Inversions, the Car Bubble, and Bernie’s Slackivists
Here’s What You Need to Know
Last week the Obama administration announced plans to curb the practice of American companies shifting their headquarters’ overseas to avoid U.S. taxation, commonly referred to as corporate tax inversions. The decision promptly killed a $160 billion merger between U.S. pharmaceutical giant Pfizer and Ireland-based Allergan, as Pfizer sought to take advantage of the Emerald Isle’s significantly lower corporate tax rate.
- Business leaders and economic experts have explained tax inversions are not the problem, but rather a negative symptom of the true issue of an “antiquated, outdated tax system” producing the highest corporate tax rate of any OECD nation. They argue government regulators should address the core issues of the taxation leading companies to seek inversions, rather than attack the inversions themselves.
- Indeed, America has gone from the best corporate tax rate in the industrialized world in the 1980’s to the worst rate in the industrialized world today, even as other countries (most recently Britain) reduce their rates to encourage business investment and growth.
- Of the remaining presidential candidates, Donald Trump has most readily taken up this argument and put forth strong language in his tax plan, which calls for the corporate tax rate to be decreased from 35 to 15 percent, and will eliminate the need for inversions. His Republican opponent, Ted Cruz has gone so far as topropose eliminating the corporate tax altogether. Nearly all of the Republican field included some reduction in the corporate tax rates in their tax reform and economic growth proposals.
- On the Democratic side, Bernie Sanders drafted a letter in response to the proposed Pfizer-Allergan merger calling on the U.S. Treasury to impose new tax rules eliminating the incentives to engage in tax inversions. Hillary Clinton alsoproposed an “exit tax” program to crack discourage American corporations from moving abroad.
- Both political parties seem to agree on the basic premise that corporate tax inversions are bad for American industry, yet Congressional intervention on the issue has stalled as Democrats promote measures to specifically block the inversions, while Republicans demand a more permanent solution to the problem through comprehensive tax reform, which they have organized a task force on as recently as last month.
Despite these latest efforts to decrease the appeal for American companies to move abroad, experts still expect corporate tax inversions to continue until the federal tax code is completely overhauled to place the U.S. marginal corporate tax at a rate competitive with other economically developed countries.
News You Can Use
SAY WHAT?
A Hillary Clinton campaign donor confirmed the use of a noise machine to prevent reporters from hearing a fundraising speech in Colorado last Thursday. Stan Bush, a reporter for Denver’s CBS-4 tweeted about the machine and posted a video of the noise, writing “campaign dsn’t want reporters to hear fundraiser speech. Turned on a static noise machine pointed at us when she spoke.” The fundraiser took place at the home of Colorado Governor John Hickenlooper, a superdelegate who has endorsed Clinton. This comes after last July, when the Clinton campaign roped off reporters at a parade. Reporters covering the Clinton campaign have repeatedly complained of lack of access to the candidate and information.
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PRIMARY CARE EXPERIMENT
On Monday, the Obama Administration announced the new Comprehensive Primary Care Plus program, calling it “the largest-ever initiative to transform primary care in America, an effort to give doctors more flexibility and reward them for producing better results for their patients.” The experimental program will be limited to 20 states and regions chosen by the Administration which will partner with private insurers, expanding its reach beyond government payments. The good news? Nearly everyone agrees that this type of delivery reform is necessary, Democrats and Republicans alike. The bad news? The reforms are complex and it will be difficult to make them work.
HUD-WINKED
The Government Accountability Office has determined two political appointees at the Department of Housing and Urban Development (HUD) may be required to returnsix-months salary after they reportedly refused to allow a civil servant to speak with the House Committee on Oversight. The Committee was investigating an alleged administration deal to avoid a possibly damaging lawsuit by stymying a separate HUD investigation into the potential litigant.
ECONOMIC AMBIGUITY
Economists are now debating whether or not the economy actually grew at all last quarter. The U.S. deficit increased more than expected, to $47.1 billion in February, causing many economists to revise their GDP forecasting. CNBC/Moody’s economists revised their 0.9% growth forecast down to 0.5%. Atlanta Fed’s GDPNow dropped expected expansion to a mere 0.4%. At the same time, a new CNBC report advises caution when looking at GDP numbers, suggesting that based on an analysis of all quarterly reports since 1990, the average margin of error comes in at 1.3 percent.
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LIES, DAMN LIES, AND GUN STATISTICS
At a recent New York campaign event Hillary Clinton charged that, “Most of the guns that are used in crimes and violence and killings in New York come from out of state. The state that has the highest per-capita number of those guns that end up committing crime in New York come from Vermont.” With 7,686 guns recovered from New York crime scenes in 2014, it is surprising to think so many would come from a tiny state from Vermont. In fact, The Associated Press notes, only 55 of them came from Vermont. By inserting the term, “per capita,” Clinton makes Vermont’s small size into a statistical disadvantage to misleadingly attack her opponent. She isn’t the first or last politician to skew statistics, but she did provide the latest example of how to sort good oppo from bad oppo.
CAR-MAXED OUT?
While the media has not been shy in covering the massive increase in student loan debt over the last decade, it has failed to bring to light another equally enormous debt crisis: car loans. Edward Niedermeyer, unpacking this phenomenon for The Federalist, reveals that “car loans have grown at roughly the same rate as student loans. Together, loans for cars and education contributed 90 percent of the growth in consumer debt since the end of 2012.” While the student loan crisis is framed by the media as just that – a crisis – the auto loan crisis is often framed as higher auto sales and touted as a portion of economic growth. Even more unnerving, “Auto Asset Backed Securities (ABS), securitized bundles of car loans not unlike the mortgage-backed securities at the heart of the 2008 credit crisis, are the hidden driver of the auto debt boom.”
SLACKTIVISTS FEEL THE BERN
Apparently Bernie Sanders has found a way to transform online “slactivists” into true activists. As Nancy Scola writes for Politico, “Sanders’ organizational success — fueled by free or low-cost, off-the-shelf apps like Hustle and Slack — is the lesser-known counterpart to his campaign’s prowess in raking in campaign cash from hordes of shallow-pocketed donors online … Sanders’ virtual volunteers do campaign work that has traditionally been handled by paid operatives … such as identifying likely voters or turning out people to campaign events. The goal is to till the ground in primary and caucus states so that when Sanders’ paid staffers arrive, they can devote their attention to voters who aren’t yet sold on the 74-year-old democratic socialist.” His digital field organizing may be the key to his unexpectedly vigorous challenge to the Clinton campaign. It remains to be seen if these tactics will prove transferrable to younger, hipper candidates.
Mark Your Calendars
Thursday, April 14: CNN Democratic Presidential Primary Debate
Tuesday, April 19: New York Primary
Tuesday, April 26: Connecticut, Delaware, Maryland, Pennsylvania, and Rhode Island Primaries
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