Another "American Jobs DESTRUCTION Act"???

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Cal Burgart
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Posts: 18
Joined: Tue Oct 11, 2011 4:46 pm

Another "American Jobs DESTRUCTION Act"???

Post by Cal Burgart »

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Reading Liberally Editorial Note: One of our long-time members, Cal Burgart was our nuclear-power expert at our 4/13/2011 meeting on the subject of "President Obama's Nuclear Stand Post-Japan/Fukushima Daiichi" -- Cal received his undergraduate engineering degree from Purdue and received his doctorate from the University of Tennessee/Oak Ridge [NB: The Oak Ridge National (Nuclear) Laboratory is operated by the U.S. Department of Energy]
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----------Original Message----------
From: Calvin Burgart
To: John Karls
Date: Thu, Oct 5, 2011 11:43 am
Subject: Doesn't this guy have it 100% wrong?
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And even worse, he makes it permanent. Doesn't this promote exporting jobs? Corporations don't have to hire, just because they have cash.

[The Salt Lake Tribune article attached to Cal's e-mail follows immediately below.]

Cal

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LEE BILL WOULD SLICE TAX ON OVERSEAS PROFITS
By Matt Canham - Washington DC
The Salt Lake Tribune - 10/5/2010

A handful of lawmakers have suggested it's time for a tax holiday on ovreseas profits, giving business an incentive to bring as much as $1 trillion home.

But Sen. Mike Lee doesn't think that goes far enough. He wants to make the holiday permanent.

The Utah Republican announced his proposal Wednesday that would drop the tax rate on international profits from 35 percent to 5 percent.

"American companies want to bring their earnings back here, build out their infrastructure, and invest in their domestic work force, but current law makes it punitive to do so," Lee said in announcing his legislation. "We should be lowering those barriers and encouraging American companies to invest in this country."

Earlier this year, Rep. Jim Matheson, D-Utah, was the primary Democratic co-sponsor on a similar bill that would drop the rate to 5.25% for 2011 and 2012, which is often called a tax holiday.

At the time, Matheson said: "Having an infusion of private sector capital on-shore in America is a pretty good thing to do for the circumstances we're in right now."

Lee said his approach is preferred because a tax holiday doesn't give businesses an incentive to invest the money in long-term projects or new jobs.

The White House has said it would consider a tax holiday on overseas profits as part of a broader tax reform policy, but it doesn't want to pass it on its own.

Lee will attempt to attach his proposal to a bill on Chinese currency manipulation now being debated in the Senate. His office said if that attempt fails, he will introduce a separate piece of legislation.
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----------Original Message----------
From: John Karls
To: Calvin Burgart
Date: Monday, October 10, 2011 11:43 am
Subject: Re: Doesn't this guy have it 100% wrong?
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Dear Cal,

Yes!!! [I see you've been reading our Reading Liberally weekly e-mails religiously!!!]

Are you back in town for the ski season???

Your friend,

John K.


----------Original Message----------
From Calvin Burgart
To: John Karls
Date: Mon, October 20, 2011 12:41 pm
Subject: Re: Re: Doesn't this guy have it 100% wrong?
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Do you have a reference to the explanation of how this causes the exporting of jobs? I have a friend that needs further explanation.

Cal


----------Original Message----------
From: John Karls
To: Calvin Burgart
Date: Tues, October 11, 2011 4:23 pm
Subject: Re: Re: Re: Doesn't this guy have it 100% wrong?
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Dear Cal,

Thank you very much for your follow-up e-mail.

I apologize for providing such a cryptic response to your first e-mail of Thur Oct 6 re the Oct 5 news article about U.S. Sen. Mike Lee's ill-informed and dangerous economic/tax proposal. [Unfortunately, I didn't have time to reply until Mon Oct 10 and by that time, Dumb Old Me, I didn't check the date on your e-mail, and assumed that you were reacting to Q&A-9 that was included in our Oct 8 weekly RL e-mail and assumed that you were simply requesting confirmation that Q&A-9 explained why Sen. Lee's economic/tax proposal was so ill-informed and dangerous.]

Q&A-9 (and the wealth of material for our 5/11/2011 meeting on which last Saturday's Q&A-9 was based) make clear --

(A) The US-based multi-national companies (MNC's) that have exported American jobs typically capture 95% of their world-wide profits in tax-haven subsidiaries (typically Singapore non-resident companies) which supervise/inspect the operations of "contract manufacturers" -- which are unrelated organizations located in low-wage countries (typically China) and which the tax-haven subs hire to manufacture for the US-based MNC all of the MNC's products using the MNC's technology.

(B) Unfortunately, for the US-based MNC's, these profits (typically 95% of their bottom lines) cannot be repatriated as dividends by their tax-haven subsidiaries without incurring the full 35% US corporate income tax. And the tax-haven subs cannot loan the money to their US parents or other related US companies without triggering the 35% tax under the "constructive dividend" rules.

