This seemed like pretty earth-shattering legislation — essentially proposing a pay regulator for everyone — so I called Schumer’s press office to clarify. His spokesman called the Wall Street Journal’s reporting “incorrect” and explained that Schumer is actually advocating that Feinberg apply the “Shareholder’s Bill of Rights” to the seven companies that he oversees.

That makes a lot more sense. Schumer introduced the Shareholder’s Bill of Rights in May with Sen. Maria Cantwell (D-WA), and the bill lays out a series of provisions aimed at improving corporate governance — and hopefully reining in corporate excess — by empowering shareholders with more influence over their company’s decisions. The bill would:

- Implement “say-on-pay,” which mandates that shareholders hold a non-binding vote on their company’s compensation packages;

- Require that companies allow shareholders access to the company’s ballot if they want to nominate directors for the board, require board directors to receive at least 50 percent of the vote in uncontested elections in order remain on the board, and require all board directors to face re-election annually;

- Mandate that companies split the jobs of CEO and Chairman of the Board and that public companies create a separate risk committee comprised of independent directors.

“These companies are the poster children for the total breakdown in corporate governance and lack of effective board oversight that contributed to the recent crisis, and I believe these reforms are critical if the government is serious about turning these companies around,” wrote Schumer in a letter to Feinberg.

And applying these provisions to all publicly traded companies would actually be a great idea, since management incompetence seriously contributed to America’s last two business booms (and subsequent busts). During both the dot-com and mortgage bubbles, corporate managers failed to rein in excessive risk-taking and irrational speculation, or resorted to accounting gimmicks to hide massive losses.

And management was utterly unaccountable to shareholders, who under America’s corporate governance structure are all but powerless to exert influence. They have no say over compensation, and if they want to place directors on the board, they have to expend millions to send out their own, separate ballot, while the current board sends a ballot on the company’s dime.

My guess is that CNBC’s crew wouldn’t like this any more than the proposal that it’s imagining — but the criticism should at least be levied at something that actually exists!

As the Journal noted, the particular reform in question — which would have limited the ability of corporations to defer taxation on profits that they earn overseas — drew the ire of the corporate world, and “companies ranging from Microsoft Corp. to General Electric Co. to International Business Machines Corp. put the topic at the top of their Washington agendas.”

Meanwhile, the CBO has predicted that this year’s “dramatic fall in corporate profits, combined with tax breaks designed to offset the burden of the economic recession, will drive corporate tax revenues down by more than 50 percent this year, to just $139 billion.” And, as Professor Joann Weiner pointed out, “even if corporations were not chalking up losses, the federal government would still face a shrinking tax base due to changes in the organizational structure of U.S. businesses”:

Since companies can essentially choose their form of taxation, largely through relatively permissive federal and state tax laws, it’s no wonder that the U.S. has one of the largest shares of income earned in non-corporate form…Profitable companies have an incentive to organize in a tax-favored form, while unprofitable companies have an incentive to remain in corporate form where they may one day offset future profits with today’s losses.

Currently, just 12 cents out of every federal dollar comes from corporate tax revenue. David Weidner, meanwhile, noted that “corporate income tax as a share of gross domestic product has fallen from 6% in 1951 to about 2% last year,” and that “the decline is mostly due to a shrinking corporate tax rate.”

Because of the administration’s move, not only does the U.S. lose $200 billion (over ten years) that could have gone towards remedying long-term budget deficits, but the drive to fix our nonsensical corporate tax code has stopped cold before it really got underway. Some administration aides did say that the tax deferral may be revisited “as part of a broader tax overhaul sometime next year,” but I’m worried that the business lobby will only feel emboldened by its ability to prevent reform and come out even stronger next time.

If these proposals come to fruition, we will see a federalization of corporate law. It also represents an unprecedented takeover of our markets by the government…Some large activist investors (particularly union pension funds) see SEC-mandated proxy access as an important tool to get more leverage in the boardroom to push a political agenda. From our vantage point we believe that these misguided proposals will harm the American economy and constrain the ability of the business community to create jobs.

