by Linda Beale
Orrin Hatch was the keynote speaker for the ABA Tax Section luncheon today in DC. Having never heard the man in person, I was surprised at the bumbling nature of his speech. He came across as an old man reciting a set of platitudes from the GOP talking-points rulebook.
Asserting that the tax code is “complicated, inefficient, unjust, unfair,” he claimed that all are agreed on a need for tax reform, because the tax code is “the major obstacle standing between us and sustained prosperity.”
Now, folks. You all know that’s bunk, right? The major obstacles standing between us and sustained prosperity are (1) the billions we squandered on two unnecessary preemptive wars and other costs of excessive militarization of our society, along with (2) the billions spent supporting the ‘too big to fail’ financial giants that have plundered the middle class while continuing to benefit from cheap (subsidized) funding.
Of course, there are a number of areas of the tax code that also stand in the way of prosperity–the preference for capital over labor, the extensive provisions incentivizing consolidation of business empires, the provisions favoring private equity enterprises that eat up and spit out workers for their own profits. Those were clearly not the target of Sen. Hatch in his favored tax “reform.”
So what did he say about tax reform? Let’s see.
1) The goal is “to produce bipartisan tax reform that can pass the House and Senate.”
For my part, I’d just as well stick with the current Code. ANYTHING that the GOP is willing to go along with will be beneficial to Big Business and harmful to ordinary Americans. About the only thing that is bipartisan these days is something that Wall Street likes, so it gets the support of Baucus and other Dems-in-name-only.
2) The Obama Administration has accepted the idea of “revenue neutral corporate tax reform” but Hatch wants broad reform of individual, corporate and pass-through.
Interestingly, the Teaching Tax Committee had a program, staged as a debate, on corporate tax reform. The audience voted overwhelmingly in favor of retaining the corporate tax and against doing reform as “lowering the rate with revenue neutrality”. Corporate tax reform as envisioned by most on the right is just another piece of the “tax cuts create growth” mythology that has been repeated ad nauseum in spite of the evidence of the last decade of tax cuts with minimal growth.
Hatch of course says we should do corporate tax reform (lowering the rates) while ALSO lowering the rates on dividends and capital gains yet again. And he wants to lower individual rates generally at the same time that we lower corporate rates–claiming, of course, that such lowering of rates is a “fairness” issue for those pass-through businesses that have only an owner-level tax in order to encourage small business growth, entrepreneurs and job creation.
Funny how no matter what the rate is or how low the effective rate is–Apple’s is less than 10%, GE’s is even lower–the DC gang will still claim that if we only get the rates lower there will be more jobs.
And he says not doing individual tax reform at the same time would be “unfair,” because we’d be “extending a helping hand to corporations and leaving individuals behind, whether families or small businesses” This is the right’s typical claim that they care about ordinary Americans. But behind that claim is the perennial desire to 1) aid the owners of capital, with no concern for labor whatsoever and 2) cut taxes generally so that the very government that people like Sen. Hatch serve can be cast as the devil and shrunk to ensure that it provides the minimum services imaginable, in ‘starve the beast’ fashion.
Hatch then launched into some scattered comments about the “principles” that should guide tax reform. They were the predictable ones from the right
1) Hatch claims the main goal of tax reform is to promote growth through lowering rates
2) Hatch claims that international competitiveness is terribly important. He wants US multinationals to be able to repatriate their overseas profits easily (meaning–no tax). He says competitiveness requires that the U.S. adopt a “reasonable territorial system”. That, he claims will increase exports and encourage investment at home.
This is, of course, garbage. Companies go abroad to exploit cheap labor in impoverished countries like Bangladesh where workers have no rights and company owners take all the profits. Having no US taxes would just be the icing on the cake. Until we end the primitive transfer pricing game that companies are allowed to play, companies like Apple and Google will continue to pretend to sell to their offshore affiliates assets that are their core business and never ever would be sold to a third party, purely to avoid US tax on intellectual property generated in the US. The reform we need is to eliminate deferral entirely. (And we certainly don’t need to keep extending the ridiculous “active financing exception” that serves as yet another subsidy for financial institutions.)
Here Hatch engaged in a gratuitous insult to every union member in the country. He asserted that the only thing holding the country back from the territorial system he wants is the unions’ lobbying of President Obama. He went on to claim that workers “have to join unions and pay unions dues”–this of course is the anti-union screed of the right that misstates the way agency shops work. In my case, faculty can be paying members of the union or they can pay a “fair share” fee for the services the union provides them (grievances, representation, negotiation) or they can contribute to a university scholarship fund and pay nothing to a union and still get those services. Hatch’s tone (and facial expression) here was one of sheer hate–I literally had to bite my tongue to avoid standing up to challenge him for his misrepresentations about unions.
