Workers and Shareholders Unite! Abolish the Corporate Income Tax

art by Christopher Sergio

Sometimes the plain logic of a learned economist is just too simple to ignore, especially when the economist happens to be Professor Laurence J,. Kotlikoff, a former adviser to Ronald Reagan.  His Op-Ed appeared in the New York Times last January 14.
Jobs don’t grow out of thin air, especially well-paying ones. They require, among other things, companies that are willing to operate where you live. Just ask the Seattle-based District 751 of the machinists’ union, which was worried that Boeing will build its new 777X airliner someplace far away where it is cheaper to produce. Last month the union offered contract concessions, as its president explained, to ensure “the long-term success” of Boeing in Washington State. And on Friday, Boeing machinists approved a contract with concessions to keep assembly of the plane in the area.
In recent decades, American workers have suffered one body blow after another: the decline in manufacturing, foreign competition, outsourcing, the Great Recession and smart machines that replace people everywhere you look. Amazon and Google are in a horse race to see how many humans they can put out of work with self-guided delivery drones and driverless cars. You wonder who will be left with incomes to buy what these robots deliver.
What can workers do to mitigate their plight? One useful step would be to lobby to eliminate the corporate income tax.
That might sound like a giveaway to the rich. It’s not. The rich, including Boeing’s stockholders, can take their companies and run — and not just from Washington State to, say, North Carolina. To avoid our federal corporate tax, they can, and often do, move their operations and jobs abroad. Apple’s tax return says it all: The company, according to one calculation, paid only 8.2 percent of its worldwide profits in United States corporate income taxes, thanks to piling up most of its profits and locating far too many of its operations overseas.
I, like many economists, suspect that our corporate income tax is economically self-defeating — hurting workers, not capitalists, and collecting precious little revenue to boot.
The United States may well have the highest effective marginal corporate income tax rate of any developed country. Jack Mintz, public finance economist and director of the School of Public Policy at the University of Calgary, puts the rate close to 35 percent, which is also the statutory rate. Other economists, using different techniques, calculate the marginal rate to be as low as 23 percent. But both figures are miles above zero.
They are also miles above our 13 percent average corporate income tax rate — the ratio of corporate taxes to total corporate profits. The fact that the marginal tax rate, whether 23 percent, 35 percent or somewhere in between, is so much larger than the average rate suggests that a sizable share of corporate profits and production is ending up overseas and untaxed.
Making, rather than just stating, this case requires constructing a large-scale computer simulation model of the United States economy as it interacts over time with other nations’ economies, and then seeing how the model reacts when you change the American corporate income tax. I’ve developed such a model with three colleagues through the Tax Analysis Center, a nonpartisan research group. Our findings make a very strong, worker-based case for corporate tax reform.
In the model, eliminating the United States’ corporate income tax produces rapid and dramatic increases in American investment, output and real wages, making the tax cut self-financing to a significant extent. Somewhat smaller gains arise from revenue-neutral corporate tax base broadening, specifically cutting the corporate tax rate to 9 percent and eliminating all corporate tax loopholes. Both policies generate welfare gains for all generations in the United States, but particularly for young and future workers. Moreover, all Americans can benefit, though by less, if foreign countries also cut their corporate tax rates.
John Steele Morgan at Commentary Magazine fills in the rest of the story, even if our other tax laws did not change:
Abolishing the corporate income tax would bring howls of protest from the left that corporations aren’t paying “their fair share.” But corporations, of course, don’t pay the corporate income tax. Instead it’s paid by some combination of workers, with lower wages; customers, with higher prices; and shareholders, with lower profits. The particular combination depends on the economic circumstances of each industry. And abolishing the corporate income tax (which was, anyway, only intended to be a stopgap until a personal income tax amendment could be ratified) would have many extremely positive effects for the American economy.
  • It would then be fair to tax dividends as ordinary income, which they are not now. That means that rich stockholders would pay 39.6 percent on that income, not 20 percent as now.
  • Corporations would repatriate trillions in profits now held overseas to avoid U.S. taxes and invest much of that money here.
  • Foreign corporations would flock to the United States instead of U.S. corporations moving their headquarters overseas.
  • Corporations would concentrate on pre-tax income, which is a function of economic success in the marketplace, not after-tax income, which is a function of lobbying success in Washington.
  • Tens of thousands of tax lawyers, accountants, lobbyists, and IRS agents would be out of work and would have to find something economically productive to do.
  • Corporations would have much less interest in providing perks to their executives that the corporation can write off instead of taxable salaries.
  •  There would be a race among the 50 states to lower or abolish their own corporate tax rates.
Unfortuntely, all of these positive results will never be seen clearly by low-information Democrats, especially the politicians who will see corporate lobbying money dry up. But the opportunity to be rid of crony capitalism, once and for all, is a powerful incentive for those of us interested in having this country return to its economic greatness.

