most of the resources of the IRS are focused on the middle class and poor, it’s the latter point where I believe we’re failing.

  4. MarkH said

    Another significant problem is (out of control) executive pay. It would probably help a lot to ban CEO participation on their own company’s board of directors — at least for corps of a certain size.

  5. Mark Gisleson said

    The point of getting rid of corporate taxes is to make the corporations visibly give that wealth to the stockholders who will then pay taxes on the dividends. I’ve read some good stuff on this idea over the years, but the long and short of it is that yes, corporations don’t pay their fair share of taxes and rather than hiring a million accountants to let the IRS go to the mattresses with these pigs, you just let market forces do the work for you.

    If corporations aren’t taxed, then stockholders will be much more aggressive about getting paid (dividends). That is a trackable transfer of wealth, and the government could deduct taxes from those dividends just like they do with your paycheck.

    I’m not saying it’s the best solution, but that there are many ways of skinning a fat cat, and we haven’t tried any of them.

    • Charles II said

      Mark says, “I’m not saying it’s the best solution, but that there are many ways of skinning a fat cat, and we haven’t tried any of them.”

      I look to the 40s and 50s and think that we managed to collect taxes then. I think this is a failure of national will and democracy. Without it, no system will work. With it, almost any system can work.

      If I were a billionaire with the morals of David and Charles Koch, and they did away with corporate taxation, what I would do is buy the whole company, turn it into an S-corporation, then use it as my personal piggybank–specifically, to lobby for ending taxation of the wealthy in any form.

      In effect, that’s what they have already done.

      • MarkH said

        Ah well, that’s where new campaign contribution limits come in. Why are any ‘for profit’ corporations able to give money to campaigns? If, as many say, the corporation is ‘solely to make money’, then hold them to that. The rich can always give from their own pocket according to whatever the law allows.

      • Charles II said

        It’s a point that some shareholders are trying to make, MarkH. The corporations are giving away their dividends without a by-your-leave.

      • Mark Gisleson said

        Charles II: I think that’s the best shorter version summary of my remarks I’ve ever read.

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