Rep. Cantor admits extending Bush tax cuts will increase deficit

From Political Correction:

Today on MSNBC, House Minority Whip Eric Cantor (R-VA) attempted to defend his party's push to preserve the Bush tax cuts, even as they fuel the huge deficits that Republicans love to rail against. While saying that the deficits are "dangerous," Cantor was reticent about the actual impact of leaving the tax cuts in place.

At one point, host Savannah Guthrie asked whether Cantor would "simply acknowledge that passing these tax cuts worsens the budget deficit problem." Cantor initially refused, saying, "Let's look at it through the prism of the working families who are seeking jobs and the small business people who are creating them." When pressed further, Cantor finally conceded that the Bush tax cuts increase deficits. "Certainly, you're going to dig the hole deeper," he said.

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Geithner: We want to expire tax cuts on the highest 2–3%

Back to taxes for a minute. Here's Treasury Secretary Tim Geithner on Meet the Press, July 25 (my emphasis):

I'll say what the president believes, and I believe this, is the right thing for the country, the fair thing, the responsible thing for the country now is to make sure we leave in place and preserve tax cuts that go to more than 95 percent of working Americans and complement those with a set of incentives for businesses to expand and hire. To make that possible, and to do that responsibly, I think it is fair and good policy to allow those tax cuts that only go to 2 to 3 percent of the highest earners in the country to expire as scheduled. The country can withstand that. The economy can withstand that. I think it's good policy.

So the Treasury Secretary is using high-profile MTP to push expiring the top end of the deadly Bush tax cuts. Three points:

• This is a very promising first step, since Geithner says explicitly he speaks for the president.
  
  
• The Bush tax cuts expire on December 31, 2010.
  
  
• There's an election in November, prior to the expiration, and Dems are already promising not to be "bad" (read, "effective") during the lame-duck Congress.

If you want to keep your party in power through 2016, Mr. President — keep your word. Please. Your credibility is already razor-thin, and Occam's Switchblade is watching.

GP

(A note to commenters on the earlier version of this post — thanks!) Read More......

Boehner now claims Bush's trillion dollar tax cuts didn't add to the deficit

That's what GOP House leader Boehner is claiming. It's a lie.

In January 2001, before the Bush tax cuts were enacted, the nonpartisan Congressional Budget Office projected annual budget surpluses of approximately $800 billion between 2009 and 2012. The CBO now projects a $1.2 trillion annual deficit for those years and has also stated that the Bush tax cuts contributed to the budget deficit.

And here's a little more:

CBPP: “The Tax Cuts Enacted Under President George W. Bush, The Wars in Afghanistan and Iraq, And the Economic Downturn Together Explain Virtually the Entire Deficit Over the Next Ten Years.” The Center for Budget and Policy Priorities recently found that, “the tax cuts enacted under President George W. Bush, the wars in Afghanistan and Iraq, and the economic downturn together explain virtually the entire deficit over the next ten years (see Figure 1). The deficit for fiscal 2009 was $1.4 trillion and, at an estimated 10 percent of Gross Domestic Product (GDP), was the largest deficit relative to the size of the economy since the end of World War II. Under current policies, deficits will likely exceed $1 trillion in 2010 and 2011 and remain near that figure thereafter. The events and policies that have pushed deficits to astronomical levels in the near term, however, were largely outside the new Administration’s control. If not for the tax cuts enacted during the Presidency of George W. Bush that Congress did not pay for, the cost of the wars in Iraq and Afghanistan that began during that period, and the effects of the worst economic slump since the Great Depression (including the cost of steps necessary to combat it), we would not be facing these huge deficits in the near term.” [Center for Budget and Policy Priorities, 12/16/09]

Doug Holtz-Eakin: Give Obama Administration A Pass For Current Deficits, They Would Have Occurred Under McCain Anyway. The top economic adviser to John McCain's presidential campaign acknowledged on Monday that the U.S. would be running a historic deficits this year even if the Republican had won the White House. In an interview on MSNBC, Douglas Holtz-Eakin argued that “you simply have to give the [Obama Administration, by and large, a pass. It did inherit a very weak economy, it inherited programs that were intended to compensate for that, they're very expensive.” The former CBO Director Holtz-Eakin further acknowledged that under McCain's stewardship “we would probably still have a record deficit.” [Huffington Post, 2/1/10; MSNBC Daily Rundown, 2/1/10]