The Word "Nigger" Isn't Racist but Opposing Obama's Politics Is

"Scream" image courtesy
In the finest display of illogical liberal journalism, the op-ed that follows takes a Republican against Republican congressional election in Virginia where the incumbent was booted (for a lot of reasons but mostly about lying to constituents) and without a scrap of evidence to support the editorial theme, labels all conservative Republicans as racist.
"If Eric Cantor had played it straight on the issues, he might have won. But instead, he tried to call someone who had the endorsements of Glenn Beck and Laura Ingraham a liberal, for goodness sake! All that did was anger and energize Brat's supporters."
This writing effort probably ranks up there with the average skill level of a ten-year-old.

The Nigger in the White House
Jim Collier is a straight-talking man so when a few months ago he wanted to use the word "nigger" in an article to shock  us into accepting that there are still people who believe and use this outrageous word, our editorial staff took collective objection and we did not print it. The editorial staff continues to object. In this article, however, Jim reminded me that the New York Times avoids using the word which convinced me that WestView should. ~George Capsis, publisher 
The uproar in the press at the stunning defeat of Eric Cantor, the former Majority Leader of the House, "unrivaled in the history of congressional primaries" according to the New York Times has shown a persistence of racism  in the United States. The newspaper reports have said that Cantor was "insufficiently conservative" on issues like immigration. This is undoubtedly true but it covers a greater and more important truth; Cantor was defeated because his opponent, a man happily called Brat, was able to tie him to Obama in the eyes of the voters. Again according to the Times, Brat's most effective campaign tool was a photograph showing Cantor standing next to the president. Brat took it for granted that a connection to Obama would be disliked by the voters in question. The Times added that such conservative Republicans have a vocal base that "demands unflinching opposition to Obama and are determined to stage confrontations with the president at every juncture."
Presidents have been subject to stinging attacks before. Franklin Roosevelt was royally hated by conservatives for his advocacy of social programs and support for unions and Lincoln was shot for his tolerance of the recent enemy. Ironically, Obama was never strongly pushed for the strong social programs liberals expected of him. He has indeed been quite passive in his approach to governing. Conservatives ought therefore to have recognized that for a Democrat, Obama was about as good as they would get. But, says the Times, any hint of cooperation with the president" was the kiss of death for candidates in conservative territory.
It is only possible to draw one conclusion; these far right voters hate Obama because he is black. The simple truth is that there is still in America an irreducible measure of racism. A large minority have for some six years been quietly angry that they must have in the White House a member of an inferior class of people. Until recently, however, they have felt constrained to keep their mouths shut. But America's increasing tolerance of far right opinion has made racism more acceptable, so long as it can be disguised, however thinly, as politics. 
Unfortunately the media, including the New York Times, has been wary of addressing this issue. In its reporting on the subject, it says that Cantor's problem was his support for immigration reform, including the legalization of people who had been smuggled in as children. There is no doubt that easing of restrictions on immigration, which basically means admitting more Hispanics from  Central and South America, is opposed by substantial numbers of Americans. So doing is entirely consistent with what we know about the behavior of groups, about which I have written in WestView before.  Groups don't like strangers, and to non-Hispanic Americans these Central Americans are strangers with a different language and set of folkways.
But blacks are seen as even more "different." In this viewpoint, Obama is not "one of us" to many Americans and is therefore, if not exactly the enemy, at least an outsider.
One of the great surprises of this particular election was that the polls consistently showed that Cantor had a huge lead over Brat. The polls were not just slightly off, as they often are, but dramatically wrong. Clearly a whole lot of people would not admit to a stranger on the phone to being racist, in the polling booths did what their hearts urged them to do: vote against Obama, even though he was not on the ballot. And one of the results of the Brat victory is that we are unlikely to see another black candidate for president for some time to come; the risks are too great for major political parties to take.
Unsurprisingly, New York liberals know nothing about the popularity of Dr. Ben Carson among conservative Republicans. And why should they? He was merely the director of pediatric neurosurgery at Johns Hopkins Hospital and Baltimore is on the other side of the Hudson River somewhere. He is credited with being the first surgeon to successfully separate twins conjoined at the head. He couldn't be any good since George W. Bush awarded him the Presidential Medal of Freedom in 2006. And, by the way, both of Dr. Carson's parents are black and there is no mystery surrounding his early life, his academic background or his professional accomplishments that are readily available to read on the internet.