Of course, in his hatred of unions, Hatch reveals the contempt in which the right generally holds ordinary workers in the US. They want companies to be competitive–meaning that they want companies to make huge profits from exploiting labor and they don’t give a damn about workers’ being able to have jobs and decent living.
3) Hatch, like all those who elevate simplicity over distributional justice and compliance needs, talked about the complexity of the tax code, claiming that $168 billion is spent annually in complying with the tax code, while there are 51% who “don’t pay tax”.
Not sure where Hatch got the $168 billion figure (federal? state and federal? tax shelter planning included?). Much sophisticated tax planning is tax avoidance planning–businesses make the calculation that they’re willing to pay accountants and lawyers a good bit to avoid a bigger tax hit. They could avoid much of that expenditure by just doing transactions in commonly accepted ways and not doing transactions that are primarily tax motivated at all.l
As for the 51% ‘shades of Romney’s 47%” comment. it didn’t even fit in. Came across as another gratuitous insult to those in the lower income distributions who barely make a sustainable living and who pay considerable sales and payroll taxes even though perhaps not income tax. We did, after all, DESIGN our tax system to try to protect lower income taxpayers from paying income tax. That’s the reason, for example, that we have a standard deduction and personal exemptions.
4) At this point, Hatch’s speech became somewhat incoherent as he wanted to hit Obama for a “sea change” from the purported wonder years of the Bush tax cuts to the new era of tax increases. So he praised the unfortunate Bush tax cuts of 2001-2003 and contrasted that with the “awful” fact that the estate tax came back after the 10-year gimmick expiration reached its sunset. (He called it, of course, by the right-wing term “death taxes”) He noted the “problem” of having to extend the various extender provisions–“tax reform should be more permanent” because, he claimed, the uncertainty “hinders long-term growth.”
Actually, almost every single one of those corporate extenders should be let go. The R&D credit, the active financing exception, etc.
5) Another of the perennial GOP tax goals popped up as Hatch claimed we need a “tax environment more favorable to saving and capital investment that will lead to a better standard of living for future generations.”
Hey, Congress had the sense to write the capital gains preference out of the Code in the thoughtful reform of 1986. But then the lobbyists for the wealthy got it right back in and they’ve whittled the rate down to a paltry 20%. We haven’t seen any of that promised “better standard of living”. IN fact, more of the profits have gone to the capitalists and workers’ wages continue to deteriorate.
The rest of the tax reform “discussion” in the speech was one platitude after another. Tax reform will “help the entire economy”, help companies “compete better”, “help all Americans.” It’s an “economic necessity” that is worth struggling to achieve even in this “toxic political environment” because we are, after all, the “greatest nation in the world.”
Wait a minute, folks. The party that is responsible for the “toxic political environment” is the GOP, the obstructionist party of no that has determined that it doesn’t care what it does to the country as long as it can stay in power.
And that claim about “greatest nation” status is highly suspect: we are horribly unequal in resources. We have a high illiteracy rate. We have high deaths in childbirth. We have high teen pregnancies. We have an obscenely high incarceration rate. We have a lower life expectancy than countries with a greater quality of living. We have fewer citizens that are college-educated than other developed countries. We have more children living in poverty. We are fast becoming an oligarchy in which the wealthy buy the laws they want and exploit the rest of us. Guns run rampant in our society and are used for heinous crimes but even when a vast majority supports simply measures like universal registration and limited magazines our Congress heeds only the gun lobby. That “greatest nation” status is highly dubious.
Hatch ended his speech with another political item –you’d think he thought that the ABA tax section must be mostly rich lawyers that are good Republicans from the tone of much of this speech. It has come to the media’s attention that the IRS office that review tax-exempt organization applications has focused on those that have “tea party’ in their title. But that’s the note that Hatch ended on–claiming that this was “harassment and intimidation” and that Congress would folloow up to find out “who was behind it, when it began, and what was done (or not done) to correct it” since “in a country with the First Amendment, no organization should be singled out” so “this is not over by any stretch of the imagination.”
Now, what readers should know is that scrutinizing applications for social welfare organization status is in fact an important role of the IRS. There is an office in Cincinnati that scrutinizes the apps. Among other things, it looks for those organizations that shouldn’t apply as social welfare organizations because their primary activity (greater than 50%) is political so they should be a “527” organization. The IRS office has very limited resources and personnel (another of the ‘starve the beast’ methods of the right), so it seeks to find efficient ways to focus on organizations that should potentially be denied social welfare status and moved to 527 status. Somebody in that office found that ‘tea party’ was a reasonable search item–probably somebody who didn’t have very good political antenna to be aware of how the Fox News types like O’Reilly would present it as “targeting conservatives’. What was really targeted was any organization, conservative or liberal, that inappropriately applied for social welfare organization status.
The right is making a mountain of a molehill here. And once again creating a media frenzy out of the public’s ignorance of the way the IRS has to work to avoid abuse of tax exempt status.