Right-Wing CATO Institute: "Don't Blame Obama For Bush's 2009 Deficit." CATO Institute: "Some critics are lambasting President Obama for record deficits. This is not a productive line of attack, largely because it puts the focus on the wrong variable...In addition to being theoretically misguided, critics sometimes blame Obama for things that are not his fault. Listening to a talk radio program yesterday, the host asserted that Obama tripled the budget deficit in his first year. This assertion is understandable, since the deficit jumped from about $450 billion in 2008 to $1.4 trillion in 2009. As this chart illustrates, with the Bush years in green, it appears as if Obama’s policies have led to an explosion of debt. But there is one rather important detail that makes a big difference. The chart is based on the assumption that the current administration should be blamed for the 2009 fiscal year. While this makes sense to a casual observer, it is largely untrue. The 2009 fiscal year began October 1, 2008, nearly four months before Obama took office. The budget for the entire fiscal year was largely set in place while Bush was in the White House. So is we update the chart to show the Bush fiscal years in green, we can see that Obama is partly right in claiming that he inherited a mess." [CATO Institute blog post, 11/19/09]

New York Times' David Leonhardt: Only 10% Of The Deficit Comes From Obama's Economic And Domestic Policy While Bush's Agenda Accounts For 53% Of The Deficit. David Leonhardt: "President Obama’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. ... The New York Times analyzed Congressional Budget Office reports going back almost a decade, with the aim of understanding how the federal government came to be far deeper in debt than it has been since the years just after World War II. This debt will constrain the country’s choices for years and could end up doing serious economic damage if foreign lenders become unwilling to finance it. ... The story of today’s deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years. You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush's policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama. The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years. About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt. Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing. About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas." [David Leonhardt, New York Times, 6/10/09]

USA Today: National Debt “Almost Doubled” Under President Bush. “At a minimum, the GOP cries of fiscal irresponsibility would have more credibility if this weren't largely the same crowd that almost doubled the national debt during the Bush administration. And too many Republicans regard tax cuts as having magical powers that somehow don't increase the deficit.” [USA Today, Editorial, 2/12/09]

President Bush Added $5 Trillion To The National Debt. According to the Treasury Department, total public debt outstanding was $5.7 trillion when President Bush took office, and it was $10.7 trillion when Mr. Bush left office. Prior to the height of the financial crisis, since which time the government has assumed much greater obligations and liabilities, the public debt was still at $9.6 trillion. [U.S Department of Treasury, Bureau of Public Debt, Public Debt 2001-2008; Politifact.com, St. Petersburg Times, “Truth-O-Meter,” 1/18/09]

Republican-Controlled Budgets Under President Bush Added $2.8 Trillion To The National Debt. From January 2001 through October 2006 the total public debt outstanding grew from $5.66 trillion to $8.58 trillion. [U.S Department of Treasury, Bureau of Public Debt, Growth of National Debt 2001 - 2007]

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The top marginal tax rate

In a recent article, I presented some of the basics about Social Security and some of the history around it. The article attempted to make four major points plus a bonus idea. In brief:

1. You don't contribute to your own retirement. Your money goes to your parents. Your kid's money goes to you.

2. You already "fixed" Social Security in 1983, and paid for it in higher payroll taxes.

3. Reagan used that earlier "fix" to hide much of his massive deficit.

4. The Trust Fund has a lot of money. The real goal of the current "fix" is protect the budget, not Social Security.

BONUS. Reagan created the Gordon Gekko era by removing the disincentive that kept CEOs from looting their own companies.

In this post, I want to expand the final point above, the Bonus point. Paul Krugman conveniently posted this image twice this weekend, and added some comments. His initial point:

Basically, US postwar economic history falls into two parts: an era of high taxes on the rich and extensive regulation, during which living standards experienced extraordinary growth; and an era of low taxes on the rich and deregulation, during which living standards for most Americans rose fitfully at best. [emphasis mine]

Here's my annotated version of his graph:

The red line is Krugman's graph of the top marginal tax rate. (Note that this is not the tax rate on all dollars; it's the rate on the last dollars only, when the last dollar is in the stratosphere. No one ever paid 90% on all dollars earned.)

The blue line is Krugman's log-scaled median family income. As Krugman notes and I pointed out in my own article, that's a bit misleading, since by the 1980s two incomes were often used to get this result. The great rise in median income from 1948 to 1970 was a rise in one-income families.

