Want evidence that the corporate capitalist system is rigged to benefit the powerful and wealthy? Check out the accounting tricks Starbucks employed in the UK to avoid paying tax despite raking in billions of pounds. From the Independent:

Starbucks has exploited accounting tricks to pay almost no UK tax on the millions of coffees, sandwiches and cakes bought by the British public over the past decade, it was revealed yesterday.

An investigation showed that the coffee company has paid only £8m in corporation tax to HMRC in the 14 years since it arrived on British high streets, despite generating sales of £3 billion.

Starbucks UK’s accounts shows that it has minimised its tax burden by officially recording losses of tens of millions of pounds year after year.

Yet in its briefings to stock market investors and analysts during the past 12 years, Seattle-based Starbucks has consistently stated that its UK unit is “profitable” and three years ago even promoted its UK head, Cliff Burrows, to run its vastly larger US operation.

Starbucks is being singled out here, but the trick is extremely common for giant corporations that hire teams of tax specialists to ensure they pay as little tax to the countries they operate in as possible:

In common with other large companies, Starbucks appears to be exploiting differing tax regimes around the world. The coffee company’s UK unit, for instance, is required to pay a royalty rate of 6 per cent of sales to Starbucks for using its intellectual property. It is not clear where this money goes.

The problem with the international financial system is that there is little international regulation of how capital flows around the world. The ultra wealthy and corporations can shift money from one side of the world to another in the blink of an eye to places where they won’t be taxed (for a good example of this check out Mitt Romney’s personal finances), so getting them to step in line is close to impossible.  Governments have less and less power to tax corporations as they are now so powerful losing their business would be even worse. Starbucks has brought jobs to the UK and knows it can get away with cheating the tax system with little repercussion. The the government gets too heavy handed Starbucks will threaten to pull its stores and use the capital to invest in tax friendlier countries. Is there a solution? Possibly, but it would require a multilateral governmental approach around the world – and despite attempts to coordinate, it isn’t happening any time soon.

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Romney's sums simply don't add up

By Ben Cohen: During the first Presidential debate of the 2012 election, Mitt Romney told President Obama in plain English, “I don’t have a five trillion dollar tax cut. I don’t have a tax cut of the scale that you’re talking about.” Romney was responding to Obama’s accusation that he would be raising the deficit further with excessive tax cuts. Romney also told Obama and the audience: “I will not reduce the taxes paid by high-income Americans.”

Politicians routinely distort figures and use evasive language to disguise their intentions, but Romney was being explicit about his taxation plans here, and one would expect them to corroborate with some evidence given the platform he was on. After all, over 67 million people and the entire news media were tuning in to see exactly what each candidate was proposing, all of whom have an unprecedented ability to fact check.

So what of Romney’s bold statements that he would not propose a $5 trillion tax cut or reduce taxes on high income Americans after campaigning on doing the complete opposite?

To assess the veracity of Romney’s claims, The Daily Banter spoke with Steve Wamhoff of ‘Citizens for Tax Justice‘, a public interest research and advocacy organization focusing on federal, state and local tax policies and their impact on America.

“First of course Romney would make permanent the Bush tax cuts, and those would cost over $5 trillion, but those would be deficit financed,” said Wamhoff. “So then on top of that Romney proposes new tax cuts, and those are things like reducing the income tax rates by repealing the alternative minimum tax, repealing the estate tax, and some other things. And these additional new tax cuts would have a gross cost of $5 trillion.”

So far, not so good. But could Romney actually pay for this with the closure of tax loopholes, as he has claimed in the past?

“The thing that’s being debated is whether or not Mitt Romney really can, as he proposes, close enough tax loopholes to offset those costs while at the same time meeting all these other goals that he spelled out,” answered Wamhoff.

“For example he says were not going to increase the deficit any more, we’re not going to give tax cuts to the rich, any more than they’ve already gotten, we’re not going to raise taxes on the middle class, and that is what the big dispute is all about,” he continued.

“We’ve run the numbers and found that you cannot do that, that it is actually mathematically impossible.”

And what about Romney’s pledge during the debate that he won’t cut taxes for high income Americans?

“It’s simply impossible,” answered Wamhoff bluntly. “He’d have to have a whole new tax plan if that was the case. So, for example, we have a tax calculator here that we use so that we can calculate the impact of these things and we looked at how Mitt Romney’s tax plan would effect people that made over $1 million a year. Romney said that he will reduce or eliminate tax expenditures in order to offset costs and the net result will be that rich people will not see a tax cut. Well, this is impossible. We calculate that even if you take away all the tax expenditures that Romney has put on the table, you take all of those away from people who make over a million dollars, on average, you’d still see a big tax cut on averaging over $250,000 in one year in Romneys plan.”

