President Obama once admiringly called President Clinton the “explainer in chief.” I felt similar admiration when I read a recently published little book by someone who’s not a politician and isn’t particularly well-known, but he’s a damned impressive explainer.
I’m talking about Morris Pearl, who is chair of an organization called Patriotic Millionaires — which, according to their website, is comprised of a couple hundred or so “high-net worth" Americans who are advocating progressive revisions to our tax system. Pearl’s group wants “millionaires, billionaires, and corporations” to start paying their fair share of taxes — to start acting like patriots instead of acting like — as one of his fellow Patriotic Millionaires bluntly puts it — “a bunch of fucking crybabies.” (See page 19 of Pearl’s excellent new book.)
You can read his book very quickly, since it’s so short. If you skip the introduction, the meat of the book is just 60 pages. Here’s the PDF:
(I know, you probably don’t have time at the moment to read 60 pages, but I urge you to click it and bookmark it and read it when you do have time.)
Every page in this book is a little gem in which Pearl clearly explains some of the most egregious ways our tax system — and the 2017 Republican tax overhaul — benefit the extremely wealthy (e.g. the current White House occupant and his family, see page 70) and play the working people of this nation for suckers.
Pearl is especially adept at showing how the justifications for this absurdly unfair system — some of which have become ingrained in conventional wisdom — are utterly bogus. One by one, Pearl knocks down all the familiar arguments (e.g. capital gains are taxed less than labor income because this “encourages investment” [wrong] which “creates jobs” [wrong].)
A retired securities expert and very wealthy stock investor, Pearl understands intimately the system he’s critiquing, and he makes it clear that his mission is not driven by altruism or guilt; rather, he argues, it’s in his and every American’s self-interest to live in a country where opportunity and innovation and the standard of living aren’t diminished by the insatiable avarice of a tiny minority who’ve gamed the system to allow them to pocket so much of the nation’s wealth.
I think many folks in the Bernie Sanders wing will find this book can help sharpen their arguments. And if you consider yourself more in the middle of Democratic politics — if you think Bernie has, for the past 40-some-odd years, been perhaps overwrought in his railing against the greed of those super-rich Americans and American multinational corporations who’ve rigged the system — then I think if you read this book you may very well come away feeling not only that Bernie’s been justified in his railing, but that America truly needs many, many more politicians and non-politicians amplifying that hue and cry.
While Pearl concentrates on tax policy in this book, of course another culprit responsible for today’s crushing economic inequality in America is deregulation, such as the scourge of stock buybacks, a toxic legacy of the Reagan Revolution. To turn things around, our country needs a progressive movement that’s stronger and smarter and louder than the conservative movement has been for the past four decades. And heaven help us if we’re too genteel to call that movement — our movement — a revolution. As Pearl writes in his introduction:
[W]hile I’d like to think my fellow millionaires will see the light soon, we can’t rely on them. Regular Americans — the ones without millions of dollars in investments — can fix this country themselves. The system may be stacked against them at every turn, but at the end of the day they have the power.
I do hope you’ll go read this whole (tiny) book...since it’s so chock-full of gems, I can hardly do it justice by quoting a few paragraphs. But it would be remiss of me to post an article about a book and not quote any passages, so here’s one:
Say you have a company that buys coffee beans, hires workers, and rents space in the United States to make coffee and sell it to people in the United States. It also buys coffee beans, hires workers, and rents space to sell it to people in Ireland. In that scenario, it’s more or less straightforward to calculate the profit in the United States and the profit in Ireland. The company can then pay a percentage of its United States profit to the Internal Revenue Service, and also pay a percentage of its Irish profits to the Oifig na gCoimisinéirí Ioncaim (basically the Irish IRS).
Now a large company that serves people coffee might have 13 or 14 thousand stores in the United States and 5 or 6 dozen stores in Ireland, so one might expect the company would pay a lot of taxes in United States (at a rate that was around 35% last year, and less this year), and somewhat less tax on profits from the 60 or stores in Ireland (at a 12.5% rate). That would make sense.
But that’s not how it works at all.
You see, a lot of large companies have what is called intellectual property. …
Now imagine some smart lawyer in Seattle clicking “send” [on an email] and transferring Starbucks intellectual property — like the company logo — to Starbucks of Ireland (it’s more complicated than this but you will get the gist of it) Starbucks of Ireland would then technically own that logo, and Starbucks of the United States would have to send royalty payments to Starbucks of Ireland for the privilege of using it. They can make the royalty payments whatever they want. If they chose to make the royalty payments for using that logo large enough, on the books, then they could show no profit in the US and all of their profits in Ireland, even though they sold much more coffee in the US. All of the profit — and therefore the amount that can be taxed — technically belongs to the company that owns the intellectual property (the logo). So Starbucks could end up paying zero taxes in the United States whether the US tax rate is 35% or the current rate of 21%. They would instead pay all their taxes in Ireland (at 12.5%).
REPATRIATION
The big problem with setting up those wonky foreign tax arrangements was that was that while corporations could transfer as much money as they wanted to the accounts of their affiliates overseas, if they wanted to distribute that money to their shareholders in the US, they would have to pay the full American tax rate on it. To avoid paying those taxes, American corporations held over $3.1 trillion in profits in offshore accounts, betting that they would get a chance to bring it back in without paying taxes on it. And they bet right, because the Republican tax bill gave them the chance to bring all of those profits back at less than half the normal tax rate (15.5% versus 35%).
Multinational corporations got hundreds of billions of dollars in tax savings as a reward for what should be tax evasion.
Now, conservatives claim that their policy is bringing about huge investment in the United States because companies are bringing back a stash of cash they have stored overseas. They think these companies (and it is a lot of big companies) are physically shipping hundred dollar bills and storing them in a big vault in Dublin or someplace. That’s just not the case. The money never actually leaves the United States, it is simply invested in US stocks and bonds (they don’t want to invest in Euros, that might depreciate against the dollars) but in accounts owned by overseas affiliates. Yes, the companies are under some restrictions, but the overseas profits are already invested in the United States.
Major corporations may claim that by repatriating their money at a lower rate they can create jobs and reward workers, but it’s little more than a PR ploy to move public option.
Take Apple, which recently announced that it would be repatriating hundreds of billions of offshore profits at the lower rate. Not content with tax savings of $40 billion (more than double the annual cost of the Children’s Health Insurance Program, which covers health care costs for nine million children in low-income families, by the way), Apple CEO Tim Cook wants our praise as well. ...
You should read the rest of that page about Apple (page 43).
And all the rest of this little book.