The green lines and text are mine. My comments:

1. Reagan took the top rate (again, the rate only the very rich, like CEOs paid on their last dollars earned) into the cellar. Corporate productivity climbed, but salaries for you and me stayed flat — actually fell, since in the 80s, two incomes were needed to produce this uninspiring result.

2. Krugman won't make the causal point, but I will. Starting in roughly 1980, corporations made a ton of money that they weren't paying out in wages. Where to put those extra dollars? Well, there were only other two choices — plow them back into the company (what used to happen), or pay them out in exec compensation. With the top marginal rate now cut almost in half, exec compensation was the obvious choice. The incentives almost insisted on it.

Look again at the post-war boom. The top marginal rate was the great disincentive that kept CEOs from pocketing the profit. This allowed profits to go to higher salaries for everyone and real growth for the companies. Why swipe the second $20 million in salary if that $20m goes back to the gov't? (Again, only the second $20 million, or whatever, was taxed at the top marginal rate.)

3. After Reagan massacred the top rate, everything that followed is tweakage. Clinton made things marginally better — note the slight increase in top tax rate AND the slight increase in family income. Bush II brought the top rate back down and killed off Clinton's small gain in income.

Krugman sums up:

The basic point [ . . . ] is that the US economy did very well with tax rates and levels of regulation (and strong unions) that, according to modern mythology, should have been crippling. That’s why conservatives have invented an alternative history in which it never happened.

Larry Beinhart makes the same point, by the way, in this HuffPost article (h/t Thom Hartmann).

Gaius Read More......

So-called Travel Promotion Act signed into law

What a terrible idea. As I've said before, if Vegas and Disney want a marketing budget let them do it themselves like other businesses. I've been charged fees like this before with some countries and it's never in rich countries. It's small time and adds another hassle to travel. The idea that it will help international marketing is laughable. Everyone who travels already knows that coming into the US is an enormous hassle, especially since the US added in new visa requirements for places like Europe. Slapping an additional $10 charge only adds to the insult. Obama was a fool for signing this and he should expect the EU and other regions to return the favor for Americans very soon.

Sorry to say but in a global competitive travel market, the US is not a friendly place to visit. It's expensive and it's a hassle. There are too many other countries who are much more welcoming. Let's just call this the Don't Bother to Travel to the US Act.

"We generally oppose tourism taxes, which this is," said Steve Lott, a North America spokesman for the International Air Transport Association, which represents 230 airlines worldwide. "We're concerned about retaliatory action by other countries."

Lott added that national resources would best be directed toward addressing barriers faced by global travelers in the United States. For example, cutting the time required for foreigners to obtain a visa and minimizing security hassles at U.S. airports would do much to improve perceptions about traveling to America, Lott said.

The non-profit U.S. Travel Association said there has been a drop in overseas travel to the United States each year since the September 11, 2001, attacks. Last year, 2.4 million fewer overseas visitors came to the United States than in 2000, it said.

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I think this interview is a bit of a disaster

From BusinessWeek:

President Barack Obama said he is “agnostic” about raising taxes on households making less than $250,000 as part of a broad effort to rein in the budget deficit.

Obama, in a Feb. 9 Oval Office interview, said that a presidential commission on the budget needs to consider all options for reducing the deficit, including tax increases and cuts in spending on entitlement programs such as Social Security and Medicare.

“The whole point of it is to make sure that all ideas are on the table,” the president said in the interview with Bloomberg BusinessWeek, which will appear on newsstands Friday. “So what I want to do is to be completely agnostic, in terms of solutions.”

Yes, I get it. In a Spock "we're all mature adults, so let's be brutally honest" sense, we do need to put everything on the table if we're truly going to get the budget in order and address federal spending over the long term. But in a "do you really want every single Democrat to lose the next election?" sense, I'm not entirely sure that brutal honesty - and I mean, brutal - was the most appropriate response from the President.

I'm not saying he should lie. I'm saying that if the point of a commission is to take the heat off of Democrats, or any one political party or politician, and spread the blame around for the necessarily painful cuts we need to be facing (in order to spare any politician or party from the political damage they'd face embracing such cuts - and in the end, undermining the cuts themselves), then you don't start off the negotiation by quasi taking public responsibility for those very same cuts. And in a Spock sense, the President did not take responsibility for raising taxes on people making under $250k and cutting Social Security and Medicare. But in a real American sense, that's exactly how his words will be twisted by the Republicans, and perceived by the public.

