ataxingmatter

GOP membership of JEC issues a "report" on the debt

[Back from my mother's 91st birthday party and frustrating flight delays and cancellations due to the mass of powerful thunderstorms passing over the center part of the country--only to find heavy thunderstorms in this region upon my return!  That's life, I guess.]

The Joint Economic Committee Republicans issued a "report" today on the federal debt that is a perfect example of the way statistics can be misused to mislead.  The report is entitled "Who Ran Up America's Debt" ( Download JEC Republican Staff Commentary - Who Ran Up America's Debt 5-25-2011).

That title suggests that this report is motivated by politics and not by an intent to provide useful information to the American public.  Because the amount of debt created when one party or another is in control is almost irrelevant to good governance--we need to know all sorts of things in order to consider whether party affiliation and debt increase is really related or not and, if so, whether it is a good thing or a bad thing that debt increased.  For example, we might ask 1) whether one party was in control for more time than another, 2) whether one party was in control during periods of crisis that required more resources (such as wartime), or 3) whether one party gained control after another had engaged in profligate spending or tax reductions that required enormous debt funding.  We might wonder whether the debt was reasonable compared to the productivity of the nation, and whether there was a plan for paying off the debt.

You all see where this is going.  If you look at the year by year data that the JEC Republicans present, you will see that there is a regular trend of increasing federal debt corresponding to the overall increase in the economyh, none of which seems out of the ordinary until the financial crisis of 2008. 

It just happens, of course, that the debt connected with the financial crisis of 2008 is on a Democrat's watch.  But the crisis that the debt responds to was primarily caused by George W. Bush's ideological adherence to the failed reagonomics policies of deregulation (allowing the development of "too big to fail" banks and other institutions with systemic interconnections that guaranteed a requirement that the taxpayer subsidize their losses, while they continued to privatize their gains),  militarization (jingoistic carrying on of wars, accompanied by huge expenditures for the military industrial complex), tax cuts (the enormous Bush tax cuts primarily benefiting the upper crust and large multinational corporations and carried out in consecutive years, with the 2001 cut alone amounting to $1.3 trillion over ten years and the 2003 and 2004 cuts leaving the budget more and more in the red while ensuring that corporations would take even more measures to avoid their fair share of the tax burden), and  privatization (increasing expenditures for "faith-based initiatives" and privatization of schools and extraordinarily costly use of mercenaries and other privatized military forces for warmongering). 

All of these policies resulted in enormous borrowing to compensate for the refusal to tax the wealthiest elite and large corporations appropriately.   And of course the Paulson TARP program at the end of the Bush regime handed over billions to the banks without a single string attached, all with money that had to be borrowed. 

The financial crisis not only bore those direct costs of the TARP and other bailouts, but it resulted in massive economic dislocation for millions of working American middle class.  That meant that we either had to allow a 1930s style Great Depression, or we had to take strong economic action to prevent it.  That required additional borrowing, which is the main amount reflected in the JEC charts and report.

Even assuming arguendo that the debt amount is bad (it isn't necessarily so), the question of who "caused" the debt is most readily answered by looking at the policies that led to the economic meltdown in 2007-8.  And the answer is--the reagonomics policies that have been pushed by the right for the last four decades.

If we want to free ourselves from thedebt burden, the best thing to do is to reinvigorate our economy.  And that does not mean just getting Wall Street back in the black.  It means doing what is necessary to reverse the upward redistribution that has been in play since Reagan, and starting to grow the economy broadly for the benefit of the middle class.  Neither party has paid enough attention to these issues, as they both have been in thrall to the corporatist elite managers and owners.  But the GOP simply holds the worst record for serving the needs of the broad middle class of this country, no matter how they try to spin the data.

Calvin Johnson's Shelf Project on corporate compensatory options

Professor Calvin Johnson at the University of Texas Law School (he has a fancy long title, but I'm being informal here) has been collecting ideas to put on the "shelf" for the government to use when it collects its senses about the need to get rid of tax loopholes that cause the Code to leak revenues like a sieve without bringing commensurable benefits to the nation.  I don't agree with all of the suggestions, in part because I think rates should increase for those at the top of the income distribution and in part because I have concluded that the corporate tax should constitute a more significant portion of the total tax revenues raised.   But every suggestion is worth considering, and a rationale conversation based on those suggestions would be a good start to the appropriate national dialogue that we should be having about tax policy and tax progressivity.

