Why Princeton and Every University Inc Should Pay Taxes

We are fast approaching the day when all tax expenditures, give-aways, exemptions, special "breaks" etc., will be repealed in the interest of a cleaner, simpler, fair, and honest tax code -- something the US hasn't had in a long time --

James Piereson and Naomi Schaefer Riley: Why Shouldn't Princeton Pay Taxes? - WSJ.com: "T-shirts are only the tip of the iceberg. Universities make money from the television rights to athletic events, music performances, cafes, alumni vacation tours and more. As a former top administrator at Emory University put it to Jennifer Washburn in her book "University Inc.": "At the time I got into academia, most people believed they were doing what they were doing—generating ideas and discoveries—because of the public good. . . . Now, when you go look at university business plans, as they are called, students are seen as clients, parents are seen as customers. The question has now become, 'What is going to sell?' ""

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Why Don't Corporations Pay Taxes Like The Rest of Us?

The US does not have a progressive tax system--it is egregiously regressive--another reason we need comprehensive tax reform before we start cutting programs:

Corporations Don't Pay Taxes, Why Should You? | The Nation: " . . . . The most skilled at this con game are the health care and technology companies, which, as a Senate investigation last year revealed, have become quite expert at shifting marketing rights and patents offshore to low-tax countries. Microsoft boosted its foreign holdings by $16 billion last year, and by the end of the company’s fiscal year on June 30, 2012, had $60.8 billion stashed internationally. Through creative accounting, Microsoft was able to claim that only 7 percent of its pretax profit last year was domestically generated. Oracle increased its foreign holdings by one-third, including new subsidiaries in low-tax Ireland, and thereby was able to add a cool $272 million to the company’s bottom line by avoiding US taxes. Abbott estimates that it saved $1.6 billion in US taxes through its operations in more than a dozen countries. By moving $8.1 billion of its profits overseas, Abbott was able to claim a pretax loss on its US operations. Johnson & Johnson, another health industry giant, has almost all of its cash—$14.8 billion out of $14.9 billion—abroad, yet still claims to be a US company. One of the longtime leaders in offshore tax avoidance has been that once-American-as-apple-pie company GE, which in a more innocent time hired Ronald Reagan to advertise its wares. Now GE has nearly two-thirds of its jobs abroad, avoided US taxes in the previous two years and has $108 billion stashed overseas. Two years ago, President Obama appointed GE CEO Jeffrey Immelt to chair his Jobs Council, despite the fact that Immelt had cut his company’s US workforce by a fifth. GE’s expertise is no longer in appliance manufacturing, a division Immelt has tried to shed, but rather in financial manipulation. GE Capital was a leader in the financial scams that still haunt the US economy, and Immelt has been most effective in lobbying Washington politicians to rig the tax laws to benefit his and other multinational corporations. He has created some jobs, but unfortunately, they are abroad, along with his company’s untaxed profits. For all these multinational corporations, the love of profit trumps loyalty to country. . . " (read more at link above)

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Apple, Europe, and Taxes

I've already written why there will be no tax reform in Washington or elsewhere because the big corporations pay such low tax rates currently--don't believe it when you are told we have a progressive tax system. The tax system in the US is grossly regressive--in fact, a flat tax system, with no personal deductions and corporate loopholes, would be much fairer than our present system. Just read the following--

No, Really, Apple Just Isn't Doing Any Tax Avoidance In Europe - Forbes: "Various of the English newspapers like to run stories on how the big tech companies are avoiding tax in the UK and Europe. Every week or two we get another piece saying that Facebook, or Amazon, Apple, have been avoiding tax and that this is an outrage, must be stopped etc. The sad thing about all of these stories is that the people writing them just don’t seem to understand the basics of the European corporation tax system. The latest story is the Sunday Times with Apple. That paper’s gated so here’s the Telegraph explanation of it:

Apple is estimated to have avoided more than £550m in tax in Britain in 2011. Its latest accounts show UK turnover at just over £1bn and profit at £81.3m, generating a tax bill of £14.4m.

 . . . So, clearly, Apple has been tax avoiding, right? Sadly, no, that’s where the problem comes in. . . . What they’re actually doing is selling the hardware through their Irish company. This one, right here. They do have AppleStores in the UK, yes, and it’s the retail sales from those that provide that £1 billion turnover and that small tax bill. But if you buy online from Apple you get your kit from Ireland. If you’re a dealer, a reseller, a shop, an electronics chain, a telecoms chain, you get your kit from Ireland. As, more than likely, do the AppleStores get their machines through Ireland. Yes, Ireland has a much lower rate of corporation tax than other EU countries: but this still isn’t tax avoidance. For we now have to look at the “but did the lawmakers mean this?” test. And the truth is, yes they did. . . . "

So don't blame Apple and the other corporations--blame the governments!

