Ticker ® Commentary on The Capital Markets Posted 2013-01-01 22:28
by Karl Denninger
ISSA Finally Says It Like It Is
“We’re taxing $1.2 trillion dollars this year. We’re not collecting it, but we’re taxing it.”
That’s the bottom line.
When Congress spends in deficit it is taxing money that it does not collect today, and thinks it can collect those dollars tomorrow — by force.
Let me point this out for anyone who is paying attention, which Mr. Issa appears to understand but nobody else on that floor has yet spoken of:
I have absolutely no expectation that my daughter, any other person who does not have the franchise, and those who are not yet born will pay those taxes, as they had neither a vote or a voice in assessing them.
She gave no consent. She received no benefit.
She has no obligation to pay and has every right to resist such an assessment through all means, without exception.
I explained this to my father, in his living room, more than a decade ago while my daughter was crawling on his carpet as he prattled on about how he was entitled to spend the same money twice — money he claimed he was owed in Medicare and Social Security benefits but which through his votes he had already spent on other things such as welfare, labor protections and other various government programs.
Nobody can spend the same dollar twice. What he was voting for, rather, was to financially assault his granddaughter as he had already voted to spend the dollars he claimed he was entitled to collect. And being a CPA he knew good and damned well what he was voting for when he voted to spend those dollars the first time. His acts were not from ignorance, they were intentional, as have been those of most of the so-called “adults” of today arguing for these “benefits” and their “representatives.”
I could and did resist at the ballot box — the consequence of my failure to succeed in doing so is mine.
If you are of age then your failure to do so, or worse, your belief that this can be continued without consequence, is likewise yours.
But my daughter had no ability to resist and received no benefit from said spending and thus has no obligation to pay and nothing other than her willful and intentional future consent, freely given, can change this fact. I made clear to my father at the time that as she grew up I would both make clear to her that she had no obligation to pay any such amounts and would fully support any decision she made in resisting such payment.
Needless to say that conversation didn’t end well.
This, above all else, is the reason that every person under the age of 18 today and every unborn citizen of tomorrow has every moral, ethical and naturally lawful right to refuse to pay one thin dime of such taxation that is imposed but not collected today by the jackasses such as Charles Rangel who are right now speaking in favor of assessing those who have not given consent.
The amount that our government claims she owes is more than $184,000 and rising by the minute.
In point of fact she owes exactly zero, as exactly none of this has inured to her benefit nor was it contracted with her consent. No person can lawfully sell another into slavery , economic or otherwise, and any attempt to do so gives rise to an absolute right under the laws of nature to resist through whatever means are necessary.
No Congress and no President has the right to impose taxation on those who are under the age of majority, have no voice or vote, and those not yet born.
All clever speeches about “fairness” are lies as no person has a right to enslave our youth and those not yet born no matter what sort of flowery language is used.
No Congress and no President has the right to deficit spend as persons who obtained no benefit and gave no consent have every right to refuse to pay through whatever means are necessary.
And if those young people make that decision, whether it happens tomorrow, next year or decades down the road they are fully justified in enforcing their decision irrespective of the means by which they do so.
Throughout the months of November and December, a steady stream of corporate CEOs flowed in and out of the White House to discuss the impending fiscal cliff. Many of them, such as Lloyd Blankfein of Goldman Sachs, would then publicly come out and talk about how modest increases of tax rates on the wealthy were reasonable in order to deal with the deficit problem. What wasn’t mentioned is what these leaders wanted, which is what’s known as “tax extenders”, or roughly $205B of tax breaks for corporations. With such a banal name, and boring and difficult to read line items in the bill, few political operatives have bothered to pay attention to this part of the bill. But it is critical to understanding what is going on.
The negotiations over the fiscal cliff involve more than the Democrats, Republicans, the middle class and the wealthy. The corporate sector is here in force as well. One of the core shifts in the Reagan era was the convergence of wealthy individuals who wanted to pay less in taxes – many from the growing South – with corporations that wanted tax breaks. Previously, these groups fought over the pie, because the idea of endless deficits did not make sense. Once Reagan figured out how to finance yawning deficits, the GOP was able to wield the corporate sector and the new sun state wealthy into one force, epitomized today by Grover Norquist. What Obama is (sort of) trying to do is split this coalition, and the extenders are the carrot he’s dangling in front of the corporate sector to do it.
Most tax credits drop straight to the bottom line – it’s why companies like Enron considered its tax compliance section a “profit center”. A few hundred billion dollars of tax expenditures is a major carrot to offer. Surely, a modest hike in income taxes for people who make more than $400k in income and stupid enough not to take that money in capital gain would be worth trading off for the few hundred billion dollars in corporate pork. This is what the fiscal cliff is about – who gets the money. And by leaving out the corporate sector, nearly anyone who talks about this debate is leaving out a key negotiating partner.
So without further ado, here are eight corporate subsidies in the fiscal cliff bill that you haven’t heard of.
1) Help out NASCAR – Sec 312 extends the “seven year recovery period for motorsports entertainment complex property”, which is to say it allows anyone who builds a racetrack and associated facilities to get tax breaks on it. This one was projected to cost $43 million over two years.
2) A hundred million or so for Railroads – Sec. 306 provides tax credits to certain railroads for maintaining their tracks. It’s unclear why private businesses should be compensated for their costs of doing business. This is worth roughly $165 million a year.
3) Disney’s Gotta Eat – Sec. 317 is “Extension of special expensing rules for certain film and television productions”. It’s a relatively straightforward subsidy to Hollywood studios, and according to the Joint Tax Committee, was projected to cost $150m for 2010 and 2011.
4) Help a brother mining company out – Sec. 307 and Sec. 316 offer tax incentives for miners to buy safety equipment and train their employees on mine safety. Taxpayers shouldn’t have to bribe mining companies to not kill their workers.
5) Subsidies for Goldman Sachs Headquarters – Sec. 328 extends “tax exempt financing for York Liberty Zone,” which was a program to provide post-9/11 recovery funds. Rather than going to small businesses affected, however, this was, according to Bloomberg, “little more than a subsidy for fancy Manhattan apartments and office towers for Goldman Sachs and Bank of America Corp.” Michael Bloomberg himself actually thought the program was excessive, so that’s saying something. According to David Cay Johnston’s The Fine Print, Goldman got $1.6 billion in tax free financing for its new massive headquarters through Liberty Bonds.
6) $9B Off-shore financing loophole for banks – Sec. 322 is an “Extension of the Active Financing Exception to Subpart F.” Very few tax loopholes have a trade association, but this one does. This strangely worded provision basically allows American corporations such as banks and manufactures to engage in certain lending practices and not pay taxes on income earned from it. According to this Washington Post piece, supporters of the bill include GE, Caterpillar, and JP Morgan. Steve Elmendorf, super-lobbyist, has been paid $80,000 in 2012 alone to lobby on the “Active Financing Working Group.”
7) Tax credits for foreign subsidiaries – Sec. 323 is an extension of the “Look-through treatment of payments between related CFCs under foreign personal holding company income rules.” This gibberish sounding provision cost $1.5 billion from 2010 and 2011, and the US Chamber loves it. It’s a provision that allows US multinationals to not pay taxes on income earned by companies they own abroad.
8) Bonus Depreciation, R&D Tax Credit – These are well-known corporate boondoggles. The research tax credit was projected to cost $8B for 2010 and 2011, and the depreciation provisions were projected to cost about $110B for those two years, with some of that made up in later years.
Conveniently, the Joint Committee on Taxation in 2010 did an analysis of what many of these extenders cost. You can find that report here.