According to the Chamber, cap-and-trade, regulating greenhouse gases, the Employee Free Choice Act, creating a consumer protection agency, and health care reform are all going to wreck the economy, and proxy access now needs to be added to the list. But far from economic Armageddon, proxy access would return a bit of accountability to America’s system of corporate governance.

As I pointed out at New Deal 2.0, the current structure of corporate elections discourages accountability and encourages static boards that don’t have to answer to their shareholders. Now, in order to elect a board of directors, a company sends out a “proxy” with its preferred slate of candidates (with the cost billed to the company), while shareholders wishing to place someone on the board have to “pay up for mailing and publicity costs, sometimes in the millions of dollars,” to send out their own, separate ballot. Instead of this, the SEC wants to mandate that shareholders who hold 1 to 5 percent of a company’s shares (depending on the company’s size) for more than one year be able to put their candidates on the main ballot.

Without access to the proxy, shareholders find it exceedingly difficult to exert any pressure on management to curtail hefty bonuses and high-risk profit seeking that come at the expense of long-term growth, while studies have shown that boards with members elected by activist shareholders perform better in both the long- and short-term. The SEC’s proposal would increase corporate democracy, by giving shareholders the opportunity to hold their boards accountable for mistakes.

As Michael Corkery wrote at Deal Journal, the argument that the SEC’s proposal would increase the role of “big government” in the business world “seems a stretch.” Indeed, it appears that the Chamber is invoking the threat of Big Brother to cover its own partnership with the business community’s entrenched interests.

The SEC has proposed implementing what is known as “proxy access,” which would make it easier for shareholders to replace a company’s board of directors. Right now, during a corporate election, a company sends out a “proxy” (ballot) with its preferred slate of candidates, while “dissenting shareholders [must] pay up for mailing and publicity costs, sometimes in the millions of dollars,” to send out their own, separate ballot.

The SEC wants to mandate that shareholders who hold 1 to 5 percent of a company’s shares (depending on the company’s size) for more than one year be allowed to put their candidates on the main ballot. But as the Wall Street Journal reported “the largest U.S. businesses, law firms and business groups have stepped up their challenge” to the SEC’s proposal:

In a last-minute bid to derail or weaken the measure, opposing groups have dispatched both Washington lobbyists and grass-roots letter-writers…The U.S. Chamber of Commerce, the nation’s largest business lobby, is engaging in an all-out lobbying effort with lawmakers that it plans to ramp up after Labor Day.

Currently, only five of the 4,000 public companies that the data service FactSet SharkWatch tracks allow proxy access.

With its opposition, the Chamber is showing its contempt for shareholders who want to hold managers accountable for their actions. As Harvard law professor Lucian Bebchuk wrote, “the objections to the SEC proposal are weak“:

The case for comprehensive reform of corporate elections is supported by a significant body of empirical evidence. Arrangements that insulate directors from removal are associated with lower firm value and worse performance. The proxy rules have been intended by Congress, the courts have stated, “to give true vitality to the concept of corporate democracy.” Adopting the SEC proposal, and the additional reforms I discussed, would advance this important goal.

Even if this proposal were enacted, it wouldn’t cure all that is wrong with American corporate governance, but it would be a step in the right direction. The Chamber, though, prefers a status quo in which corporate boards remain unaccountable to the very people who own the company.

That’s all well and good, but a new study shows that concerns over a return to perverse pre-crisis pay structures need to go much further than those seven companies. As Gretchen Morgenson reported, “a study of changes made in pay practices by 191 of the nation’s largest companies this year shows that where pay is concerned, enlightenment remains a long way off“:

The study was conducted by James F. Reda & Associates, an independent compensation consultant in New York, and it looked at proxy filings issued by almost 200 companies in the first half of 2009. The firm analyzed changes these companies made to their pay plans that take effect this year. [...] Instead of seeing a greater reliance on long-term incentive programs, the Reda report found that changes in these companies’ plans made short-term incentive pay a bigger part of the compensation pie. Let me say that again: The plans — despite the calamities that short-term profiteering has visited on our economy — made short-term incentives a bigger component of compensation.

