Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Saturday, December 01, 2012

What the CEOs Lobbying on the Fiscal Cliff Really Want

A merry band of corporate executives is zig-zagging Washington today, meeting with almost every principal player in the “fiscal cliff” negotiations. The CEOs are meeting with administration officials at the White House, with House Speaker John Boehner, and with House Minority Leader Nancy Pelosi.

According to most press accounts, these business titans are “pressing for a solution to the so-called fiscal cliff” (Bloomberg), while “touting the virtue of bipartisanship and shared sacrifice” (The Washington Post).

But what’s important to understand—what every press account of these meetings should note—is that they’re not, in practice, proposing any sacrifice from their companies in particular nor their industries in general.

Key planks of their proposals, explicitly articulated by the Fix the Debt campaign and other industry coalitions pushing for a deal, include a lower corporate tax rate—even though many of these companies pay little or no corporate taxes as it is. Then there’s a territorial tax system, which would allow corporations that have profits parked overseas to bring them back home without paying any taxes. (Right now, they’d be obligated to pay the normal 35 percent corporate tax on those profits if they were repatriated). Some, but not all, of the CEOs also want the Bush tax rates extended for all earners.

That’s not exactly “shared sacrifice.” A report from the Institute for Policy Studies notes that the 63 CEOs behind “Fix the Debt” would reap $134 billion in tax windfalls for their companies just from a territorial tax system alone. That naturally would increase, not decrease, the deficit, so somebody’s got to pay—hence the Very Serious pleas to “reform” Medicare and Social Security.

“These CEOs paint a stark picture of hypocrisy,” said Scott Klinger, co-author of that IPS report, in a statement. “They’re simply taking advantage of the so-called ‘fiscal cliff’ to push the same old agenda of more corporate tax breaks while shifting costs onto the poor and elderly.”

To put a finer point on it, here is what the nine CEOs tooling around Washington today stand to gain in the fiscal cliff negotiations—how much their company would gain from a territorial tax system, and how much the individual CEO would gain if the Bush rates on top earners are extended.

The figures on taxable CEO compensation and unrepatriated offshore earnings are from that excellent IPS report, unless the company was not included. (It detailed only members of “Fix the Debt.”) In that case, I consulted the company’s SEC filings, and linked to it. The effective tax rate figures are either from this Citizens for Tax Justice report, or if it wasn’t included, from other sources which are also linked. (See a more detailed breakdown below the infographic.)

Ken Frazier, CEO, Merck & Co.

Merck’s unrepatriated offshore earnings: $44.3 billion

Estimate windfall from territorial tax system: $15.5 billion

Merck’s effective corporate tax rate from 2008-2010 (standard is 35 percent): 11.5 percent

Frazier’s 2011 taxable compensation: $5.4 million

Frazier’s yearly savings if top Bush rates are extended: $237,352

Muhtar Kent, CEO, Coca-Cola

Coca-Cola’s unrepatriated offshore earnings: $23.5 billion

Estimate windfall from territorial tax system: $8.2 billion

Coca-Cola’s effective corporate tax rate from 2008-2010 (standard is 35 percent): 14.1 percent

Kent’s 2011 taxable compensation: n/a

Kent’s yearly savings if top Bush rates are extended: —

Douglas Oberhelman, CEO, Caterpillar Inc.

Caterpillar’s unrepatriated offshore earnings: $13 billion

Estimate windfall from territorial tax system: $4.55 billion

Caterpillar’s 2011 effective corporate tax rate (standard is 35 percent): 25.6 percent

Oberhelman’s 2011 taxable compensation: $10.2 million

Oberhelman’s yearly savings if top Bush rates are extended: $459.851

Marissa Mayer, CEO, Yahoo! Inc.

Yahoo’s unrepatriated offshore earnings: $3.2 billion

Estimate windfall from territorial tax system: $1.12 billion

Yahoo’s three-year effective corporate tax rate from 2008-2010 (standard is 35 percent): 8.7 percent

Mayer’s 2011 taxable compensation: n/a

Mayer’s yearly savings if top Bush rates are extended: —

Thomas Wilson, CEO, Allstate

Allstate’s unrepatriated offshore earnings: $0

Estimate windfall from territorial tax system: $0

Allstate’s 2011 effective corporate tax rate (standard is 35 percent): 17.9 percent

Wilson’s 2011 taxable compensation: $4.1 million

Wilson’s yearly savings if top Bush rates are extended: $175,793

Lloyd Blankfein, CEO, Goldman Sachs

Goldman Sachs’ unrepatriated offshore earnings: $20.6 billion

Estimate windfall from territorial tax system: $3.3 billion

Goldman Sachs’  effective corporate tax rate 2008-2010 (standard is 35 percent) 20.8 percent

Blankfein’s 2011 taxable compensation: $15.6 million

Blankfein’s yearly savings if top Bush rates are extended: $706,104

David Cote, CEO, Honeywell International

Honeywell’s unrepatriated offshore earnings: $8.1 billion

Estimate windfall from territorial tax system: $2.8 billion

Honeywell’s effective corporate tax rate 2008-2010 (standard is 35 percent) -0.7 percent

Cote’s 2011 taxable compensation: $55.2 million

Cote’s yearly savings if top Bush rates are extended: $2.5 million

Mark Bertolini, CEO, Aetna

Aetna’s unrepatriated offshore earnings: $0

Estimate windfall from territorial tax system: $0

Aetna’s effective corporate tax rate 2008-2010 (standard is 35 percent) 28.8 percent

Bertolini’s 2011 taxable compensation: $9.5 million

Cote’s yearly savings if top Bush rates are extended: $423,208

Frank Blake, CEO, Home Depot

Home Depot’s unrepatriated offshore earnings: $2.4 billion

Estimate windfall from territorial tax system: $8.4 million

Home Depot’s effective corporate tax rate 2008-2010 (standard is 35 percent) 35.6

Blake’s 2011 taxable compensation: n/a

Blake’s yearly savings if top Bush rates are extended: n/a

Notably, none of the corporations represented in Washington today except Home Depot actually paid anything close to the corporate tax rate of 35 percent. Most would benefit handsomely from a territorial tax system, though not all—the interests of these companies don’t always align perfectly. Some, like Honeywell and Yahoo!, wouldn’t gain anything from reductions to Medicare and Social Security—the demands from those CEOs to cut spending on those programs is perhaps nothing more than a cover for their windfalls elsewhere. Others, like Goldman Sachs and Aetna, surely would benefit from a reduction in these programs.

What’s clear, though, is that the sacrifice preached by these CEOs is most certainly one-sided.

CEOs aren’t the only ones with a lot to gain from these negotiations. Lee Fang reports that a congressman heavily involved with the “fiscal cliff” talks has already been hired as a lobbyist.

Original Article
Source: the nation
Author: George Zornick

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