Who is in charge of messaging at the White House? From the beginning of the Obama administration the White House's messaging has been quite poor. It's why lots of Republicans say the man is a socialist, and do so with impunity, it's why 75% of Americans think the stimulus was wasted (when it wasn't), and it's why health care reform is now a rather large mess. This White House kind of sucks at messaging. And this is another, rather horrifying, example.

Who is in charge of messaging at this White House? Why do we have to keep receiving "clarifications" telling us that the President, or some unknown staffer, didn't really mean what they very clearly said?

This interview today is going to be used against every single Democrat in the next election, and it's going to be used against President Obama in 2012. The Republicans won't be so kind as to tell the voters the truth about deficit reduction. They'll simply choose smart politics over smart policy - they'll reject any such budget cuts or tax increases and make us look like fools.

The President's instinct at the beginning of a hugely important negotiation was to go public and negotiate with himself, taking partial ownership of something incredibly dangerous. The entire point of the negotiations was to spread the risk around. Not to permit the Republicans to yet again hang this around our necks.

Seriously. Who is in charge of messaging at the White House? They need to be fired. And God help us if it's the President himself. It's been a year now. These mistakes are no longer forgivable nor acceptable. Read More......

Cut tax breaks from polluters?

That might be one way to make them green. At least until their lobbyists get involved and open a few new breaks. The Guardian:

Ministers could save £12bn of public spending over four years by clamping down on tax breaks and support for polluting oil exploration, cement, aluminium and transport, according to a report from green campaigners this week.

With all three major parties committed to cutting the projected £178bn budget deficit, and to a low-carbon economy, a report by the high-level Green Alliance thinktank argues that many spending cuts could achieve both ends. Perhaps the most controversial suggestion is to halve the £10bn national and regional roads spending budget.

Other proposals include ending the zero value-added tax (VAT) rate for aviation and shipping, and reducing tax breaks on oil and gas exploration and the Climate Change Levy for big energy users such as cement and aluminium companies, saving more than £5bn.

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Voters passed tax increases in Oregon (yes, tax increases on the wealthy and corporations)

Riding a wave of populism, voters in Oregon passed two tax increases yesterday:

Oregon voters bucked decades of anti-tax and anti-Salem sentiment Tuesday, raising taxes on corporations and the wealthy to prevent further erosion of public schools and other state services.

The tax measures passed easily, with late returns showing a 54 percent to 46 percent ratio. Measure 66 raises taxes on households with taxable income above $250,000, and Measure 67 sets higher minimum taxes on corporations and increases the tax rate on upper-level profits.

The results triggered waves of relief from educators and legislative leaders, who were facing an estimated $727 million shortfall in the current two-year budget if the measures failed.

Voters voting for a tax increase doesn't happen every day. And, it sounds like this bucks a trend with Oregonians.

Jonathan Singer provides the political context:

The message out of Oregon, like the message out of Massachusetts, is resonating: Voters are in a populist mood right now -- not an anti-government one, necessarily, but a populist one nevertheless. The progressive brand of populism that resonated with Oregonians this month is slightly different than the one that rang true in Massachusetts. Yet the message is just as clear.

The real question now is whether DC will listen, or if instead it will continue to cling to its common wisdom.

If voters passed a tax cut, it would fit with the conventional wisdom. The DC brain trust won't be able to get its collective head around this one. Read More......

UK proposes new tax on banks, Geithner rejects

The "Tobin Tax" has been kicked around a lot lately as one possible option. France and Germany were recently promoting the idea and now, the UK has come on board. It's easy to understand that not everyone will always agree on policies such as this though it's becoming hard to see when Geithner and Obama will ever ask the financial businesses to contribute their fair share. If not this, what? When? Under what circumstance? The never-ending free ride for Wall Street becomes less and less acceptable as time moves on. The administration continues to be either too timid to fight or they actually believe the Wall Street centric view of the world.

Gordon Brown suffered a rebuff from Washington yesterday after he signalled Britain's backing for plans for an international transactions tax on banks to help the world recover from the financial crisis.

At the G20 summit in St Andrews, Fife, the Prime Minister dropped Britain's longstanding opposition to the scheme, which could raise billions a year for poor nations.

