Relevant and even prescient commentary on news, politics and the economy.

Small businesses, tax cuts, and reporting

 I sometimes get the ‘eyes rolling’ reaction from people in my social sphere when I insist that at least linking to  original documents is important, and that someone needs to follow up on what an author says someone else says (as a way to gain traction and authority status for their own writing, such as saying the non-partisan Tax Policy Centers says).  I won’t go into the idea of spin, which involves figuring out intent.  Mine is a caution for readers:

The post is lifted from a note from Daniel Becker in response to a query I sent to him…Dan is a small businessman in the way most of us think of as small business.  (The IRS has a different criterion  of ownership that allows a company like Bechtal at $31 billion to be considered a small business).

Dan Becker’s note:

The Washington Post article is   Obama calls for small business tax breaks.   The article uses the  Tax Policy Center original under the title Temporary Tax Relief to Create Jobs  as the source for the reporting.

The WP article notes:

“The last time the country had a similar proposal to the tax subsidy was during the Carter administration, according to the Tax Policy Center. Research by the Labor Department found that few firms knew about the tax policy, but those that did increased employment notably.”

But from their source it actually notes:

“The last experience the United States had with a credit for incremental employment was with the new jobs credit enacted at the beginning of the Carter Administration in 1977. Evaluations of that credit and how it came about found that most firms were either unaware of the credit or did not respond to it. Research based on a Department of Labor survey found that only 6 percent of firms who knew about the credit said that it prompted them to hire more workers. Firms that were aware of the credit, however, increased employment about 3 percent more than other firms. ”   (bolding is Dan B.’s)

WP had another smoothing over (under the fold):

“An incremental jobs credit could be a cost-effective way of raising employment in the short run, the nonpartisan center said in a report this year. The effectiveness of any jobs subsidy depends . . . on how employers perceive its potential benefits when making hiring decisions.”

The actual statement:

In summary, the effect of this proposal on employment is very uncertain. In theory, an incremental jobs credit could be a cost-effective way of raising employment in the short run and some research suggests that the 1977 credit did increase jobs, although the evidence on that is far from conclusive.
The effectiveness of any jobs subsidy depends greatly on both the details of the proposal, still to be finalized, and on how employers perceive its potential benefits when making hiring decisions.

Dan B

(Editorial comment at end of note from Dan Becker….Man! They still want to believe that cutting taxes is actually the same as if the 99% were now getting that $1 trillion of income that is now with the 1%. Just like they believe cutting taxes will increase revenues (sure if you convince the dictator to stop taking a full 90% of all that his people produce, but that’s not US).

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1/24/12 Links worth noting: Germany rejects Swiss banking secrecy deal; Labor Devaluation

1/24/12  Links worth noting by Linda Beale:

Germany rejects Swiss banking secrecy deal;   Labor Devaluation 

David Jolly, German Lawmakers Reject Swiss Tax Deal, New York Times (Nov. 23, 2012).
The US and other countries like Germany have been pressing the Swiss on their bank secrecy, which allows U.S. and other foreign citizens to establish bank accounts without the knowledge of the home country and thus hide assets and income from home-country taxation.  The US passed laws (called by the acronym “FATCA”) that require foreign banks to actively report information on US accountholders.   The hope is that every country will recognize the harm done to tax systems by banking secrecy and join in imposing similar information-reporting requirements.

The Swiss, meanwhile, have been trying to circumvent universal adoption of such laws.  See, e.g., Nicholas Shaxson, A scheme designed to net trillions from tax haves is being scuppered, (Nov. 22, 2012).   Britain, Luxemburg and Austria are cited as being in the forefront of the scuttling movement:  Britain, for example, has entered into a “Rubrik Agreement” with the Swiss.

The Swiss thought they had a deal with Germany.  This would be a bilateral deal in which the Swiss agree to an upfront payment in lieu of any back taxes on the accounts and then agree to act as tax collector for the foreign government on the accounts, thus maintaining secret the identity of the foreign taxpayers.
Such an agreement is problematic for two reasons:  (i) it requires the foreign government to trust the Swiss banks to pay the right amount over in taxes and (ii) it undermines the drive to eliminate offshore banking secrecy as a cover for tax evasion.

Transparency in international banking and taxation matters would require that banks provide information on accounts held by foreigners to the foreigners’ home jurisdictions, without any account-specific or accountholder-specific request required.  The reason for a more transparent rule is that otherwise the home jurisdiction has to have information it does not have (who has an account at a Swiss bank) before it can ask for the information it needs to ferret out who has such an account and may be engaging in tax evasion.  The biggest cracks in banking secrecy have thus come from  whistleblowers and opportunists who sell account-holder information to purchasing jurisdictions.