“If you were going to encourage long-term thinking and behavior, you would reduce short-term pay, but companies have in fact reduced the long-term programs,” Reda said. “This is counter to the direction suggested by the United States Treasury, academics and other expert advisers regarding ways to mitigate risk.”

This is obviously most problematic at financial firms, where short-term incentives lead to excessive risk taking, which, as we’ve seen, can lead to economic calamity. Bloomberg reported today that France is considering an outright ban on guaranteed bonuses of the sort that are creeping back onto Wall Street. While nothing being considered in the U.S. goes quite that far, the House did pass a bill that would give bank regulators the ability to review the structure of pay packages at financial firms, to encourage a move towards long-term incentives.

In the Financial Times, Lucian Bebchuk made the case for giving regulators such power:

Outside the financial sector, government intervention should indeed be limited to improving internal governance, leaving choices over pay structures to shareholders and the directors elected by them. But financial institutions are special, and their special circumstances warrant a broader role for government. Regulation of pay in financial institutions is justified by the very same moral hazard concerns that provide the basis for existing regulation of the sector.

The proposal on the table in the House would not cap amounts, but the knowledge that a regulator could veto a pay package’s structure might make Wall Street banks think twice about pumping up short term incentives. Of course, the regulators would actually have to follow through on the threat to nix packages, but if they did, this could be a welcome regulatory change.

High-tech industry giants such as Hewlett-Packard, IBM, Microsoft and Oracle will intensify their opposition this fall to an Obama administration proposal aimed at limiting what critics insist are offshore tax breaks…[T]he high-tech sector is fighting back with a lobbying blitz aimed at positioning the deferral as a necessary mechanism that enables U.S. companies to remain competitive in foreign markets — and not as a tax break.

NJ reports that “while proposals to limit tax deferrals and other international tax law changes have yet to find their way into legislation, the tech sector isn’t taking any chances.” “Threats persist,” said Bartlett Cleland, senior director of tax and e-health policy for TechAmerica. The Business Roundtable has also promised to “spend whatever it takes” to preserve the status quo.

As usual, these companies are leaving out the convenient fact that they use a variety of tax havens and loopholes to pay far below the statutory corporate tax rate of 35 percent. For instance, Hewlett Packard (HP), which kept $5.2 billion in earnings overseas in 2008, lowered its effective tax rate by 16.9 points last year. And HP was not even close to the most effective at this, as General Electric managed to drive its rate all the way down to 5.5 percent last year.

The Obama administration’s proposal to deal with this problem is fairly benign, saying only that companies choosing to keep their profits offshore “must also defer taking their deductions until their overseas profits are brought back to the country.” It seems only fair that companies keeping their profits offshore be prevented from claiming deductions on those earnings. The administration also wants fix a tax rule known “check the box,” which was meant to simplify classification of corporate subsidiaries, but unintentionally created a tax loophole.

According to a report from the U.S. PIRG Education Fund, a $100 billion annual tax burden is shifted to US-based individuals and companies, thanks in part to corporations stowing their profits offshore. Research has also shown that corporations allowed to defer taxation on offshore profits will leave that money offshore regardless of their home nation’s tax rate. These two measures proposed by the administration, meanwhile, will raise an estimated $146.6 billion over ten years, while putting some small sense of fairness back into the corporate tax code.

Gingrich claims that “the following four tax cuts will help create jobs here and jobs now and fundamentally shift power from politicians to small business.” He also told Politico that he “has lined up the support of several members of Congress to introduce legislation incorporating his tax plan.” So here’s what we would be getting if Gingrich’s plan were enacted (all calculations after the jump):

1. Cutting the corporate tax rate from 35 percent to 12.5 percent.

As was extensively discussed during Sen. John McCain’s (R-AZ) failed presidential bid, cutting the corporate tax rate simply does not create jobs. According to the Congressional Budget Office, a corporate tax cut “does not create an incentive for [businesses] to spend more on labor” and “is not a particularly cost-effective method of stimulating business spending.” This cut would cost about $2.1 trillion over ten years.