“It’s impossible to make this plan work,” Wamhoff repeated. “He says that hes not going to give tax cuts to the rich, but literally his plans would give tax cuts to the rich.”

So was Mitt Romney flat out lying during the Presidential debate?

“I don’t believe it is possible to be Mitt Romney, and not have people working for you that can calculate these things, I don’t believe that’s possible,” answered Wamhoff diplomatically. “I don’t know how to phrase this exactly, but Mitt Romney has said all sorts of things about his tax plans that cannot possibly all be true.”

For a more in depth look at Mitt Romney’s tax plans the Citizens for Tax Justice released the following breakdown here.

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Matt Taibbi has a good point when it comes to attacking Romney for apparently not paying any taxes (a fact yet to be proved):

What they [the Democrats] should be doing instead is hammering Romney on the missing returns, yes, but focusing even more on the returns he did release. We’ve known for seven months now, for instance, that Romney paid $3 million in federal taxes in 2010 on $21.7 million in taxable revenue, an effective tax rate of 13.9 percent. Which, as most people know, is less than half the rate most people pay on their income tax.

When Romney released these numbers, he said they were “entirely legal and fair,” and added, “I’m proud of the fact that I pay a lot of taxes.”

The Romney tax returns are a prime example of our increasingly two-tiered bureaucratic system, in which there is one set of rules for poor and middle-class people, and another set of rules for people like Mitt Romney.

And sadly, Taibbi is probably right about why Obama isn’t:

Barack Obama is one of the few politicians with the communication skills to explain this to middle America, but he’s refusing to go there, probably because he’s still hoping for a post-election rapprochement with Wall Street. He wants to go after Bain Capital, but not private equity in general; he wants to go after Mitt Romney’s missing tax returns, but not the tax returns of all people like Mitt Romney.

I posted about this earlier today where I argued we’re unlikely to see the Democrats make much real movement on the tax code or financial regulation, because in reality, it’s politically suicidal. No Wall St or rich people backing, no Presidency.

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Bucking the trend of European economic austerity dogma, France is ramming through a host of measures to get their economy on track that consist mostly of increasing taxes on the rich – a wildly popular prospect with the majority of French people. Some of the measures are aimed specifically at financial transactions and interestingly, actually tax ‘non-transactions’ that traders have traditionally used to manipulate the market. The Tax Policy Center’s Steven Rosenthal explains:

The high frequency tax applies to traders that (1) use computer algorithms to determine the price, quantity, and timing of their orders (2) use a device to process these orders automatically, and (3) transmit, modify, or cancel their orders within half a second (the half a second has been set by draft administrative guidance). The high frequency tax is .01% on the amount of stock orders modified or cancelled that exceeds 80% of all orders transmitted in a month (under the draft administrative guidance). In effect, France now may tax orders that are not filled. It has created a “non-transaction” tax.

Here’s Alex Hern at the New Statesman on why this is a very effective use of taxation that renders criminal trading behavior useless rather than illegal:

The move is interesting not just because it is the first time you can be taxed for not making a financial transaction, but also because it uses the tax system to achieve a goal which many would argue should be done through regulation or criminal legislation instead. The act of deliberately placing false orders in an attempt to manipulate the market is pretty clearly something which has no place in a healthy financial system, and yet the French authorities declined to attempt to ban the act.

Instead, they rendered it pointless by making it impossible to profit from. It’s easier to enforce, harder to evade, and will make a bit of money for the government to boot. Seems win-win.

There’s absolutely no way the Obama administration could get anything like this passed given the grip Wall St has on his office, even though it would add hundreds of billions to the White House’s coffers and make paying down the debt far less painful. The sad truth is that the US government is so completely beholden to Wall St that it can never really change America’s economic reliance on the highly volatile and often criminal financial sector. To get a reasonable system of taxation through would require mass organization on a grass roots level, and that doesn’t look too likely either. There was hope with Occupy Wall St, but the urgency seems to have died down and now we’re left trusting Obama to make the right decisions on how to handle Wall St. And sadly, his record isn’t too good.

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Harry Reid’s accusation that Mitt Romney paid no federal taxes in 10 years took a new twist as the Senate Majority leader took the issue to the Senate floor. From the LA Times:

Reid’s allegations, which he has refused to substantiate, are taking the issue to a new level.

The Democrat, in remarks to the Senate this morning, said that “the word’s out that he [Romney] hasn’t paid any taxes for 10 years.”

Of course, that “word” has come from none other than Reid himself.  Since last month, when he alleged in a Senate floor speech that Romney “basically paid no taxes in the prior twelve years,” the Nevada Democrat has continued to hammer away at the topic.

