Do you ever have times when you read something, then have to re-read it because you can’t believe you read it right?
That’s my reaction to the news that Goldman Sachs (Treasury Secretary Paulson’s former stomping grounds) is having a fine holiday season while Vermonters and other Americans face destitution and service cuts. Why fund fire trucks, child care or health care when ponzi-schemers could be partying instead?
Here’s the deal: Goldman played their accounting cards so well this year, that they “owe” only 1% tax. So on the multi-billions of dollars they earned last year, plus the $10 billion taxpayer dollars they took in the bailout, they only have to pay a pittance to support the infrastructure of the country that made their obscene profits possible.
More below the fold…
So what? Companies are always finding ways to pay less tax. Aren’t fewer taxes better?
That last question is a conditioned response now in America. We’ve been told over and over for decades that companies hire more people if they have to pay fewer taxes. This is based on something called the Laffer curve (named after a person, not after what the greedsters do everytime they con us into believing in it). The Laffer curve is supposed to be this magical statistical map of taxes vs jobs. Presumably, the higher the taxes, the fewer the jobs.
But what most proponents of this theory misunderstand is that the guy who came up with the theory didn’t map a linear relationship between jobs and taxes, he mapped a curve. On one side would be increasing taxes creating jobs by creating a better educated workforce, better roads, better security, etc. – all those things taxes pay for that make it easier to do business successfully.
The peak of the curve is the hypothetical number where you’ve got the ultimate in support for successful business combined with the ultimate profits for that business.
The other side of the curve, where it goes back downhill, is where taxes become so onerous, the business can’t profit.
What we’ve been told for the last few decades is that any and all taxes are automatically on the downhill side – any tax automatically drags down profits to the point at which no business can survive. So we’ve been cutting, and cutting, and cutting, and all of a sudden, we have crappy roads, schools are hemorrhaging, and fire departments go begging. And businesses are failing. Rapidly.
Which brings us back to Goldman. They paid 1% in 2007, but paid 34% in 2006. That’s a 97% tax cut. Which side of the Laffer curve would that put them on?
From Bloomberg News:
The company’s effective income tax rate dropped to 1 percent from 34.1 percent [last year]…The firm reported a $2.3 billion profit for the year …[and] lowered its rate with more tax credits as a percentage of earnings and because of “changes in geographic earnings mix,” the company said.
So they won’t be contributing to rebuild our failing roads, our kids’ health care, or our police, fire, military, or really any budget items this year.
Instead, they’re going to make much better use of the money they’ve “saved” (you know, like that $10 billion debt guarantee they got from the U.S. tax payer in October): Christmas bonuses!
That’s right. It’s not what they’re calling it, they’re calling it “employee compensation.” Some refer to it as a “retention bonus,” because with the economy cranking out so many new high-paid jobs for bankers, they’re worried their employees will head for greener pastures. (For the reading comprehension impaired, the previous sentence was absolutely dripping with sarcasm.)
Would you like to let Goldman Sachs know what you think of their decision to shift money around to the places that would tax them the least, so they could avoid paying taxes back home? Would you like to help them understand just how much you appreciate their shafting of the US taxpayer, by taking our money, using it for bonuses, and then choosing not to pay their fair share in taxes?
Here’s a good place to start:
GOLDMAN SACHS CONTACT INFO
Main number in NYC: 212-902-1000
Investor relations: 212-902-0300 (gs-investor-relations@gs.com)
Bug their press department: 212-902-5400
And if you want to talk to someone in the US Senate who has almost single-handedly ensured that the rip-off artists wizards of the financial industry would be comfortably free of regulations and accountability, how about dropping a line to Chuck Schumer’s office?
CHUCK SCHUMER CONTACT INFO
Washington, D.C. office: 202-224-6542
New York City office: 212-486-4430
Democratic Senatorial Camapaign Committee: 202-224-2447
Why Schumer? The NY Times gives some background:
Mr. Schumer appeared at a breakfast fund-raiser in Midtown Manhattan for Senate Democrats. Addressing Henry R. Kravis, the buyout billionaire, and about 20 other finance industry executives, he warned that a bailout would be a hard sell on Capitol Hill. Then he offered some reassurance: The businessmen could count on the Democrats to help steer the nation through the financial turmoil.
“We are not going to be a bunch of crazy, anti-business liberals,” one executive said, summarizing Mr. Schumer’s remarks. “We are going to be effective, moderate advocates for sound economic policies, good responsible stewards you can trust.”
The message clearly resonated. The next week, executives at firms represented at the breakfast sent in more than $135,000 in campaign donations.
…[Schumer] repeatedly took other steps to protect industry players from government oversight and tougher rules, a review of his record shows. Over the years, he has also helped save financial institutions billions of dollars in higher taxes or fees.
He needs to know we’re watching and that we won’t put up with this game any more. Let him know that it’s time to end trickle-on economics.
Warm up that dialing finger and get on the horn to these people. Let them know you will not tolerate any more of these shenanigans.