Deficit reduction achieved

We’ve found the solution to decreasing the country’s deficit spending—more revenue!

According to a report yesterday from the U.S. Treasury Department, the federal government decreased deficit spending by 6% ($70 billion) in 2011 to date compared to the same period in 2010.  If we continue to do that for the rest of the year that will mean we reduced the anticipated deficit by $120 billion in 2011--all due to more revenue coming in and not from cutting any spending that will hurt Main Street’s economy.

Extend this trend line out for the next decade and we will have cut the projected federal deficit by $1.2 trillion.  All the Congressional  deficit-reduction supercommittee, scheduled to find $1.5 trillion in reduced spending over the next 10 years, needs to do is find some additional revenue. 

No problem.  Make the multinational corporations pay their taxes by ending offshore tax have abuse or let the Bush tax cuts on the wealthy expire and “poof” the job is done.    

But there is another way we can do even more deficit reduction as the Treasury news indicates—create more revenue by creating jobs.  More people working means more workers paying taxes. 

That’s exactly why U.S. Representative John Larson of Connecticut wants to create another “supercommittee” for job creation.  He plans to do this next month by introducing an amendment to the legislation creating that other supercommittee.   

More jobs also mean more consumers for our small businesses.  That’s what we really need to grow our economy back to a balanced budget.

Balanced deficit reduction

As the debt ceiling debate rages on, it appears that Congress and the President are looking at a plan to simply raise the debt ceiling enough to allow the federal government not to default for a short period of time and do some budget cuts along with it. What a tremendous waste of an opportunity to address the issue of multinational corporations using tax loopholes and offshore tax havens to avoid paying their fair share of taxes.

There is an estimated $1 trillion dollars of taxes over the next decade that these multinationals should be paying but won’t if we don’t change our corporate tax laws. That equals 1/4th of the debt reduction goal President Obama said he wanted. It’s low hanging fruit that these corporate giants and their advocates like the U.S. Chamber won’t let us pick because of all the campaign contributions and lobbyists at their command.

Fortunately there are other business organizations that understand the need for a balanced approach to deficit reduction that includes both budget cuts and responsible, common sense revenue increases.

Below is a letter from the American Sustainable Business Council being delivered today to House Speaker John Boehner and Majority Leader Erick Cantor. Copies are being given to the President and other Congressional leaders.
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July 19, 2011

RE: Debt Ceiling, Taxes and Deficit Reduction Approaches

Dear Speaker Boehner and Majority Leader Cantor,

The American Sustainable Business Council is a network of business associations and companies representing over 100,000 businesses across the nation. Our members are part of a growing force within the U.S. economy that understands that financial success requires balancing economic, social and environmental needs.

We see an enormous opportunity in the public debate over the budget and debt, for fundamental reforms to grow our economy and strengthen our country. However, we do not believe the conversation is heading in the right direction. We are concerned that offshore tax havens, growing income inequality, rollback of environmental and safety regulations, and divestment from infrastructure and workforce development, present serious challenges to our global competitiveness. The continued practice of discounting externalities, subsidizing highly profitable mature industries, and rewarding off-shoring of U.S. jobs has contributed substantially to the national debt and undermined the health of the U.S. economy.

As businesspeople, we also believe that the tax code needs to be significantly modified so that small and mid-sized companies and middle class families, are not asked to pay a disproportionate amount of taxes. We are quite willing to pay our fair share, but find it troubling that many of the nation’s largest companies pay an effective marginal rate far, far less than we do.

We write to ask you to re-examine your basic assumptions of what is required to stabilize the U.S. economy and address the budget deficit. Please understand that not all business leaders agree with many of the points you make daily in the name of defending the private sector. It is inaccurate to lump together large and small business—and businesses in every sector of the U.S. economy--as if all of our interests were exactly the same. Some might see this as a strategy to use the halo of small business to camouflage the excesses of big business.

We do agree with the U.S. Chamber of Commerce and the Business Roundtable that we must raise the debt ceiling, and soon. However, we find that a diversity of business voices is not being heard on the specifics of the current budget debate. Many business leaders believe that raising revenues through tax code modifications, and supporting federal government services, is critical for economic health. Cuts to programs for the young, old, disabled and unemployed will hurt not only our customer base, limiting their capacity to buy our products, but our nation as a whole.

Further, we disagree with the perspective that any tax increase destroys jobs. We believe that there are important distinctions to be made between good taxes and bad taxes, between incentives that create jobs and real value for the economy and those that don’t. There are expenditures that are critical to improving productivity and the nation’s infrastructure and those that are a waste of money. Removal of certain subsidies for mature industries, in our view, does not constitute a tax increase but rather a smart business decision. This is how we run our companies – moving resources towards areas of greatest need in a constantly changing marketplace.

We would point out that during the 1980’s, President Reagan raised taxes many times and unemployment continued to fall. And, when President Clinton raised taxes in 1993, unemployment fell and investment expanded. We would like to see the discussion of job creation using proven methods re-elevated in the national debate, including government investment in areas of significant national interest, such as renewable energy development, manufacturing, education, high speed rail and basic R&D. The private sector and federal government must work together to ensure that America not only remains an economic powerhouse, but also a nation built on principles of fairness.

We have two other important concerns: (a) the largest companies rarely pay the statutory rate, instead often paying half that in practice while small businesses, who account for most of the net job growth, consistently pay higher tax rates; (b) job creation in America is our top priority. To that end, we need to ensure that reduced tax rates actually result in jobs being created here at home, rather than being shipped overseas.