Reid has said he learned about Romney’s taxes earlier this summer from an investor in Bain Capital who, he said, called his office to pass along the information.  The senator has refused to identify the investor and has acknowledged that he can’t be certain about the veracity of the charges he’s been spreading.

In a conference call with Nevada reporters on Wednesday, he broadened what he said were his sources for the contention that Romney was able to avoid federal taxes.

“I have had a number of people tell me that,” said Reid, according to the Las Vegas Review-Journal , while refusing to elaborate. “I don’t think the burden should be on me,” Reid told home-state reporters. “The burden should be on him. He’s the one I’ve alleged has not paid any taxes. Why didn’t he release his tax returns?”

I’m all for going after Romney on his extremely dubious record at Bain Capital, but having ‘a number of people’ telling Reid off the record that Romney paid no taxes whatsoever doesn’t cut it. The burden is not on Romney to prove every single accusation hurled at him, particularly when they are completely unsubstantiated. It is extremely important that Romney release all his taxes for the last 10 years for the public to see, but not because Harry Reid claims that he hasn’t paid any. If Reid has some evidence, he has a responsibility to produce if he is going to continue making the accusations in public.

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James Kwak provides an enlightening analysis of the GOP argument that the individual mandate is an oppressive tax on the middle class. His conclusion:

In short: Very few people are even theoretically subject to the tax, and most of them are made much better off by the law, since they are transfer beneficiaries.

How can this be? How can a law make everyone better off? Well, it doesn’t. There is a tax-and-transfer element to the Affordable Care Act. The main people who are paying more are the rich (because of a Medicare payroll tax surcharge) and those with good health plans (because of the excise tax on “Cadillac plans”). In addition, the new spending is financed in part by reductions in Medicare spending; those reductions may or may not result in reduced availability of care for Medicare beneficiaries.

The Affordable Care Act is not painless, and there are definitely taxes involved. But the individual mandate “tax” is not one of them.

Of course, Romneycare wasn’t an oppressive tax on the middle class because the definition of ‘mandate’ is apparently different in Massachusetts….

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Eric Cantor: Tax the poor, no the rich (Photo credit: Wikipedia)

By Ben Cohen: I’ve always subscribed to theory that Republicans believe in slashing taxes for the wealthy because the party is funded by corporations and rich people who would massively benefit from it. The idea that tax cuts for the 1% gives some tangible benefit to the economy is now so clearly ridiculous that it couldn’t be anything else. Or so I thought, until I read an extremely interesting piece by one of my favorite economic writers, James Kwak of the TheBaselineScenario and The Atlantic.

Kwak’s piece is aimed at exposing the fact that lots of Republicans want to raise taxes on the poor, while cutting them for the rich. The argument used by Republicans like Eric Cantor and Mitt Romney is that 47% of the American population pay no income tax because they don’t make enough, so they should start contributing to help the government pay off its debts. Kwak disproves this nonsense pretty easily – the number is actually around 18%, and those who don’t pay income tax consist largely of the elderly who are either on Social Security where benefits aren’t taxable, or are no longer working.

But Kwak goes further than this and looks into some more disturbing reasons as to why certain Republicans are obsessed with extracting as much money from the working poor as possible. Kwak proposes two explanation; the first echoing my sentiments that the Republican Party is simply doing its paymaster’s bidding, and the second relies on a terrifying look into the psychology of the wealthy elite enamored with their own importance. Writes Kwak:

The other, even-more-disturbing explanation, is that Republicans see the rich as worthy members of society (the “producers”) and the poor as a drain on society (the “takers”). In this warped moral universe, it isn’t enough that someone with a gross income of $10 million takes home $8.1 million while someone with a gross income of $20,000 takes home $19,000.* That’s called “punishing success,” so we should really increase taxes on the poor person so we can “reward success” by letting the rich person take home even more. This is why today’s conservatives have gone beyond the typical libertarian and supply-side arguments for lower taxes on the rich, and the campaign to transfer wealth from the poor to the rich has taken on such self-righteous tones

I think Kwak hits the nail on the head here, and I don’t think the two explanations are mutually exclusive either. The Republican Party has basically created a self serving ideology that conveniently pays off wealthy benefactors and justifies it by a belief in their own God-like importance to society.

I’ve actually seen and heard this type of logic with a lot of wealthy and powerful people I know, and have never really thought about it as the underpinning for a political ideology. But I guess it’s actually quite obvious.

There is definitely a culture of self importance amongst the top earners in American society – after all, if the US is a meritocracy, it stands to reason that those with money have it because of merit. If that logic is followed, those who don’t have money don’t have merit, and are therefore a drain on society as their needs are supported by the wealthy.