Johnson's most recent suggestion regards the tax treatment of compensatory options, those neat little giveaways for corporate executives that siphon value from equity holders while adding to the total "rents" that high level managers are able to extract from firms.  Johnson suggests ending the exemption for performance-based stock options from the section 162(m) $1 million compensation deduction limitation.  It is expounded in Corporate Meltdowns Caused by Compensatory Stock Options, 131 Tax Notes 737 (May 10, 2011). 

I think this idea is a good one.  Compensatory stock options were touted as a way to align managers' interests with shareholders' interests.  It turns out that they give managers even more reason to juice up the value of the stock in "timely" fashion, in order to give themselves more pay at shareholders' expense.  As Johnson notes, these options encourage riskier behavior, when we should be demanding more prudence.  There is no good rationale for excepting them from the $1 million limitation.  (It might even be that limiting the amount of deductible pay would cause shareholders to think twice about just how much they are paying their top managers as well.  Paying top managers more for a calendar day than most of their workers get in a year of work is scandalous, yet it has become all too common these days.)

The following is the abstract for the article.

            Tax contributes to high-risk investments that cause meltdowns when the high risk turns into losses. This proposal would end the exemption of compensatory stock options from the section 162(m) $1 million limit on compensation deductions. A CEO with stock options has an incentive to increase the volatility of corporate assets, because an option holder participates in gains but does not share in the losses from volatile corporate assets. However, high-risk investments hurt outside parties when they collapse. In some cases, the government has had to pay bailouts to prevent further economic meltdown. It is far better not to induce high risk in the first place.

            This proposal would disallow the deduction of credit-risk interest that covers the risk of default. Because the credit-risk interest is an assessment of how likely it is that the debt will not be paid, it tracks the protection against loss that gives equity its option-like character. Risk is an equity-like feature of an instrument. Current law’s attempt to distinguish debt from equity is a quagmire. Disallowing the extra credit-risk interest is a gradual, fair, and administrable way to separate debt features from equity.

            This proposal is made as a part of the Shelf Project, a collaboration among tax professionals to develop proposals to raise revenue by defending the tax base.  It is intended to raise revenue without a VAT or a rate increase in ways that would improve the fairness, efficiency, and rationality of the tax system. The hard work needs to be done now to develop viable proposals. Shelf projects are intended to foreclose both 85 percent income tax rates and 60 percent federal sales taxes.

Infrastructure and Taxes

There's a web article on "The Ugly Truth About Infrastructure (and Taxes)", The Infrastructurist, May 12, 2011, that is worth a read.  Don't miss the comments--one of the more intelligent comment threads about taxes, in part because though there are clearly both right and left represented, it does not appear that the thread has been taken over by the typical right-side trolls that repeat the same old sound bites on many of our websites these days. 

The point of the article is that the US has allowed its infrastructure to deteriorate mightily, with deferred maintenance costs estimated at more than $2 trillion (and climbing).  And infrastructure is the key to a decent life--potable water, clean air, trustworthy bridges, potholeless highways, dependable electric grid, gas lines that don't explode in the middle of a neighborhood killing dozens in their homes at night, sewage systems that don't dump the crap into fresh water streams or, even worse, into too-close potable water pipes, public transportation systems that meet 21st century needs with less pollution and more speed, public education systems that prepare our population for the world as it is, not a fantasy world of homeschoolers who study the Bible but leave out biotechnology and physics.

Why has our infrastructure deteriorated?  Because we have not made it a priority.  When thoughtful people suggested that the best way to deal with unemployment and the other awful results of our casino capitalist banking crash would be to fund necessary infrastructure improvements, the reagonomics crowd balked and voted for more spending on tax cuts, instead (mostly to the rich and big business, and not nearly so effective as economic stimulus). 