(C) Accordingly, the US-based MNC's are compelled by the lack of any good alternatives to invest their funds in commercial paper (that is, short-term debt) of UNRELATED US companies -- which are typically the CHUMP American companies that did NOT export American jobs to foreign countries.

(D) There are two sides to this "coin." First, in direct answer to your question, any proposal to reduce or eliminate US corporate income taxes on foreign earnings (Sen. Lee is proposing a reduction from 35% to 5.25% AND PRESIDENT OBAMA'S DEFICIT-REDUCTION COMMISSION PROPOSED A COMPLETE ELMINATION WHICH IS WHAT "TERRITORIAL TAXATION" IS) means that the US-based MNC's that exported American jobs will escape US corporate income taxes of the profits from exporting those jobs!!!

(E) The second side of that "coin" is that when the tax-haven subsidiaries are suddenly permitted to dividend to their US parent corporations all of the earnings that have accumulated and been invested in commercial paper of the CHUMP US companies that did NOT export American jobs, the CHUMP American companies that did NOT export American jobs have to repay their commercial-paper loans (rather than rolling them over) WHICH MEANS A SUDDEN CONTRACTION IN PAYROLL AND CAPITAL EXPENDITURES FOR THE CHUMP AMERICAN COMPANIES THAT DID NOT EXPORT AMERICAN JOBS.

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I would especially commend to you the following materials contained in the Participant Comments section of http://www.ReadingLiberally-SaltLake.org for our 5/11/2011 meeting -- (A) Q&A-14 of "Suggested Answers to Short Quiz" and the Reply entitled "Q&A-14 and the Real Cause of the Economic Crash", (B) "The American Jobs DESTRUCTION Act of 2004" which discussed the 2008-200? impact of the sudden $4 TRillion contraction of capital expenditures and payroll for the CHUMP American companies that had NOT exported American jobs, (C) "The US Government's Confession Re AIG's Subprime-Mortgage INSURANCE", and (D) "The Plausibility of John Karls' Challenge to Conventional Wisdom" (concerning the real cause of the economic crash).

Following President Obama's refusal to honor our May 2011 Six-Degrees-Of-Separation E-mail campaign requesting him to honor his campaign pledges by announcing that he would veto any attempt to exempt profits from exporting American jobs (such as proposed by his Deficit-Reduction Commission and as proposed by Sen. Lee), I considered whether to try to get Prof. Paul Krugman (Princeton's Nobel-Prize-winning economist and a regular OpEd columnist for the NY Times) to employ his slave labor (aka graduate students) to perform the empiricle studies that would confirm whether my "Challenge to Conventional Wisdom" was correct -- since he would be uniquely-well positioned not only to ensure the empirical work was completed expeditiously, but also because he would have his own megaphone (his regular NY Times OpEd column) to broadcast the results in a fashion that would attract proper attention.

Unfortunately, my spare time was consumed by the litigation against the 15 large international financial institutions described in the third section of http://www.ReadingLiberally-SaltLake.org entitled "Possible Topic for Fall 2011 -- Inner-City Holocaust and America's Apartheid 'Justice' System."

But not to worry (OR NOT not worry, depending on one's perspective).

It appears Congress will soon enact a new "American Jobs DESTRUCTION Act" providing another special 5.25% tax on dividends from tax-haven subs causing another $2 TRillion of reductions in capital expenditures and payroll of the CHUMP American companies that did NOT export American jobs.

Unless, the special Bi-Partisan Deficit-Reduction Congressional Committee (which was created in August and tasked with proposing by November 23rd at least $1.2 TRillion of additional reductions in the US government's 10-year projected budget deficits) includes in its bill the proposal of President Obama's Deficit-Reduction Commission TO EXEMPT ENTIRELY THE PROFITS FROM EXPORTING AMERICAN JOBS (AKA "TERRITORIAL TAXATION").

It's a shame that not one of the 100 US Senators and not one of the 435 US Representatives will ask themselves the simple question whether they believe the tax-haven subs HAVE MATTRESSES!!!

Otherwise, they might stumble onto the fact that the $4 TRillion dollars that was the subject of the 2004 American Jobs DESTRUCTION Act and the $2 TRillion dollars that is the subject of the looming New American Jobs DESTRUCTION Act were NOT stuffed in mattresses in the tax-havens. Instead, they might stumble onto the fact that the $6 TRillion had been loaned to the CHUMP American companies that had NOT exported American jobs and that Congress will soon cause another economic crash that it will not be able to explain away by blaming the new crash on something else.

Hopefully, we will not need Prof. Krugman's slaves (aka graduate students) to explain what happened this time!!!

Your friend,

John K.

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Reading Liberally Editorial Note:

For John Karls' unique qualifications to comment on the foregoing matters, please see his resume which is "Reference M" in the third section of this bulletin board entitled "Possible Topic for Fall 2011 - Inner-City Holocaust and America's Apartheid 'Justice' System."

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