Fortune 500 Deferring $433 Billion in Taxes

According to a new report today from Citizens for Tax Justice, the 285 members of the Fortune 500 that have parked money overseas would owe an estimated $433 billion in taxes if and when it is repatriated. No wonder these companies are working so hard to get a "repatriation holiday" even though the one given in 2004 did not yield  any significant new investment, but lots of dividends and stock buybacks.



The new report list 10 companies with $209 billion parked overseas that report the taxes they would owe on these profits (only 47 do so). These companies all report that they would owe 32-35% on their money, which indicates they have not paid any taxes abroad on it; in other words, the money is in tax havens.









Note that some estimates place these figures even higher; in March, I reported that Apple's overseas stash was estimated at $64 billion.



Based on the entire 47 companies that report their estimated tax bill, CTJ came up with an average tax rate of just over 27%. Multiplied by the $1.584 trillion in overseas cash held by the 285 corporations (up from about $1 trillion estimated in March) yields the figure of $433 billion in taxes that would be due if the income were repatriated or the deferral provision for overseas income ended.



What does it all mean? As U.S. companies continue to enjoy record profits, they are declaring them to be foreign profits at a high rate, as we can see in the increase from the March to October estimates. Numerous tech and financial companies have stashed literally tens of billions of dollars, each, in offshore tax havens, which drain billions a year from tax coffers that must be made up with higher taxes on the middle class, larger budget deficits, or cuts in programs. And as we have seen from the two tax returns Mitt Romney has released, there is one tax system for the 1% and another one for the rest of us.

The Folly of Subsidizing Retail

Next to giving subsidies for a company to relocate, or to prevent it from locating, the lease defensible common use of investment incentives is for retail. Why should this be? Let me count the ways.



Most importantly, retail is a derivative economic activity, as David Cay Johnston says. A location's population and income determine how much retail it can support. For this reason, the apparent job creation of retail subsidies is completely phantom, as sales and jobs are simply transferred from older stores to newer locations. The best proof of this is contained in a groundbreaking study by the East-West Gateway Council of Governments, the regional planning agency of the St. Louis metropolitan area.



East-West Gateway's study found that from 1990 to 2007 (i.e., before the financial crisis), the over 100 local governments of the St. Louis metro area had collectively provided over $2 billion in subsidies for malls and other retail facilities. Most of this was in the form of tax increment financing, a popular local subsidy tool in both Missouri (to the tune of $339 million annual average from 2004 to 2006; see p. 7 in the source) and Illinois. Yet, by the end of this 17 year period, there were only 5400 more retail jobs in the metro area than at the beginning. This would total $370,370 per job if the jobs were created by the subsidies; however, it is more likely that they are simply due to income growth in the region. (Note to reporters: This would be a great study to replicate in your area.)



Second, retail jobs are not all that good. Here is a custom graph from FRED showing the nominal wage trend for all production and non-supervisory workers (blue) and for production and nonsupervisory workers in retail (red). As you can see, the wage gap has been increasing for 40 years. As of September, the exact figures were $13.86/hr. for retail vs. $19.81/hr. for all private industries. Moreover, given that the overall total as shown in the graph actually represents a decline in real wages, the decline in retail is much more pronounced.

In addition to the low pay, retail workers rarely get benefits. According to a new report, only 29% of retail workers get health care benefits, even though half of retail employees have college degrees and 70% are over age 24.



Third, retail does not generate much secondary employment, the way manufacturing does. It does require warehouse jobs, but those generally get subsidized, too, as in the case of Wal-Mart.



The bottom line, then, is simple. Retail is a derivative economic activity that generates almost no new spinoff activity, and local governments (except perhaps in poor areas with food deserts) should not subsidize it. As we have seen in St. Louis, local governments have proven perfectly capable of wasting billions of dollars for temporary gains in sales tax revenues. It's time to stop the madness.

Why You Should Be Wary Of Investing In A Hedge Fund

http://www.marketwatch.com/story/why-hedge-funds-may-not-be-right-for-you-2012-08-20?grcc=a7f24c54a647d13131fa762b3b407132Z3ZhpgeZ0Z107Z200Z129Z2&mod=WSJ_hpp_sections_personalfinance&grcc2=ec81c45fe8b322c6cfd0d5d080866c1d~1345583764374~18f3b45caef80572d421f68a979bd6dc~joefulwiler~1345574637221~3~2~0~0~0~107~200~129~0~2~

They don't reliably beat a plain vanilla S&P 500 index fund.

Fed Govt is taking people's Social Security benefits for unpaid student loans

http://www.smartmoney.com/borrow/student-loans/grandmas-new-financial-problem-college-debt-1344292084111/?grcc=a4f895e7054a7059c6202ead76abe9fcZ3ZhpgeZ0Z945Z200Z122Z2&mod=WSJ_hps_sections_personalfinance&grcc2=42c73cb69dec487e83620f173e1812d4~1344450110805~18f3b45caef80572d421f68a979bd6dc~joefulwiler~1344450032742~3~2~0~0~0~945~200~122~0~2~

This is going to leave some seniors in a very tough spot financially.

The dangers of a Do It Yourself will

http://www.gftpln.org/Article.do?orgId=450&articleId=16968

The data is in - tort reform is baloney

http://www.statesman.com/opinion/tort-reforms-slight-impact-no-shock-2402843.html

Just another example of wealthy special interest groups buying off legislators.  

Finally - some bankruptcy relief for student loans on the horizon

The growth of student debt is stirring debate about whether the government should step in to ease the burden by rewriting the bankruptcy laws—again.

In 2005, Congress prohibited student debt from being discharged through bankruptcy, except in rare cases, because of concerns that many young graduates—who often have no major assets such as a house or a car—would be tempted to walk away from loan obligations.

Some lawmakers now want to temper that position, pointing to concerns that a significant number of Americans could be buried under education loans for decades. Their efforts, however, would apply only to private loans—a fraction of the market.

In the past decade student debt has surged as tuition and enrollment climbed. At the same time, college graduates' earnings have declined. The average debt load of all new graduates rose 24%, adjusted for inflation, from 2000 through 2010, to $16,932, says the Progressive Policy Institute, a left-leaning think tank in Washington. Over the same period, the average earnings of full-time workers ages 25 to 34 with no more than a bachelor's degree fell by 15% to $53,539.

Terri Reynolds-Rogers, a 57-year-old health-program manager from Palmer, Alaska, declared bankruptcy in 2007, but still has $152,000 in student debt. She said she dropped out of medical school in 1999 to care for her two children after her husband died of brain cancer.

http://online.wsj.com/article/SB10001424052702303978104577364120264435092.html?mod=WSJ_hps_sections_careerjournal