So as the infrastructuralist notes, we need to raise taxes to pay for the things that we dearly desire and that make life worth living--clean water, etc. (see list above).  Since we are a tax haven country, we can certainly afford to raise taxes.  We can go back to the Clinton era tax code, lock stock and barrel by just letting all of the Bush tomfoolery expire on the slated date at the end of 2012.  That would be a good start.  Then we can enact a progressive estate tax system to move us out of the 19th century when a million was a fortune and into the 21st, when a billion is.  We can enact the Fair Taxation of Hedge, Equity and Real Estate Partnership Managers Bill--to treat their pay for work the same way we treat everybody else's pay for work, as ordinary income subject to the highest tax rates, instead of calling it a "carried interest" that gets favored capital gains rates most of the time.  We can get rid of the charitable contribution deduction for market value of stocks rather than for the amount paid by the owner for those stocks--that's a pure giveaway to the wealthy who own most of the financial assets.  We can eliminate the corporate tax loopholes and the subsidies for Big Oil, WITHOUT lowering the tax rate to make ourselves even more of a tax haven.  We can enact a tax on financial transactions to help pay for the mess that the big banks made of our economy with their derivatives casinos.

We can, in other words, pass real reform that gets rid of the giveaways in the tax code and helps us move forward as a nation.

Oil Companies Want Tax Breaks (surprise)

As anyone who drives a car knows, gas prices are rising almost by the minute.  Oil companies profits are likewise on the ascendance, as gas revenues skyrocket, and tax subsidies make sure they don't have to pay much over to Uncle Sam.

Oil company executives from BP, Chevron, Shell, ConocoPhillips, and ExxonMobil were called to Congress Thursday to talk to the Senate Finance Committee about their tax breaks-- like the oil depletion allowance and the wacky "domestic manufacturing deduction" that Congress enacted as a giveaway for almost all domestic companies when it fixed the problematic provision that discriminated against foreign companies. 

Company executives didn't like the fact that Americans are apparently becoming much more aware of the extraordinary tax breaks that they have enjoyed for decades, so they couched their objections in terms of the current craze for "corporate tax reform" (which means reducing, probably only temporarily, some of the tax expenditures favoring corporations and using the revenues gained from that to cut tax rates on corporations--a stupid proposal when we should be using the revenues saved to fund government programs and reduce borrowing).  Of course, the executives also rattled off their usual warning that taking away their special tax breaks would end up reducing domestic production.  Since domestic production doesn't really affect the price we pay for gas at the pump, this argument is akin to the "give us tax breaks so we can compete" argument.  They both amount to the same thing--the claim that if only companies have to pay even less in taxes, they will use the money saved to do good things.

 

Sen. Orrin Hatch (R-Utah) helped the corporatist message along in his opening remarks.  As the Daily Tax Report for May 13, 2011 (93 DTR G-4) notes, Hatch asked  “With respect to tax incentives available for all U.S. manufacturers, is it wise—and this is an important question—is it wise to single out one industry and treat it differently from others?” And Louisiana Senator Mary Landrieu, from a Big Oil state, predictably opposes the bill.

For once, Baucus seemed to be moving towards the right side of this debate.  Even though he agreed that all of the Code provisions should be examined in due time (especially those silly "extenders" that Congress can't seem to treat as the temporary provisions that they were created to be), he talked about the importance of using the elimination of oil and gas subsidies to make real progress in reducing the deficit.  But he still hasn't indicated whether he supports S. 940, the bill that Charles Schumer is trying to get through Congress, which would take $21 billion saved by repeal of the subsidies and use it to cut the deficit.

The testimonies offered on behalf of BP, Chevron, Shell, ExxonMobil, and ConocoPhillips, as well as the opening statements by Baucus and Hatch, are available in TaxCore.

Repatriation Holiday Alive again?

The House appears to be interested in reviving the idea of a repatriation holiday for multinationals with more than $1 trillion socked away offshore.  They've put forward the "Freedom to Invest Act of 2011" (H.R. 1834), providing for a 5.25% tax rate on repatriated earnings of multinational corporations.

If you will recall, the 2004 "Jobs Act" bill provided for a repatriation holiday for multinationals.  It was to be a "one time only" "never to be repeated" provision that would let the bad companies who had not been repatriating regularly bring home the dollars (and then behave better thereafter).  The purported rationale for the provision (never really believed by anybody) was that repatriation at a very low tax rate would mean lots of money would come home, the money would be used by companies to invest in America, and there would be a springtime of jobs creation here at home as a result. 