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Biden: Middle Class Buried for Last 4 Years (video)

Biden: Middle Class 'Buried' for Last 4 Years
In a campaign speech, Vice President Joe Biden says the middle class has been 'buried' for the last four years, comments the Republican party jumped on and used to criticize the Obama administration.


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How I Fixed the Tax Code (In Half a Day)--another view

How I Fixed the Tax Code (In Half a Day) - SmartMoney.com: "I figure a good tax code should be simple, efficient and fair. So I wondered if we could just combine a national sales tax, which is simple and efficient, with a drastically simplified but progressive income tax, which would be fair. Scrap the regressive payroll tax. Scrap the regressive corporation tax, too: Instead tax the business owners, and treat all investment income and capital gains as income. No loopholes. No breaks. Easy. The IRS says 2011 taxes total about $2.3 trillion. A 10% national sales tax would bring in about $1.1 trillion, or nearly half of what we need. That would ensure everybody pays something, and it would be relatively easy to collect. What about income taxes? I played with three tax rates: 0%, 25%, and 40%. (Notice I have shunned the cowardly "39.6%," as well). . . "

The fix is easy . . . the political will is missing.

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Will Higher Tax Rates Balance the Budget?

As the U.S. debt and deficit grows, some politicians and economist have called for higher tax rates in order to balance the budget. The question becomes: when the government raises taxes, does it actually collect a larger portion of the US economy? 


Professor Antony Davies examines 50 years of economic data and finds that regardless of tax rates, the percentage of GDP that the government collects has remained relatively constant. In other words, no matter how high government sets tax rates, the government gets about the same portion. According to Davies, if we're concerned about balancing the budget, we should worry less about raising tax revenue and more about growing the economy. The recipe for growth? Lower tax rates and a simplified tax code.


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Tax reform--it is not going to go away

Who can argue that tax expenditures give politicians a way to hand out favors and engage in indirect spending, all without explicit accountability? Given the fiscal unsustainability of the U.S., it is past time for comprehensive reform of the entire tax code and tax system, including elimination of loopholes, tax expenditures, etc.--or as Uwe E. Reinhardt in the New York Times puts it:

" . . .the best approach would be to abolish the distinction between capital gains and ordinary income altogether and desist from using the tax system for any kind of economic or social engineering. . . . Consider now a person who bought a vacation home for $500,000 and two years later, during one of our recurrent real-estate bubbles, sells it for $1.5 million. That $1 million profit is now taxed at a rate of only 15 percent. If the home had been the principal residence of this person and his or her spouse, half of the $1 million profit would not be taxed at all. Suppose next that this tax-favored person’s neighbor were a busy neurosurgeon whose many hours of hard, physical and intellectual work earned him or her a net practice income of $1 million during those same two years. That neurosurgeon would pay the ordinary income-tax rate on that income (on average a bit less than 35 percent, because only income over $388,350 a year is taxed at 35 percent). By what definition of the term would can one call the glaringly differential tax treatment of the real estate investor and of the neurosurgeon horizontally equitable? Indeed, by what theory of justice could one defend it on ethical grounds? . . . But if encouraging capital formation is the argument in favor of the capital-gains tax preference, why not include in “capital formation” the formation of “human capital,” that is, the personal investment required to produce well-educated and well-trained individuals? Corporations and nations thrive economically on the strength of their human capital, which is arguably their most valuable asset. . . . If the partners at Bain Capital are granted a low 15 percent tax rate on what basically is an earned commission for hours smartly worked, rather than a return on their own invested capital, should not the return on the neurosurgeon’s own investment in his or her human capital be granted the same preference? . . . " 

http://economix.blogs.nytimes.com/2012/03/16/capital-gains-vs-ordinary-income/

So who in Washington is going to lead on this issue?  So far I haven't seen any real leadership-- Democrat or Republican. And yet the solution is simple.

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Newt Gingrich Tax Cheat - Forbes

While the media is entranced by Mitt Romney's returns and the fact that he fully paid all taxes on his income in accordance with current law, most of the media is ignoring the real tax story--

Newt Gingrich --Tax Cheat? - Forbes: "While candidate Gingrich has been busy focusing on the tax return failings of his opponent, Governor Mitt Romney, a report by Forbes’ Janet Novack suggests that, once again, Newt may be using a good offense to keep from having to play some serious defense when it comes to his own failure to pay up on his tax obligations. According to Novack, “Newt Gingrich avoided tens of thousands of dollars in Medicare payroll taxes in 2010 by using a technique the Internal Revenue Service has consistently and successfully attacked. . . .”"

In other words, the media is giving Newt Gingrich, who according to Forbes cheated on his taxes in the amount of "tens of thousands of dollars," a "pass."  Why?

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