By Anonymous (not verified) on October 18, 2012

Just provide “job creators” with the capital they need, and America will experience a remarkable economic revitalization, argues Republican Wisconsin Senate candidate Tommy Thompson.

But he tried that with GM, and it blew up in the faces of the workers in Janesville.

Thompson should by now recognize that handing out tax incentives to corporations is no guarantee of job creation, or even holding on to existing jobs like the 2,800 lost when the Janesville GM plant closed at Christmas 2008, despite some $34 million in various forms of state subsidies.

Then-Gov. Thompson is shown in the picture accompanying this story presenting an $8.25 million check from Wisconsin taxpayers in 1990 to then-GM CEO Roger Smith (who gained notoriety for the wave of GM plant closings devastating Flint, Mich. as memorably depicted in Michael Moore’s documentary “Roger and Me”).

Gov. Tommy Thompson presenting an $8.25 million check from Wisconsin taxpayers in 1990 to then-GM CEO Roger Smith (“Roger and Me”)
Lisa Wells received a home visit from the Capitol Police with these two citations. Photo by Rebecca Kemble

While Thompson was handing GM’s CEO a multi-million check for supposedly training for “training” an already-experienced workforce in Janesville, and while GM was raking in over $4 billion in profits, the company was soon making plans for a new plant in Silao, Mexico, that duplicated the product line of Suburban vehicles being produced in Janesville.

After the GM plant closed, Silao’s low-wage workforce—at about 1/10 the wages sustaining Janesville families—has been kept employed making full-size pickups and with $200 million in new investment.

Thompson has joined the Mitt Romney and Paul Ryan chorus calling for an end to the taxation of the foreign operations of US-based corporations. That would suit GM just fine and would encourage more transnational firms to continue shutting US plants and expanding offshore. (Thompson’s staunchly progressive opponent Tammy Baldwin has been especially outspoken against corporate offshoring and the tax breaks that help fuel them.)

The “territorial” tax proposal is being sold as a bold gesture to provide job creators with badly needed capital. But U.S. CEOs are already sitting on an unprecedented pile of un-invested capital and hardly need more income or profits, and handing out enormous tax breaks to footloose corporations is not a substitute for a real jobs policy. What’s more, a tax emption would constitute a major raid on the US Treasury.

Accordingly, the Romney-Ryan plan has been justly criticized as providing a major new incentive—along with the low wages and total management control prevailing in China, Mexico, and other repressive sites favored by transnational corporations—to relocate even more jobs from the US. The toll has already been immense, with major US firms liquidating 2.9 million jobs in the US while creating 2.4 million jobs overseas during the 2000-10 period (Wall St. Journal, 4/19/11).

To sidestep this critique, Thompson proposes on his website that he would adopt the basic Romney-Ryan concept, but add some conditions that prove to be meaningless. “Tommy will pursue a policy of zero taxation on foreign profits repatriated to the U.S. when those profits are used for investment in plant and equipment, job training or research and development,” his website declares.

“This is a terrible idea,” insists David Cay Johnston, Pulitzer Prize-winning journalist specializing in tax issues and author of the just-published Fine Print: How Big Companies Use ‘Plain English’ to Rob Us Blind. “There isn’t enough demand. Wages are flat. The whole trend and direction now is to drive down wages in the global economy.”

Thus, America is not plagued by a shortage of capital, but a lack of consumer spending and low wages that dampen spending power, making it pointless for businesses to invest for the domestic market, Johnston argues. “An unbelievable ocean of cash is available for investment, but the demand is not there,” he maintains. “U.S. corporations are sitting on an incredible $6 trillion in savings, with $1.5 domestic held domestically and $4.5 overseas.”

Moreover, he said, “A lot of profits held offshore were actually earned in the U.S. Corporations send money from their right U.S. pocket to their left pocket overseas, and call it a deduction.”

Corporate profits are purportedly taxed at a 35% rate--but minus deductions that makes the average corporate tax rate about 13%-- according to the Citizens for Tax Justice when corporations bring home or “repatriate” their profits. “If a corporation brings home a billion dollars and invests it, they get a 100% write-off immediately, thanks to the most business-friendly president in US history, Barack Obama,” explains Johnson. That’s due to a provision called “expensing.”

However, that is still insufficient for the Republicans and their corporate allies. “They want to save $350 million bringing a billion back into the country, and then get another $350 million for their investment, That’s a $700 million return based just on repatriating $350 million and investing it, an incredible return.”

It is precisely such tax maneuvers—like the write-off on U.S. taxes for moving equipment and machinery offshore—that have persuaded so many U.S. citizens that the tax system is stacked against them.

Roger Bybee is a freelance labor reporter who writes frequently for The Progressive, In These Times, and Z magazine. He wrote the cover story "The Truth About Paul Ryan" for The Progressive in March 2011.

Add new comment

By submitting this form, you accept the Mollom privacy policy.

More

Subscribe to The Progressive and Get A Free 2015 Calendar

Abby Scher on the race to elect Maine's next Governor

Thirty years after the title year of George Orwell’s “1984,” the Oscar-worthy “Citizenfour” features a real-life...

By Victor Menotti

At a time when most Americans agree that the country has too...

By Wendell Berry

Manifesto: The Mad Farmer Liberation Front

Love the quick profit, the annual raise,
vacation with pay. Want more 
of everything ready made. Be afraid 
to know your neighbors and to die.
And you will have a window in your head.
Not even your future will be a mystery 
any more. Your mind will be punched in a card 
and shut away in a little drawer.
When they want you to buy something 
they will call you. When they want you
to die for profit they will let you know. 
So, friends, every day do something
that won’t compute. Love the Lord. 
Love the world. Work for nothing. 
Take all that you have and be poor.
Love someone who does not deserve it. 
Denounce the government and embrace 
the flag. Hope to live in that free 
republic for which it stands. 
Give your approval to all you cannot
understand. Praise ignorance, for what man 
has not encountered he has not destroyed.
Ask the questions that have no answers. 
Invest in the millennium. Plant sequoias.
Say that your main crop is the forest
that you did not plant,
that you will not live to harvest.


Say that the leaves are harvested 
when they have rotted into the mold.
Call that profit. Prophesy such returns.
Put your faith in the two inches of humus 
that will build under the trees
every thousand years.
Listen to carrion—put your ear
close, and hear the faint chattering
of the songs that are to come. 
Expect the end of the world. Laugh. 
Laughter is immeasurable. Be joyful
though you have considered all the facts. 
So long as women do not go cheap 
for power, please women more than men.
Ask yourself: Will this satisfy 
a woman satisfied to bear a child?
Will this disturb the sleep 
of a woman near to giving birth? 
Go with your love to the fields.
Lie easy in the shade. Rest your head 
in her lap. Swear allegiance 
to what is nighest your thoughts.
As soon as the generals and the politicos 
can predict the motions of your mind, 
lose it. Leave it as a sign 
to mark the false trail, the way 
you didn’t go. Be like the fox 
who makes more tracks than necessary, 
some in the wrong direction.
Practice resurrection.

Wendell Berry is a poet, farmer, and environmentalist in Kentucky. This poem, first published in 1973, is reprinted by permission of the author and appears in his “New Collected Poems” (Counterpoint).

Public School Shakedown

Progressive Media Project

Newsletter