Instead, the program was a bust--a mere giveaway (again) for multinationals and their wealthy owners and managers.  Companies brought home money, paid almost not tax on it (a statutory rate of 5.25% instead of the statutory 35%), and proceeded to lay off thousands of US workers.  Most of the money was apparently used to buy back shares.  A boon for shareholders (and managers who own lots of shares), but not for workers.  Shareholders, of course, were probably much more likely to take the money and buy shares of foreign companies in the secondary market than they were to make a genuine invest in an entrepreneurial activity here in the states. 

And most of us predicted that having once done such a holiday, there would be pressure from MNEs to repeat it, no matter how disastrous an impact it had on tax revenues and no matter how worthless it was at creating jobs, its only purported rationale.  As a result, companies would continue to be rewarded for holding monies offshore awaiting another repatriation holiday, and the good companiesd that regularly repatriate would think twice before doing so again.  The repatriation holiday, in other words, is the worst of incentives and has the effect of encouraging companies to hold more money offshore while awaiting another tax-free (or low-tax) bonanza.

Now the House wants to revive that bad idea.  Companies have been lobbying, and lately what companies lobby for they tend to get.  That's corporatism at its worst.

The House has at least added a provision to get at the job cuts.  A company would pay a fine of $25,000 for each job cut during the two years following the low-tax repatriation.  But come on, folks, isn't it clear that what will happen is that they'll cut before repatriating or wait two years and , bingo, right then there'll be a big reshuffling with offshoring of jobs?  And even if it sort of worked in preventing companies from firing workers en masse right after repatriating, that doesn't really mean that the repatriation is a positive.  Note that there is nothing that requires a company to prove that it used the repatriated funds to create jobs in the US!  Or not to create more jobs abroad instead of in the US--i.e.,  the fine on jobs lost doesn't at all address the real problem that companies will intentionally use their funds offshore to create more new jobs there, resulting in no lost jobs here but no new jobs here either!  The penalty for lost jobs within 2 years just provides a nice cushion of transition period to companies that are moving more of their jobs offshore.  They can use the two years to gear up offshore, and then fire away at home.

And this program ain't cheap.  At a time when the Republicans are hollering deficit angst, they are intent on giving away the store to the corporations.  This repatriation holiday is estimated to cost about $79 billion over ten years--the lost taxes that should have been paid on the repatriated cash.  And, as noted, you can bet that there will continue to be retention of profits offshore as companies gear up for "regular" repatriation holidays at almost zero tax.  No company will be foolish enough to regularly repatriate without a holiday, once Congress bows to the pressure this time.  This is just one more knife-wound in the corporate tax and the shift of taxation to little guys that has been going on since Reagan's presidency will continue.

Thank goodness for Rep. Doggett, who noted in his release on this matter that "to Republicans, deficits only matter when asking seniors and students to sacrifice."  As Doggett's release notes:

Money is fungible and efforts to tie repatriated funds to new investment and hiring failed.  The evidence shows that the corporate tax holiday was mainly used for stock repurchases and dividends—uses expressly prohibited by the legislation.

***

After a second repatriation tax break, firms may reasonably anticipate that this repatriation tax break will happen again, encouraging them to shift even more profits out of the U.S. to avoid paying any U.S. taxes now and paying only fire sale rates in the future on that money stashed abroad. 

The JCT analysis in response to Doggett's request for information is available here. 

The telecommunications industry lobbying release is available as well (TIA is one of the members of the "working to invest now in America campaign" --WIN--set to win low taxes on repatriation):

Telecommunications Industry Association Applauds Introduction of Freedom to Invest Act

Foreclosures--Jamie Dimon says they're good for you.....; Naked Capitalism doubts; ATaxingMatter suggests maybe tax can help

Naked Capitalism's Yves Smith picked up a post from Adam Levitin and added a fair dose of her own leavening to the Levitin treatment of Jamie Dimon's Lloyd Blankfein moment, in Jamie Dimon Says Banks Are Being Nice to You When They Take Your House, Naked Capitalism, May 5, 2011.  It's worth excerpting, and you can follow the links to see Dimon's Blankfein moment in full.