But within hours of the significant shift in UK policy on the so-called "Tobin tax", the US Treasury Secretary Tim Geithner dismissed the move, saying Washington was "not prepared" to support it.

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Let Vegas and Disney find their own marketing money

This $10 fee that the Senate thinks is so great will be a slush fund for the deepest pockets in the tourist industry. Please. Other businesses have to figure out business plans and marketing budgets so it's unclear why taxing foreign tourists to fund new foreign tourist marketing pitches makes sense to anyone other than an idiot. As I said the other day, the EU and other countries will surely start doing the same thing. Is it possible for Congress to live outside of their small minded little world? And yes, this silliness is bi-partisan including Harry Reid. Did Vegas not really plan for a rainy day?

Members of Congress would like to attract more international travelers to the United States, but the welcome mat would come with a $10 price tag.

The Senate took up legislation Tuesday to establish a nonprofit corporation that would coordinate programs promoting international travel to the U.S. Millions of visitors would be charged the $10 assessment to help fund the corporation.

The bipartisan bill, which has 53 co-sponsors, cleared a key hurdle when senators approved a motion 80-19 that will allow senators to consider final passage of the bill as early as Wednesday afternoon.

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Will California legalize pot to help budget deficit?

When President Obama got asked whether the US should consider legalizing marijuana in order to help the economy recently, a number of us laughed. But with California issuing IOUs to debtors, it's not so funny anymore. The California tax board, analyzing proposed legislation to legalize pot in that state, says the state could make $1.4 billion a year off the sales. So what do you think about legalizing pot in California or nationwide? To each his own, a necessary step in dire times, or a good thing gone too far?

California could see a nearly $1.4 billion per year increase in state revenues were it to legalize marijuana, the state Board of Equalization says in an analysis of pending legislation to to do that.

The bill (Assembly Bill 390) by Assemblyman Tom Ammiano, D-San Francisco, is still awaiting its first committee hearing and is likely not to be considered until next year. It would impose not only sales taxes but a $50 per ounce fee on marijuana sales, which would be licensed by the state much as alcoholic beverages are regulated.

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If the stimulus hasn't worked, then doesn't that mean the GOP tax cuts are to blame?

Reader Jason asks:

Krugman likened the tax cuts in the stimulus as fat, in that it would provide little genuine nutrition to the American economy. Correct me if I am wrong: the vast majority of the spending measures in the stimulus have yet to occur, whereas the tax cut effects were immediate. Right? So when the Republicans are saying the stimulus has failed aren't they really saying the tax cuts have failed? I feel like I am missing something because no one has really pointed that out.

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States to pass $24 billion in tax increases

You knew this was coming. If the same doesn't happen at the federal level it will be a big surprise. People want services and the money has to come from somewhere. Borrowing is less of an option these days. CNNMoney:

States are poised to pass as much as $24 billion in tax and fee hikes in coming weeks, as they struggle to balance their budgets amid the worst economic downturn since the Great Depression, a report released Thursday found.

The spike blows away the $726 million in recommended increases for fiscal 2009.

At the same time, state budgets are set to shrink for a record second year in a row. The recession has caused tax collections to plummet and the need for social services to soar.

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Roy Blunt (R-MO): Congressman, GOP leader, Senate Candidate and Tax Cheat

Typical Republican. Rails against taxes, then tries to cheat the District of Columbia on his property taxes. But, Blunt and his lobbyist wife got busted. Roll Call (sub. req.) broke the story:

The District of Columbia Office of Tax and Revenue will charge Rep. Roy Blunt (R-Mo.) and his spouse $5,600 in back property taxes for their Georgetown home, following a nearly two-month review of the property’s tax status.

The Missouri lawmaker and his wife, Abigail Perlman Blunt, own a three-bedroom Georgetown home, valued at $1.62 million in tax assessment records.

According to public tax records, the Blunts’ home had received the homestead tax deduction as recently as April, a benefit intended for full-time city residents that can shave hundreds of dollars off annual tax bills — and significantly more in the long term by limiting assessment increases.

Public records show that the city has recalculated taxes dating to 2005. The city does not list interest or penalties on the unpaid taxes.

Blunt is running for the seat vacated by Republican Kit Bond. So far, he's the only declared Republican candidate, although a couple others are making noises about jumping in.