Outlook on IRS E-Mails Not Promising

If IBM can continue to use its antiquated and buggy Lotus Notes e-mail system since 1989, it is pure speculation as to the version of Microsoft Outlook that is managing the e-mails of the Internal Revenue Service, but the version can make a difference as to the extent to which e-mails are available to retrieve. Outlook 2003 was a stable system relying on central servers to provide a place to archive the e-mail documents. With Microsoft Outlook 2007 and later versions came the ability to limit the number of emails that could store in each users account. Megan McArdle made some inquiries and determined:
As far as I can tell, the agency is using exchange servers with Microsoft Outlook e-mail clients. In a system like this, messages are normally stored on the server. However, the IRS sharply limits the size of mailboxes. In 2009, the limit was 150 megabytes; by 2011, it had increased that to 500 MB. Either way, this is a low limit, in these days of sizable attachments. This would require anyone but the proverbial Web-browsing grandmother to regularly archive their e-mails on a hard drive or delete them.
According to documents provided by the IRS, [Lois] Lerner was archiving her e-mails on her local hard drive, which developed fatal problems (bad sectors) in the middle of June 2011. The data proved unrecoverable despite heroic efforts on the part of the IT staff. They can partially reconstruct her mailbox by searching the archives of other IRS employees but cannot retrieve any e-mails to or from outside users, because the server's backup tapes have been recycled, and the hard drive is gone.
So the IRS encouraged individual e-mail clients through its files limits to pick and choose which e-mails would be archived and where the archived files were saved. Lois Lerner chose which e-mails she wanted saved and she also was permitted to chose the convenience of having important e-mails organized for retrieval on her own computer since 2009. The IRS could have chosen (but did not) to install a back-up system to regularly save all e-mails and other data from all IRS computers as often as daily, but, as Megan McArdle points out, such a system would cost these penny-pinchers another $10 million a year against the IRS IT budget of $1.8 billion to do so.

So is it possible that the missing Lerner e-mails were really related to a hard drive failure, the answer is most certainly. And is it possible in this age of multiple computer server backups that this data could be lost? The answer is that data is being deliberately deleted every minute of every day by e-mail clients and back-up practices of local hard drives linked through servers at the IRS were, until recently, poorly conceived and executed.

While it is difficult to swallow the theory that all the employees at the IRS are engaged in a conspiracy, it is easier to reason that not all employees need be conspirators - only those appointed into power positions and those who are long-time Democrats who treasure their well-paying, rocking chair jobs that lately pay bonuses to those who cooperate.

Lois Lerner got caught on tape expressing what could be a dominate view among those in the Internal Revenue Service leadership regarding the Supreme Court's ruling in the Citizen's United case.
Lerner spoke to a small group at Duke's Sanford School of Public Policy on October 19, 2010, just two weeks before the wave election that brought the Tea Party and Republicans significant gains in Congress. During her appearance Lerner was asked about the flow of money from corporations to 501(c)(4) groups. "Everyone is up in arms because they don't like it" Lerner replied, adding "Federal Election Commission can't do anything about it; they want the IRS to fix the problem."
Lerner goes on to outline the fact that 501(c)(4) organizations have the right to do "an ad that says vote for Joe Blow" so long as their primary activity is social welfare. However Lerner again emphasizes the political pressure the IRS was under at the time saying, "So everybody is screaming at us right now 'Fix it now before the election. Can't you see how much these people are spending?'" Lerner concludes by saying she won't know if organizations have gone too far in campaigning until she looks at their "990s next year."
As I noted previously in an article on the effects of IRS rules on Tea Party groups, there never was enabling legislation to permit the IRS to administer to the qualification of 501(c)(4) organizations. The agency simply wrote rules affecting them. And it is now obvious that government arrogance prevails inside its most-feared agency. It has taken the stance that the IRS does nothing wrong and Congress has no need to question its actions or authority. And just in case you haven't figured it out, the entire Federal government now operates on the rules of law that suit the Obama administration, without care to treat citizens and taxpayers evenly and fairly.