It takes about two seconds to debunk this nonsense given the overwhelming evidence for structural poverty and stationary social mobility in America. Economic success is not determined by merit, but by the money you were born into in the US – a fact that Republicans can never acknowledge.

I’ve heard of rich students having ’1% Parties’, flaunting their unearned wealth and privilege while working Americans struggle to pay their mortgages and put food on the table. It is deeply troubling when a political philosophy codifies distinct moral classes based on a supposed ability to ‘produce’ for society. Modern day Republican political philosophy is now more than just social Darwinism, as the poor aren’t simply left to defend for themselves, they now have to pay what little they do make to cover the tax breaks given to the rich. Mitt Romney’s tax plan for America would do just that, an indication of how the Republican Presidential nominee views society and the poor. For Romney, working Americans exist to service the needs of the all-wise wealthy producers in society. Their labor is no longer enough to satisfy the egos of their masters, they now need to be reminded of their lowly status and made to pay up.

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Photo of California Attorney General (and former California Governor) Jerry Brown (Photo credit: Wikipedia)

California Gov. Jerry Brown called on state lawmakers to embrace austere cuts and urged voters to approve tax hikes in outlining a revised budget Monday.

Brown proposed $8.3 billion in cuts across education, health care and welfare programs in laying out a plan to address the state’s $15.7 billion shortfall, an amount equal to 17 percent of the state’s discretionary fund. He warned that additional cuts are ahead if voters reject his tax-hike initiative in November.

“Cutting alone really doesn’t do it,” Brown told reporters in releasing his $91 billion general fund budget plan. “And that’s why I’m linking the serious budget reductions — real increase to austerity — with a plea to the voters: Please increase taxes temporarily on the most affluent and everyone else with a quarter of a cent sales tax.”

Brown, a Democrat, also is asking state workers to share the pain by taking a 5 percent pay cut, most likely by reducing their work hours. The pay reduction would be handled in contract negotiations with the state’s public employee unions.

In addition to the cuts, Brown hopes to close the deficit with $5.9 billion in new revenue from the tax initiative he proposed earlier this year that would temporarily add a quarter cent in the state sales tax and collect higher income taxes on those who make $250,000 a year or more.

If voters reject the tax increases in the fall, Brown is proposing $6 billion in additional automatic spending cuts, almost all of which would fall on K-12 schools. The so-called trigger cuts could mean that some districts would have to cut the school year by up to three weeks.

Read more at ABCNews.com….

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By Ben Cohen: I was interviewed on the RT Network last Thursday on wealth inequality in the US and the shifting perception about the American dream. You can check it out below:

I think the change in the public’s attitude towards social mobility could really spark tangible change in America. The excesses of individualistic capitalism, debt and insecurity is having a serious psychological effect on the population, and increasing awareness about it could lead to a ground swell of popular movements to change the status quo. The sense of change is palpable, and we don’t know how it will manifest, but it’s clear the current system is completely unsustainable and something will have to give.

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Finally, a Western country has taken the initiative in actually making banks pay for the colossal damage they have done. From the BBC:

French President Nicolas Sarkozy has announced plans to introduce a tax on financial transactions. The 0.1% levy will be introduced in August regardless of whether other European countries follow suit. The tax is part of a package of measures set out by the president to promote growth and create jobs…. In an interview with French television, Mr Sarkozy said he hoped the tax would push other countries to take action.

"What we want to do is create a shockwave and set an example that there is absolutely no reason why those who helped bring about the crisis shouldn't pay to restore the finances," he said.

"We hope the tax will generate one billion euros ($1.3bn, £0.8bn) of new income and and thus cut our budget deficit."

Sarkozy is a center right politician attempting to introduce what is generally viewed as a left wing tax. The truth is that the financial industry is severely undertaxed, and anyone with a realist view of economics understands this. Above all, Sarkozy is a pragmatic politician who realizes that the status quo is completely unsustainable. He is behind in the polls to the socialist party and the public is eager to enact punitive policies agains the banks.

While there are political calculations at hand, it is quite a brave move to take the lead in introducing a tax like this – if it goes through, the argument becomes much more powerful for other leaders to do something similar.

The political pressure in Britain to enact a tax like this could be too much for David Cameron to fend off and the Conservative government might be spurred into action (despite having blocked similar proposals last year). It will of course be far, far harder in America due to the Republican congress and Democrats bought off by the banking industry. But the ripple effect in Europe should not be underestimated if Sarkozy does implement his plan. It will show that governments and the public do have the power to hold the banking industry to account, possibly marking the beginning of a new and more just era. 

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