The Democratic nominee will be the current Secretary of State, Robin Carnahan. Early polls look good for Robin. But, Missouri is always a tough state.

If you want to help pick up this seat for the Democrats, we've set up an ActBlue page for Robin. She's a good friend and a solid progressive. And, she's also the proud parent of a new foal, which you can help name. Robin's family has a farm in Rolla, Missouri. Over the years, I've learned way more about farming, particularly about cattle, from Robin than I ever imagined I'd know. That's why I always loved one of her first t.v. ads:

She does know bull when she sees it. And, horses, too. Read More......

48% think they're paying the right amount in taxes

That surprises me. I'd have been among the 46% who feel that our taxes are too high. Though, that doesn't mean I think they should be cut. You can think your taxes are too high, but be resigned to the fact that taxes are a necessary evil - even if they sting.

The new survey purports that a plurality of Americans (48%) think they're paying just about the right amount in taxes. Traditionally in American society, just the right amount in taxes is zero.

But now taxpayers are like Goldilocks on her third bowl of borrowed bear porridge. It's just right.

A slightly smaller group that apparently drinks bottled water (46%) thinks taxes are too high.

What do you think? Take our poll in the top of the next column to the right. Read More......

Brace yourself for this news, but paying lobbyists pays off

Now why am I first thinking of Lawrence Summers and Phil Gramm? Anyway, this research confirms what many already believed. The system as it stands today remains much too susceptible to the influence deep pockets and the highest bidder. This report is not the most comforting news for democracy. Business can't afford not to have lobbyists but democracy can't afford to have them in this form. There's nothing inherently wrong with lobbyists though lobbyists on steroids in our current system which requires massive amounts of cash to win elections is the problem.

The study zeros in on 93 firms that spent as much as $282.7 million lobbying on the issue during that period, and ultimately saved a total of $62.5 billion through the tax change. Researchers used publicly available lobbying disclosures filed with Congress and financial statements submitted to the Securities and Exchange Commission to compare the amount each company saved with its lobbying expenditures.

"It calls into question what Congress did in 2004," said Stephen Mazza, who conducted the study with Raquel Alexander and Susan Scholz. "It clearly is a very lucrative field for lobbyists. Congress wanted to create jobs, and what they probably did was create jobs for the lobbyists."

The results reflect one reason that lobbying — always a major industry in Washington — has experienced explosive growth in recent years. Companies and interest groups spent $3.42 billion lobbying Congress and the federal government in 2008, the last year for which such figures are available, according to the Center for Responsive Politics. That's a 14 percent jump from the previous year.

If Obama wants to cut into this system, as he says he does, he knows who has to go first. Why he even hired Summers in the first place is annoying. Read More......

AIG sues US for tax payments

Guess who is paying for this? So besides funding casino gamblers at AIG, we're now funding lawyers who are suing the owner. Even worse it involves money that was being hidden offshore where AIG could hide it. You may recall that the US is actively going after individuals who move money offshore but it's been accepted by business for years. Will someone in Washington please locate a spine and knock some heads at AIG? This episode becomes more sickening by the day.

While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.

A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

This comes back to the original problem that many have had with Geithner and company. He is not the person we need for these extraordinary times. We need someone who is much more aggressive about fighting these companies and restoring balance to a distorted and dysfunctional system. Geithner is not that person. Read More......

UK looking for corporate tax income

This is a similar problem in the US as well. Naturally it's not possible as an individual, but for corporations, it's the status quo. Even worse, the GOP will support the corporate efforts to hide income and avoid taxes because that's how they think you grow an economy. Business is doing this all over the world yet nobody ever calls them out. As regular people are left with the bill for the recession and corporate leaders still have their pockets stuffed with cash from those high times, perhaps it's time to re-think what's fair.

An extensive Guardian investigationhas examined the accounts of the UK's biggest companies - many of them household names - and discovered a series of sophisticated tax strategies which, critics say, amount to an almost unstoppable tide of perfectly legal corporate tax avoidance.

The veil of confidentiality that covers these tax avoidance schemes is so difficult to penetrate that nobody knows exactly how much tax goes missing each year. But HM Revenue & Customs estimated that the size of the tax gap could be anything between £3.7bn and £13bn. The Commons public accounts committee put it at a possible £8.5bn and the TUC said £12bn.