But we will likely never know how dishonest the IRS really is - as demonstrated by the Kim Strassel revelation in the WSJ that the Lerner hard drive failed within two weeks of an inquiry to the IRS from House Ways and Means Committee chairman Dave Camp concerning the targeting of Tea Party groups. Power Line has additional coverage of this amazing. perhaps unbelievable, coincidence here, here and here.

If It Ain't Broke . . . or Because Today's the Day the Teddy Bears Have Their Picnic

From a distance, there is Harmony,
And it echoes through the land.
And it's the hope of hopes,
It's the love of loves,
It's the heart of every man.
 ~(Julia Gold, "From A Distance")
What has been on my mind lately? Is it the surgical repair of a herniated fibrocartilage between my 1st and 2nd lumbar vertebrae or is it the impending doom brought on by an unfriendly interface change to that will likely end my friendly relationship with Intuit Software's QuickBooks Online?

On Monday, June 16, the comfortable look and feel of the so-called Classic QBO interface (like Coke Classic perhaps) will be replaced by the surprisingly nonharmonic Harmony interface. There is no going back and you cannot keep the old interface even if you are willing to pay for the privilege. Customers began conversions last summer with those using the Simple Start version of QBO until now when the more complex businesses using QuickBooks Online Plus are suffering through nightmarish problems.

When all users finally have awakened from the non-REM sleep, some 624,000 license holders will have been subjected to involuntarily debugging of the software rewrite. We already know that keystrokes have increased, as has processing time and relearning where programmers have hidden common accounting features has meant extensive trial and error attempts as well as many calls to an overworked help desk in order to use the software. Intuit employees such as programmers and customer service are being paid for this adventure but small business owners are eating the cost of extended working hours on the other end.  Intuit does not even offer free use of the software during the conversion process.

While it is true that customers do not have to take this lying down, Intuit is holding all of the aces. Of all the small businesses that use accounting software, either online or in house, 85% are using some version of QuickBooks!
Intuit reported there are 624,000 subscribers using QuickBooks Online as of April 30, 2014, up from 459,000 at April 30, 2013.   While this is impressive, the company reports it sold over 5.2 million copies of the desktop QuickBooks to users in the 2 ¾ years ended April 30, 2014, and an additional 319,000 companies “subscribed” (rented) a desktop version of QuickBooks. 
While QBO is growing rapidly and has a larger user base than any other small business financial management solution, we estimate (based on Intuit data) that approximately 1 in 10 QuickBooks users use QBO, while 9 in 10 use the desktop application.
So what will I be doing Monday morning? Well, unless United Healthcare gets off their asses and approves surgery on the 16th (another story for another blog entry), I will be gritting my teeth, cursing and attempting to learn to run the new QBO interface, unless the boss asks me to find another way to get around what appears to be a poor substitute for QBO Classic.

I am a bit surprised that some ambulance-chasing lawyers aren't signing up clients to enter into a class-action lawsuit against Intuit for damages and expense recovery. Winning $300 per subscriber plus 40% for the class-action law firm adds up to a $262 million jackpot. Or perhaps a Microsoft miracle will happen.
MS Blue Monster

Microsoft got away with a major change in its Office Enterprise suite back in 2007 when they eliminated drop-down menus and introduced the ribbon across the top of the each of the Office programs. But Microsoft was selling its new version, so any expense to teach users how to run the new software fell upon the willing Office purchasers. And the lucky stiffs like me who never will be able to get along without Office 2003 menus were helped out by some Russian programmers who put a freebie add-on interface on the net called UBIT which makes the 2003 menus available in all subsequent Office versions.

. . . And We Will Immediately Return Your Children As They Wander Across Our Border

Actually, we will throw in Michelle Obama as a bonus
Here are pictures of some of the 100,000+ children that have arrived recently from Mexico - supposedly unaccompanied by adults - here at the encouragement of our president who seeks to ignore immigration laws and bypass Congress yet again. So what? Congress didn't pass the Dream Act? Well, who needs Congress?

Fiction Tops Fact in Hillary's Political Almanac

Hillary Clinton's campaign organization is off and running in efforts to divert a GOP House investigation of the "Clinton-And-Obama-Lied-and-Americans-Died-in-Benghazi Scandal." On May 30, Politico published the pre-release of the "Benghazi Under Attack" chapter of Hillary's book which supposedly contains her personal recollections of time she spent as Secretary of State, entitled "Hard Choices." Follow-up commentary published in such sources as the Wall Street Journal, Fox News, The Blaze, Washington Times, NY Magazine, LA Times and Breitbart all attribute quotations from the book to Hillary as the book author.