(Yves Smith) Jamie Dimon has finally managed the difficult feat of making Lloyd Blankfein look good. When Blankfein said Goldman was “doing God’s work,” as offensive and laughable as that sounds, it’s an arguable position. If you look at the God of the Old Testament, he’s a really cranky and often capricious character. * * *

(Quoting Adam Levitin) In the course of a CNBC interview (full show here, foreclosure discussion runs from 4:07 to 5:23), JPMChase CEO Jamie Dimon stated that: “Giving debt relief to people that really need it, that’s what foreclosure is.” As he explained: “[Homeowners] are probably better off going somewhere else, because they get relieved almost 100% of the debt through foreclosure.” For real? It’s debt relief? Why not just go old school with “let them eat cake”? “Debt relief” requires a forgiveness of debt. It’s a gift, not an echange. There’s no quid pro quo. In foreclosure, however, the homeowner gives up the house, and doesn’t necessarily get any debt relief. If the mortgage is recourse, there could still be a deficiency judgment. Does Dimon mean that JPMChase is forgoing all deficiency judgments? I doubt it. And even if so, there’s an exchange of debt for house. That’s hardly debt relief. That’s debt collection. * * *

(Yves Smith) * * * [I]f banks were so keen to be considerate to borrowers’ need to move on, they’d be far more receptive to short sales, yet both commentors on this site and media reports indicate that many servicers make it well nigh impossible to enter into a short sale when it is almost always a better outcome for the homeowner and investors. * * * Nevertheless, the Dimon moral calculus is fascinating. If foreclosures are kind, is it even kinder to restore debtors’ prisons? After all, those people who lose their homes would be assured of getting shelter.

(ATaxingMatter) The continued intransigence of banks and servicers and the continuing problems caused to foreclosed families and foreclosed neighborhoods is striking.  Just look at the situation underlying Los Angeles' suit against Deutsche Bank for failing to properly maintain foreclosed properties, resulting in neighborhood deterioration from the double whammy of residents moving out of foreclosed properties and foreclosed properties attracting graffiti and worse.  See, e.g., Los Angeles Sues Deutsche Bank Over Foreclosure Blight, Reuters, May 4, 2011; Los Angeles Sues Deutsche Bank as Slumlord, Bellingham Herald, May 4, 2011. 

It's past time for Congress to permit mortgage loan modification in bankruptcy.  If it can't bring itself to do that, then maybe it could use the tax Code to disincentivize foreclosures generally and bad foreclosure behavior specifically--a kind of "sin tax".  Perhaps a new "excessive fees" tax targeted to recoup a considerable percentage of the add-on fees and other charges that servicers and banks tack onto foreclosures.  Or a tax of 50% of the sale price when a foreclosed home is eventually sold for less than a verifiable short sale proposal that was rejected by the servicer or bank. 

PEW report on "The Great Debt Shift"

The PEW Foundation's report on the reasons the U.S. debt is at its current level is now available:  The Great Debt Shift.  This report lies behind Montgomery's Washington Post article reviewed in the prior post.

This discussion of deficits and debts appears to be backwards.  If our congressional representatives truly had the well-being of Americans and the long-term status of the country in mind, I suspect we would have a very different national conversation.

First, we would have a real dialogue--hopefully with minimal misleading and false talking points based on distortions of facts --centered first around what it makes sense for governments, and the federal government in particular, to be spending money on.  I have in mind the development of a consensus about expenditures essential to the well-being of the citizenry. 

 I'd include at the least items such as:

• a  national defense network (thinner than the current Homeland Security/Military apparatus, so that it does not become too powerful);
• an open, transparent and fundamentally conservative financial system that provides credibility to the US so that it can conduct its affairs and that provides a sound system of credit for commerce and individual interests;
• basic and decent health care for everyone;
• public infrastructure such as transportation, communication and energy networks;
• decent public education from child care/pre-kindergarten through college;
• seed money to support innovation (such as direct funding for basic research and short-lived tax incentives to innovative technologies that have some track record of improvement over current technologies);
• appropriate regulation of markets to avoid  (i) externalities like pollution, fishing stock depletion, endangered species extinction and (ii) generally problematic dominance of markets by a few large players;
• legal regimes that provide means of holding corporate entities and individual actors responsible in both civil and criminal actions as appropriate; and
• appropriate safety nets to ensure that vulnerable citizens are cared for in difficult times. 