UK listed companies are not required to set out exactly how much UK corporation tax they actually hand over to HM Revenue & Customs. When the Guardian asked each FTSE 100 company to provide this information only two offered a response.

Similarly each company was asked what its official policy on so-called tax planning is and how this is implemented. No company was prepared to answer the question directly. However, the investigation, which we publish over coming days, has established that:

• The UK-based drinks giant Diageo plc has transferred ownership of brands worth billions of pounds, including Johnnie Walker, J&B; and Gilbey's gin, to a subsidiary in the Netherlands where profits accrued virtually tax-free. Despite average profits of £2bn a year, it paid an average of £43m a year in UK tax - little more than 2% of its overall profits.

• Two major drug firms have shifted ownership of their brands to tax havens in the Caribbean. Their UK operations can then be made to pay royalties for the use of the trademarks, reducing their profits and the amount of tax due in this country.

• An internationally renowned corporation has structured itself so that it is now simultaneously a British public company, tax-resident in Amsterdam, but whose brands are Swiss-owned.

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Pick your poison: federal, state or local taxes

The tax cut game that Obama has decided to join to appease the Republicans (who won't join him regardless) is shortsighted and ignores the looming state and local funding problems. California, anyone? For decades the GOP has played this game and sure, you can cut taxes at one level but everyone knows that the money will still be spent for services that people want so the money has to come from somewhere. Cut state taxes - hooray! - and surprise, local taxes go up. In this case, cutting or continuing federal tax cuts will still leave enormous deficits at the state level so sooner or later, that money is going to have to be found.

Pretending as though it's not an issue is irresponsible and it's likely taxes will go up considerably very soon. The alternative is going to be even more slashing of budgets but besides the Republican states who prefer trolling at the bottom, who wants to cut important services such as education or basic infrastructure? It's not entirely clear where the Obama team thinks the money is going to come from but then again, Republicans never have grasped such ideas. Obama seems stuck in a pre-credit crisis mindset with economics despite that old system collapsing. He is more progressive than McCain, but hardly progressive.

Why is his team directed by the old guard who guided us into this mess? Where are the progressive economists who predicted this economy or who detailed why the old system was failing the majority and benefiting the minority? Obviously Obama was our best option in the election but he is going to have to come around very quickly on the economy or else he will be a one and done. Running the economy is not the same as making campaign promises.

But President-elect Obama, faced with the biggest financial and economic crisis since the Great Depression, has pledged to go slowly on tax hikes, which he fears would take consumer demand off life support and put it in the morgue. He's made some tax cuts a cornerstone of an economic-stimulus package Congress will debate in coming weeks.

No, the real danger to your wallets comes much closer to home -- from cash-strapped states and municipalities, which are in their worst shape fiscally in decades.
Though they may resist at first, governors and state legislatures could be forced to raise income taxes, sales taxes, state university tuitions, transit fees and whatever else will help pay the freight.

That may mute the impact of any federal stimulus package, because if one government takes while another gives, you'll still have less money to spend at the mall.

The situation is dire. The recession and the housing crash have landed body blows to local governments, severely reducing tax revenues. The National Governors Association projects fiscal 2009 budget shortfalls may reach $60 billion, and fiscal 2010 deficits could top $80 billion.

The Center on Budget and Policy Priorities, a Washington, D.C.-based liberal think tank that focuses on state and local finances, says: "Combined budget gaps for the remainder of the fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion."

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Bush slips in one more shot against France

A complete ass right until the end. Increasing import duties on Roquefort cheese? What the hell?

Less than a week before it leaves office, the Bush administration has sparked anger across the Atlantic by tripling the import duty rate on roquefort cheese to 300%, a move which the US hopes will "shut down trade" in the sheep's milk product by making it prohibitively expensive.

The decision, part of Washington's attempts to force the EU into dropping its ban on hormone-treated beef, was greeted with disbelief by the French government and by farmers in the south-western Aveyron region who depend on the industry for their livelihoods.

"Maybe the Bush administration indulged itself by taking this decision just before it leaves," Robert Glandieres, president of the roquefort producers' group, told Reuters.

The tariff on roquefort, condemned as "incomprehensible and inadmissible" by the French government, will probably have a minimal effect, given exports to the US account for just 2% of annual sales. French farmers said it would mean "the end" for roquefort in the US and vowed to take "symbolic actions" in return.

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