Ben Shapiro at Breitbart does a fair job at providing critical analysis of Mrs. Clinton's failures, but never gets around to disputing that the former Secretary of State did not write the words contained in and quoted from "Benghazi Under Attack" or for that matter, any other chapter in the book. It is fair to say that all supposed autobiographers, even those who write their own books, intersperse fiction with fact to add interest to the telling of tales about their lives. When the "autobiography" is entirely the work of a ghostwriter, then writing style of the actual writer governs much of the content.

In Hillary Clinton's case, the former First Lady and Secretary of State has never written a book. According to Roger Friedman in Showbiz 411 in June 2013, Edward "Ted" Widmer is "doing the heavy lifting" in the writing of Hillary's latest book which is consistent with her earlier books, "It Takes A Village", which was ghostwritten by Barbara Feinman and "Living History," in which Maryanne Vollers, Lissa Muscatine and Ruby Shamir did the research and wrote the prose. Not so coincidentally, by the way, Ted Widmer also did some ghostwriting for Bill Clinton's 2004 memoir, "My Life."

I was struck by how much difference it makes to the tone of the writing when commentators grant credit to Hillary as if she had composed "Benghazi Under Fire." Acknowledging Widmer as the author adds a weird passivity to Hillary which further exposes her incompetence.  Read my re-write of Ben Shapiro's Breitbart piece with my alterations highlighted inside square brackets and you will understand what I mean.
The Clinton camp reportedly leaked the 34-page Benghazi chapter of Hillary’s latest tome to favored outlet Politico. The portions quoted by Politico demonstrate an offputting self-pity and a false righteous indignation utterly at odds with Clinton’s actions as Secretary of State.
According to Politico, Clinton [ghostwriter Ted Widmer] writes [in "Hard Choices"], “Those who exploit this tragedy over and over as a political tool minimize the sacrifice of those who served our country.” Of course, the sacrifice of those who served our country wouldn't have been necessary if Clinton had done her basic duty in protecting diplomatic facilities overseas. And when it comes to politicizing Benghazi, it was the Obama administration that repeatedly lied for weeks to the American people about the source of the attacks to continue portraying President Obama as tough on terror during election season.
Hillary [and Bill Clinton apparatchik Widmer] goes on to attack anyone who asks questions about her behavior during Benghazi, writing [this made-up quotation for Hillary], “I will not be a part of a political slugfest on the backs of dead Americans. It’s just plain wrong, and it’s unworthy of our great country. Those who insist on politicizing the tragedy will have to do so without me.” Except, of course, for the “political slugfest” in which she [actually often] engages by ripping the motives of her opponents.
Hillary [in Ted Widmer's story writing] does pretend to take responsibility for Benghazi, but blames it on the "heartbreaking human stakes of every decision we make.” She [according to the story line] then says she did everything she could by waiting a week-and-a-half to begin an investigation from an Accountability Review Board led by handpicked allies, who promptly exonerated her and refused to even interview her. And she [supposedly - but without actual press reports nailing this down with any certainty,] dismisses congressional oversight as politically motivated [with another hard-hitting, newly-derived, quote]: “Many of these same people are a broken record about unanswered questions.”
Questions that Hillary [is not allowed to, thus] does not answer, of course. Questions like: Where were you? Why did you reject security? Why do you continue to insist that a YouTube video was to blame for the terrorist attacks?
Hillary has reportedly hired former National Security Council spokesman [and Obama administration van driver] Tommy Vietor to spin Benghazi. This is the same man who explained on national television that he didn't know how talking points on Benghazi were manipulated, since “dude, this was like two years ago.” His dismissive tone is perfect for Hillary’s upcoming 2016 campaign, given her own dismissal of the State Department spin after the Benghazi attacks: “What difference, at this point, does it make?”
And indeed, it makes no difference what Hillary [actually] writes [or would have written]. Her [imagined] indignation is a substitute for her lack of record. Emotion substitutes for decency. “As Secretary I was the one ultimately responsible for my people’s safety, and I never felt that responsibility more deeply than I did that day,” Hillary [is credited as having written] .... But of course, that’s a lie [in real life]. She never felt [or at least demonstrated her] responsibility – which is why she [has to be portrayed to see] ... herself as the real victim of Benghazi.