After having developed some consensus around the kinds of expenditures that promote personal freedom and the general welfare of our citizenry and our society,  I'd want us to have a conversation about  the means of achieving those important expenditures.  There is no need (or justification) for arbitrary caps, such as "government expenditure should not exceed 19% of GDP" or a priori conclusions about whether or not we can "afford" such things as decent universal health care or decent old age insurance.  We should, of course, consider whether current taxation, fees, and other revenues can provide sufficient funding for the items that we have prioritized.  If not, we should consider what additional revenues might be reasonably generated to fund those priorities.  Only if the result of funding those priorities through the best means we can determine is more damage to the citizenry and societal structure than not making those expenditures at all should we consider pulling back from our determined agenda.

As I said, the US is currently doing this backwards.  We are operating with an intentionally defective tax revenue system ginned up by the "starve the beast" crowd to protect its own interests.  We had a reasonable tax system in place in 2001, a system that a majority of people considered satisfactory, even at the time that the Bush Administration was amping up the PR to push through its huge 1.35 trillion tax cut predominantly of benefit to the wealthy.  (That is not to say, of course, that there was no room for improvements, such as by removing ambiguities, deleting the chaff hanging on from decades or more that no longer had a good rationale, such as the huge agribusiness subsidies, and others.)  An ideological whirlwind, based on neoliberal views that support the primacy of property rights and hence the primacy of the propertied classes, swept that away and substituted growing deficits, growing debts and expanding military commitments.  Remember that Bush II actually increased spending while pushing through and supporting what amounts to one of the biggest tax cut packages in our history, when you take all of the various cuts from 2001-2008 into account.  And, of course, it was the GOP that pushed for using more tax cuts (particularly for Big Business) rather than direct public infrastructure investment as a huge part of the economic stimulus package that was finally passed.  Now, those resulting deficits and debts are being combined with a priori arbitrary numerical targets to purport to justify the "necessity" of eliminating important safety net programs that enhanced personal freedoms by freeing the unemployed, the poor and the elderly from some of the worst ravages of economic insecurity. 

Americans may be beginning to wake up.  Witness the fury at some of the Town Hall meetings of the House members who supported Ryan's budget proposal that combined new tax cuts for the wealthy with more reductions of aid for the poor.  But the Paul Ryans, Donald Trumps, Sarah Palins, Michele Bachmanns, Grover Norquists, Glenn Becks and all the others participating in false facts echo chambers are trying hard to prevent that from happening.  Hopefully, more and more members of both the Democratic and Republican parties will step forward to pull us back from the brink of ridiculous gamesmanship over birth certificates, college transcripts, Harvard Law Review articles, the debt ceiling (get rid of it altogether) and ideologically driven spending targets so that we can have the national discussion we need to have.

The Washington Post's Lori Montgomery on the U.S. Debt

Lori Montgomery, Running in the Red: How the U.S., on the road to surplus, detoured to massive debt, Washington Post, April 30, 2011, notes that the run-up of the U.S. debt was a choice, made in the first year of the Bush Administration when Bush pushed through a huge tax cut.

Rubin wanted to use the surplus to start repaying the debt, which was then just more than $3 trillion. The White House billed it as “saving Social Security first,” viewing the surplus as an opportunity to shore up the nation’s finances before huge numbers of the baby boom generation began claiming federal retirement benefits. “The problem was a whole other part of the political spectrum wanted to use the surplus for tax cuts,” Rubin said in an interview. “They said they wanted to give the people back their money. Of course, it was also the people’s debt.”

The Bush tax cut bills passed almost every year he was in office (and the additional losses in tax revenues triggered by recession) are "the biggest culprit, by far" behind the huge increase in the debt that the right is trying to use to convince Americans that we have no choice but to settle for decimating almost all of the New Deal programs.  The 2001 and 2003 Bush tax cuts amounted to about $1.8 trillion (based on the sunsetting gimmick that had various provisions ending after 8 or 10 years to make the cost look lower than it was expected to be).

Many Americans seem to think that Obama is the source of the high deficit/high debt problem.  But Montgomery shows that most of the big ticket spending increases go back to the Bush administration. 

