Today, President Barack Obama released the budget for what will cover his last year in office.
Even though he called for a greater emphasis on “middle-class economics” during the State of the Union address, the president’s budget does not go far enough to make sure that Wall Street and corporations pay their fair share of the cost of government. Notably missing from the budget is a strong stance on closing international tax loopholes and an important tax on stock, bond and derivative trades.
President Obama’s budget addressed the problem of international tax loopholes, but only partially. Though he proposed repatriating corporate profits stashed offshore, he should have proposed bringing these taxes back at a much higher rate. The 14 percent he proposed for immediate taxation to fund infrastructure investments is much too low, since multinational corporations have been milking a bevy of tax breaks for years. Though the president proposes taxing future overseas profits at 19 percent, and compared to the current statutory rate of 35 percent, that’s still leaving a lot on the table of the $2 trillion of profits estimated to be stashed offshore.
Granted, Obama’s 19 percent repatriation proposal is itself stronger than what U.S. Sens. Barbara Boxer (D-Calif.) and Rand Paul (R-Ky.) recently unveiled — a plan to shore up the depleted Highway Trust Fund by repatriating offshore taxes at the bargain-basement rate of only 6.5 percent. The 2015 bipartisan infrastructure reparation proposal is only slightly more than 1 percent higher than the 5.25 percent rate used in the well-documented failure of a similar experiment in 2004. Boxer and Paul’s 2015 proposal is a revenue loser, similar proposals are expected to cost in the range of $100 billion over 10 years, according to the Joint Committee on Taxation. Repatriation holidays such as these are major giveaways that will reward corporations that have for years avoided paying taxes by using accounting gimmicks to shift profits to the books of related foreign corporations.
Addressing the collateral consequences of punishment has long bedeviled the Solomons of justice. The poorly behaving student is expelled, but then is denied access to alternative schooling. Washington metes out penalties for financial misdeeds, but concern for those collateral consequences has in many cases led to light punishment.
The U.S. Department of Justice’s Attorney General Eric Holder confided that HSBC Bank USA, found guilty of laundering $200 trillion worth of money for tyrants, terrorists and narco-traffickers, was so large that holding it fully accountable might jeopardize the economy. The reasoning is similar to that used justify bailing out the “too big to fail” banks that caused the economic collapse. This led to the epithet: too big to jail (TBTJ.)
The TBTJ problem has infected other regulators. Corporate violations announced by the Department of Justice are supposed to trigger mandatory penalties when the same entity is overseen by other agencies, such as the Securities and Exchange Commission (SEC). For example, the SEC deems financial firms that break the law “bad actors,” which disqualifies them from certain activities.
One disqualification prevents financial firms from selling private securities for clients companies. These private securities are sold to larger, more sophisticated investors. Qualifying private securities offerings receive less SEC scrutiny than offerings to the general public. Excluding bad actors from selling these securities serves two purposes: It protects investors from scheming sales firms, and it acts as a deterrent to the violation of laws.
The congressional leaders who negotiated $1.1 trillion federal spending bill – dubbed the “CRomnibus” – must not have known they were in for a fight.
But when Public Citizen and other public interest allies got hold of the 1,600-page bill and saw that it contained a bevy of atrocious policy riders that had nothing to do with funding the government, the fight was coming.
The take-it-or-leave-it budget – including the poison pill provisions that Public Citizen opposed – did ultimately pass. The fight for its passage is instructive for how public interest advocates can wield power in the coming years, even as majorities in Congress seem determined to deliver a return on Corporate America’s Citizens United-enabled election investments.
The worst that could have happened would have been if the giveaways to corporations and the super rich had been accepted without a fight.
Thankfully, that’s not what happened.
We called on grassroots activists like you to act – to email and call your members of Congress – and you acted.
Tens of thousands of outraged citizens made it known that they would not accept a budget bill that allows millionaires and billionaires to have more influence in our elections and that puts taxpayers on the hook for Wall Street’s recklessness.
And then – hearing the outrage of tens of thousands of constituents across the country – principled members of Congress (of both major parties) fought the bipartisan backroom deal.
We’ve just seen the worst that Washington has to offer with the “cromnibus” government spending bill passed by the U.S. House of Representatives last night.
Instead of Congress passing a clean funding bill along lines that were previously agreed to and had bipartisan acceptance, Big Business exercised its insider influence and took advantage of an artificially rushed and secretive process to cut deals to enhance the political influence of the super-rich, put taxpayers on the hook – again – for Wall Street recklessness and make our roads less safe.
Moneyed interests maneuvered to eviscerate campaign spending rules, so that a super-rich couple may now contribute up to $3 million to a national political party in a single (two-year) election cycle. It’s a certainty that this move will be followed up by calls to “level the playing field” and permit the same monstrous contributions to candidates and political committees.
Wall Street called on its friends to include a Citigroup-drafted provision that would roll back a key Dodd-Frank measure that was designed to prevent Big Banks from using taxpayer-insured money to bet in the derivatives markets. With the top four banks responsible for 93 percent of derivatives activities in the United States, there is zero question about which entities will benefit. Nor who will pay; when the next financial crisis comes – as it will, as certainly as the calendar changes – taxpayers will be forced to pay for Wall Street gambling on derivatives.
At the behest of the trucking industry, U.S. Sen. Susan Collins included in the spending bill a provision to override rules to reduce truck driver fatigue, which risks the lives of truckers and other drivers.
These are only some of the known giveaways in the spending bill. It will probably take many weeks, or longer, before all of the industry deals are discovered.
As serious and troubling as are these measures, there is reason to fear worse is to come. Even though it opposed many of these harmful provisions, the White House pushed for approval of the overall spending deal, which had to overcome substantial opposition from members of Congress in both parties. If this is the kind of “bipartisanship” we’re going to see in the coming two years, the country is facing dire prospects indeed.