Friday, the Germans rejected–for now at least–a German-Swiss deal supported by Chancellor Merkel that had been two years in the making.  France is apparently also considering rethinking a similar deal.
The Swiss leverage was clearly stated by Swiss banking official Mario Tuor, who “noted that without a deal, the status quo would remain: German officials can seek specific information from the Swiss government on people suspected of tax evasion, or go back to buying data stolen from Swiss banks. ‘With an agreement, every German taxpayer in Switzerland would be taxed,’ Mr. Tuor said.” German Lawmakers Reject Swiss Tax Deal

The Steady Devaluation of Labor, Two Half Hitches (Feb. 2012).

This is an oldie but goodie, one worth reminding you of (or calling to your attention for the first time).
[The] minimum wage, in constant dollars, has had its ups and downs since 1970 but the overall trend indicated by the straight black line is down. The numbers show that the American economy puts less value on the entry level worker than it did in 1970. Why is that? Are minimum wage workers less intelligent now than they were forty years ago? Are they lazier?

The reason probably has a lot to do with the rise of the global economy and cheaper Chinese labor. It may also have to do with basic attitudes toward labor. Some see labor as a commodity, while others believe it is not. 

Representative Steve King (R-IA) on the floor of the House of Representatives last year:

“Labor is a commodity just like corn or beans or oil or gold, and the value of it needs to be determined by the competition, supply and demand in the workplace.”

Samuel Gompers, cigar maker-turned-labor organizer and founder of the American Federation of Labor in the early 20th Century, had a different business ethic related to labor and said this:

“You cannot weigh the human soul in the same scales with a piece of pork.”

Labor advocates actually managed to insert a statement affirming the status of human labor in the 1914 Clayton Antitrust Act“The labor of a human being is not a commodity or article of commerce.”

cross posted with ataxingmatter

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More links

Whats the matter with Chisago county?  One look at the NYT’s article on how and why people who receive benefits from the government think they don’t, and considers the ’causes’ slid into the article as ‘fact’.

Payroll tax cut undermines Social Security  An article in the LA Times that considers the messages involved in using the payroll tax as a stimulus

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Links worth noting

by Linda Beale

Links worth noting

Lynn Parrymore (Alternet, Naked Capitalism) on the difficulties in putting a stop to congressional insider trading: Can Rep. Bacchus and his money-crazed congressional colleagues be stopped from insider trading?

OMB Watch BudgetBlog, Small Biz Owners: Big Businesses, Millionaires Not Paying Fair Share (showing that small businesses are more aware of problems of corporate loopholes and more supportive of having big businesses and wealthy pay higher taxes)

Brad DeLong, Grasping Reality, Heartening News about what Economists Think (Feb. 16, 2012) (noting that a recent Chicago forum found most economists admitting that the 2009 stimulus bill had kept unemployment lower than it otherwise would have been)

Trudy Lieberman, The case of the missing premium, Columbia Journalism Review (Feb. 16, 2012) (hattip Naked Capitalism) discusses new disclosure rules purportedly designed to help contain health care costs by permitting purchasers of insurance to do more comparison shopping. The article notes a fatal flaw in the disclosure requirements–no one has to reveal the actual insurance premium.

But insurers and employers do not have to tell consumers how much a policy costs—in other words, no premium information has to be given. Yep, that’s right—the key piece of information needed to make a good decision is missing. When insurers design a policy, they consider the interplay of coinsurance, copays, deductibles, coverage, and, of course, the premium, which lets them know what price point will make a consumer say “yes.” Price is the bottom line for consumers, but it’s poison for sellers, who fear a shopper might choose a policy with a lower price, other things being equal. So much for that price competition that was to solve all the ills of U.S. health care.
Jost told me “premium disclosure is not required by statute.” Chalk that up to clever bill drafting. The administration was trying to add it to the proposed regulations circulated months ago, but Jost said “plans and employers pushed back. It was one place to give.” HHS official Steve Larsen did his media walk-back. “People have premium information. They will have that. The goal of this provision was to focus on coverage, benefits and how they interact,” he said.

Citizens for Tax Justice, Tax Justice Digest, Quick Hits in State News: Tax Victory in Iowa, and More (Feb. 17, 2012), provides more evidence that cutting taxes isn’t the way to achieve broad-based tax growth:

Gardner [of Institute on Taxation and Economic Policy] writes that Georgia lawmakers “wanting to join the non-income tax club are simply idolizing the wrong states. Most states without income taxes are doing worse than average … and the states with the highest top tax rates are actually outperforming them.”

Citizens for Tax Justice, Tax Justice Digest, New Fact Sheet: Obama Promoting Tax Cuts at Boeing, a Company that Paid Nothing in Net Federal Taxes Over Past Decade (Feb. 16, 2012). The key fact you need in addition to the information in the title–that Boeing has $32 billion in pre-tax U.S. profits in those years.

Mark Thoma, Economist’s View, NBER Research Summary: Offshoring, International Trade, and American Workers (Feb. 19, 2012) (excellent exercpting from academic work on offshoring and the impact on American workers).

Tax Policy Center, Roberton Williams, Tax Rates on Capital Gains (history of tax rate fluctuation over the last century).

crossposted with ataxingmatter

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