Big-ticket spending initiated by the Bush administration accounts for 12 percent of the shift. The Iraq and Afghanistan wars have added $1.3 trillion in new borrowing. A new prescription drug benefit for Medicare recipients contributed another $272 billion. The Troubled Assets Relief Program bank bailout, which infuriated voters and led to the defeat of several legislators in 2010, added just $16 billion — and TARP may eventually cost nothing as financial institutions repay the Treasury.

Obama’s 2009 economic stimulus, a favorite target of Republicans who blame Democrats for the mounting debt, has added $719 billion — 6 percent of the total shift, according to the new analysis of CBO data by the nonprofit Pew Fiscal Analysis Initiative. All told, Obama-era choices account for about $1.7 trillion in new debt, according to a separate Washington Post analysis of CBO data over the past decade. Bush-era policies, meanwhile, account for more than $7 trillion and are a major contributor to the trillion-dollar annual budget deficits that are dominating the political debate.

Montgomery reports that Republicans (who were the drivers of the huge Bush-era series of tax cuts) "reject raising taxes as part of the solution."  

 But Montgomery's story is, like most reporting these days, too shallow.  She notes that Bush's campaign talk about "giving the tax money back to the people, because 'It's your money'" took place in the context of the surplus generated during the Clinton years. But now they plan to use the need to raise the debt ceiing as leverage to force the Democrats to accept cuts to entitlements while still giving major new tax cuts to the wealthy and big business.

The article suggests that, if only Bush and Congress had known about the two wars and the heightened security costs after 9/11 and the financial crisis, they would not have passed the gigantic tax cuts.  Pete Domenici, for example, says "Nobody would have thought that all these things would have happend after you cut taxes.  That you'd have two wars and not pay for them.  That you'd have another recession.  A huge extravaganza of expenditures."

Yet it was the same president Bush who pushed through the huge tax cuts year after year who chose to start two wars that had little to do with U.S. security and lots to do with the military industrial complex and Republican war-mongering ideology.  And then chose to pay for those wars with borrowing rather than by rolling back the bills that had starved the government of tax revenues at just the wrong time.  And Congress went along.

But even that distorts the perspective on the Bush tax cuts and the surplus.  By the time the 2002, 2003, and 2004 tax cuts were passed, we already knew that there wasn't a surplus.  Bush was running significant deficits, and the wars in Iraq and Afghanistan were mushrooming well beyong the rosy low-cost estimates that the Bush war machine had first projected.  The war funding was being handled by supplemental bills to disguise its huge cost.  So those tax cuts were passed in spite of the deficits and hugely increased borrowing to pay for the Bush-Cheney permanent ramp-up of the military complex, including the expensive hired mercenaries and hired Halliburton services that proved that privatization of the military resulted in increased costs.  The way the tax cuts were handled, and the way the right-wing rhetoric disguised the reality of the need to borrow to pay for tax cuts while conducting a war of choice, demonstrates that the GOP is not the party of fiscal responsibility that it tries to claim it is. 

Argentine Crackdown on grain/bean exporting companies, including Cargill and Bunge

According to BNA's David Haskel in the May 1, 2011 Daily Tax Report, Argentina has sent 1200 tax agents out to raid the offices of major grain and bean companies, including two US agribusiness MNEs, Cargill and Bunge.    The agents carried out raids across the country on Friday and Saturday, targeting 200 companies and individuals (including notaries and accountants) suspected of being involved in the scams.  The documents seized will be studied as the tax administration determines its next moves.

Companies are thought to be using various tax evasion techniques, including setting up shame companies attributable to deceased people, money laundering, and claiming abandoned silos as place of origin for grains.  Cargill is accused of billing its sales to a Uruguayan subsidiary, that would then bill companies set up in tax havens.  In addition, the Uruguayan subsidiary claimed it was making sales at below purchase price, generating losses that allowed it to reduce taxes.  Bunge is suspected of the biggest tax-dodge, based on raids of its offices and seizure of files.  It may have used the scams to avoid $300 million in taxes.  The Argentine tax office indicated that other American companies, including Archer Daniels Midland, DuPont and Louis Dreyfus, are also under investigation.