As this crisis is turning on fixing the Federal budget, we would highlight that the tax burden is being described as if the prosperous—whether individuals or corporations—are paying taxes at the highest marginal rate. A few of the nation’s wealthiest citizens claim that they are paying 50% of their income in federal or federal and state taxes. They are not.

In fact, the effective rates of taxation—the real rates that wealthy individuals and corporations pay—are half the highest marginal rate or less. Corporate taxes as a share of federal government receipts are at their lowest level since the 1950’s. Fixing these distortions and closing huge tax loopholes and subsidies in our Federal budget to generate revenue should be at the heart of resolving the current crisis.

With this as background, we offer a set of principles and solutions that our members see as essential to getting our country back on track:

Principles

• Taxes have a critical role to play in funding research to generate innovation and growth, providing for our national defense, and creating an equitable economy.

• Raising revenue to fulfill essential obligations, such as maintaining/improving infrastructure is smart policy, as are taxes that fund workforce investments.

• The national burden for debt reduction should not fall on small companies.

• Small and mid-sized businesses use their assets to reinvest in their communities and workforce. They are the backbone of the U.S. economy, creating most of the net new jobs over the past decade.

• Regulations are needed, as the marketplace isn’t perfect. We find that carefully crafted regulations can save more money than they cost, as evidenced by the inadequacy of banking regulations that cost our nation over one trillion dollars in lost assets.

Solutions

• Reducing the budget deficit should not be achieved exclusively by reducing public expenditures, many of which improve the nation’s competitiveness. Drastically cutting expenditures will also likely increase the unemployment rate. Revenue enhancements should be a key part of proposals for deficit reduction.

• Taxes that assure a stable middle class and maintain consumer demand—key to our economic future—are welcome.

• An effective and graduated Corporate Alternative Minimum Tax could assure that companies pay their fair share of taxes. Small businesses pay on average far higher effective rates than most Fortune 100 multinationals because of widespread use of tax havens. The Stop Tax Havens Abuse Act of 2011 would go far to close these loopholes. We must stop subsidizing the largest and wealthiest corporations at the expense of our domestic businesses and the national economy.

• Corporate subsidies should be limited to spurring innovation, preserving the environment and public health, hiring veterans and minorities, and other job creating initiatives. Initiatives such as the Small Business Jobs Act are relatively inexpensive ways to continue to spur growth.

• America’s wars should either be paid for by surtax or by adjusting the defense budget. The defense budget should not be immune from cuts. Due to deficiencies in the federal contracting process, which appear to favor a few large corporations, we believe there is room for substantial savings.

We have not endorsed any comprehensive deficit reduction package, however select policy solutions in line with these principles have been proposed by groups as diverse as the Congressional Progressive Caucus, the Cato Institute, and the Bowles-Simpson Commission. Estimates suggest that enacting policies in line with these principles could easily save upwards of $2.75 trillion dollars over a decade, without cutting into essential federal programs on which this nation was built.

A ‘sustainable’ economy focuses on building long-term value and assets. It invests in next generation ideas and technologies while contributing to the well-being of our communities. We believe these ideas and policies to be consistent with a fair marketplace, represent the views of thousands of small businesses across the country, and will foster long-term economic prosperity.

Thank you for your consideration and interest.

Sincerely,

David Levine, Executive Director
American Sustainable Business Council

SCSBCC joins Senator Carl Levin in announcing the Stop Tax Haven Abuse Act

Yesterday morning Frank Knapp of the SC Small Business Chamber of Commerce joined Senator Carl Levin in a Washington, DC press conference to announce the introduction of the Stop Tax Haven Abuse Act. Below are Mr. Knapp’s comments that he made yesterday to the Washington press corp.  Click here to view video.
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I’m Frank Knapp, President, CEO and co-founder of the SC Small Business Chamber of Commerce.

While our members are in South Carolina, small businesses across this country, from California to Washington, DC understand that while they are paying their taxes, many US-based, multinational corporations are not. That’s not fair and it makes us angry.

When multinational corporations don’t pay their taxes, when they use offshore tax havens to cheat, small business have to pay more in taxes.


Frank Knapp (l) and Senator Carl Levin at the
July 12, 2011 Press Conference

Elected leaders like to say how small business is the engine of our economy and they look to us to create most of the new jobs.

Well, we’re tired of subsiding government services for multinational corporations that rely on our courts, our national defense, our infrastructure, and our education system, all of the essential government services that these multinational corporations want and need to be successful.

Small businesses want tax parity with these corporate giants.

We can compete with our goods and services with any multinational corporation but not if we don’t require them to pay their taxes.

These multinationals and their highly paid advocates warn us that creating the transparency needed to spot illegal tax evasion and avoidance, better defining US profits and increasing penalties for offshore tax cheating would somehow hurt our country’s economy.

We’re not talking about any new taxes the money these multinationals are investing in American jobs. We only want the taxes they owe on money squirreled away in post office boxes in the Cayman Islands or Bermuda, profits that aren’t being invested in our economy.

The SC Small Business Chamber is from South Carolina, but this issue resonates with every small business across the nation. Today we are America’s Small Business Chamber and we are patriotically proud to support Senator Carl Levin’s Stop Tax Haven Abuse Act.