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Monthly Archives: April 2011

Today I happened on a great article by Scott Patrick Humphrey. It discusses the connections between big business and the US government, undeniable after reading the article.

Mr. Humphrey has obviously done some research and supports his arguments well. Another myth he dispels is that public employment is responsible for draining public funds and creating public debt.

According to the Current Population Survey-IPUMS by the Economic Policy Institute, the average compensation, including salary and benefits, by education level in the United States breaks down like this: if you have a high school education, in the private sector you make $50,596, in the public sector, $53,880. That is a difference of $3,284 in favor of public workers; a number that seems modest at best. If you have a bachelor’s degree you will garner $91,256 in the private sector and $68,290 in the public sector; a difference of $22, 966 in favor of private sector workers. With a professional degree the private sector worker gets $192,977, while the public sector equivalent gets $121,192, a difference of $71,785. There goes that idea. Yet while we fiddle and fight amongst ourselves, the game is afoot and we’re in the hole from the get-go. When is it enough? But ya know what? “… on average, 54 percent of state and local public sector workers hold at least a four-year degree compared to 35 percent of full-time private sector workers” (Jeffrey H. Keefe, Debunking the Myth of the Overcompensated Public Employee).

Another issue is the disappearance of pensions and health care.

But here are many of the facts that the tea-baggers have never seen, because facts are found in books. Let’s start with pensions: in 1988, 63 percent of workers in large private sector firms participated in defined benefit pension plans; last year it was 30 percent; pensions are disappearing. (BLS, National Compensation Survey: Employee Benefits in the US for firms with more than 100 employees – retirement benefits)

Fewer firms are offering retiree health care benefits. Among firms that had 200 or more employees in 1988, 66 percent offered retirement health care; last year it was 28 percent. Apparently even if you work your whole life with a company, there is no guarantee you will be able to have care during the stage of life when you will need it most. (Kaiser Family Foundation; Employer Health Benefits 2010 Annual Survey)

This–of course–is another way to transfer income away from the middle class to the rich.

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Floyd Norris has published a new article on corporate taxes in the U.S. While corporations continue to complain that their tax burden is too high, statistics show that their tax burden is less than before and less than most developed countries.

The I.R.S. 2010 Data Book offers some information. In Table 6 on page 15, it details gross tax receipts for every fiscal year since 1960.

In the 1960s, corporate taxes amounted to about 22 percent of overall tax receipts, and averaged 3.9 percent of gross domestic product. In the most recent decade, the figures are about 12 percent of total taxes and 2.2 percent of G.D.P.

In other words, the corporate tax burden in roughly half what it was.

In times when US debt is a big concern, the next question must be about who faces the extra burden of US debt?

Or here is another set of available data. The Commerce Department calculates total corporate profits as part of its G.D.P report. Looking at 10-year averages to smooth out cyclical swings, pretax corporate profits are now higher than at any time in more than three decades. But corporate tax payments as a percentage of pretax income are lower than at any time since World War II.

So US debt must come at the expense of the taxpayer, and with higher income taxpayers benefiting from lower rates, the middle class faces a bigger burden. Is this any way to encourage growth in the US? Still the corporations argue that their tax rates are higher than in most of the world.

The news here is — or would be if it were true — that American companies face high effective rates. It is true that the 35 percent statutory rate is high by international standards, but there are so many exemptions and loopholes and incentives that relatively little money is actually collected.

If you read the fine print of the study carefully, you see this:

Total income taxes is defined to be the sum of all taxes imposed on income by local, provincial or state, national, and foreign governments during the year. It is the total tax provision and includes current taxes as well as the change in net deferred tax liabilities for the year.

So this counts taxes American companies do not actually pay, but only defer. There are numerous reasons for companies to have deferred taxes, often because tax laws enable expenses to be taken earlier than accounting rules provide. And companies with overseas profits can defer taxes indefinitely by never repatriating the profits.

Suffice it to say that US corporations are avoiding taxes as best they can. We would expect that of any corporation, but that the US government allows it–that is the question.

Interesting article today on how migration patterns are changing in response to economic changes, with many Europeans choosing to live and work in the developing world rather than their home country.

Europe’s ruinous debt crisis and job-sapping economic miseries are reshaping migration trends, with a generation of home-grown talent grabbing at the chance of economic rewards on continents once treated with disdain.

Portuguese are packing their bags for booming Angola and Mozambique in Africa, and for emerging economic powerhouse Brazil, where there is a shortage of engineers to prepare the country for the 2014 World Cup and 2016 summer Olympics in Rio de Janeiro. Spaniards are being drawn to their former colonies in Latin America.

Most of the data mentioned is from Spain and Portugal, but similar changes are also mentioned for Italy, France, Ireland, and Greece.

The article stresses that people are fleeing unemployment and stagnating economies. As an American expat working in China, I believe there are better opportunities overseas for many people, depending on what you do.