2. Abolish the estate tax.

Gingrich seems to be under the impression that Paris Hilton is a job-creating machine, as this tax cut primarily benefits ultra-wealthy families making up 0.2 percent of estates. According to the Center on Budget and Policy Priorities, “repeal of the tax would add $798 billion to deficits over the first decade in which its effects would be fully felt (2012-2021),” while the Tax Policy Center points out that “the estate tax can’t have much effect on hiring by small business because hardly any owners ever face the estate tax.”

3. Abolish the capital gains tax.

Gingrich has been trying to get this particular cut enacted since 1997, and claimed that it should be enacted because “this is the rate that Alan Greenspan testified was best for economic growth.” However, the notion that capital gains cuts spur economic growth is false. After the 2003 capital gains tax cut, growth in non-residential investment “only matched the historical norm.” Instead, this cut would overwhelmingly benefit the wealthiest taxpayers.

4. A two-year, 50 percent payroll tax reduction.

The payroll tax funds the Social Security and Medicare trusts, so Gingrich’s proposal hurts the fiscal condition of both programs. (The Making Work Pay tax credit in the Recovery Act accomplishes the same thing, without hitting Social Security and Medicare.) Meanwhile, the cut would result in $926 billion in deficits over the next two years. Gingrich claims that he will pay for this with $300 to $400 billion in repealed Recovery Act money and leftover TARP funds. But there is only about $80 billion left in TARP, so this would leave more than $400 billion in unpaid deficits. Plus, repealing the Recovery money is precisely the wrong thing to do now, as it is needed to do real, practical things for the economy.

In the end, Gingrich’s plan amounts to throwing money to mainly the well-off and hoping that it will have some positive effects. That’s not what is needed to get the country out of its economic rut.

Calculations:

1. Corporate tax revenue is projected to be about $3.3 trillion over the 2010-2019 budget window. Cutting the current 35 percent rate to 12.5 percent would reduce revenue to about $1.2 trillion ($3.3 trillion x 12.5/35), resulting in $2.1 trillion in deficits.

4. Payroll tax revenue is projected to be $915 billion this year and $938 billion next year. Reducing these by half would result in a total of $926.5 billion in deficits.

Well, analysts at the National Bureau of Economic Research took a look at what the corporations actually did with the money and it turns out that domestic investment was not high on the list:

Now the most detailed analysis of what actually happened — using confidential government data as well as corporate reports — has estimated what happened to the $299 billion companies brought back from foreign subsidiaries. About 92 percent of it went to shareholders, mostly in the form of increased share buybacks and the rest through increased dividends. There is no evidence that companies that took advantage of the tax break…used the money as Congress expected.

Incidentally, the law “specifically said the money could not be used to raise dividends or to repurchase shares.”

Kristin J. Forbes, an economics professor at the Massachusetts Institute of Technology and one of the authors of the study, said that “the restrictions on how the money will be spent seem to have been completely ineffective“:

“Dell was a great example,” she added, referring to Dell Computer. “They lobbied very hard for the tax holiday. They said part of the money would be brought back to build a new plant in Winston-Salem, N.C. They did bring back $4 billion, and spent $100 million on the plant, which they admitted would have been built anyway. About two months after that, they used $2 billion for a share buyback.”

The researchers do “say their findings did not indicate that any companies violated the law barring use of the money for share repurchases and dividends.” Even if that’s the case, this is one more example of corporation’s gaming the tax system and using their huge presence in Washington to unduly influence tax policy. These numbers should be brought up again and again as the debate over the Obama administration’s corporate tax reforms proceeds.

Baucus continued his waffling on tax havens today, rebutting a push by Rep. Lloyd Doggett (D-TX) and Sen. Carl Levin (D-MI) to hold off on a free trade agreement with Panama until the Panamanian government makes more of an effort to stop tax avoidance within its borders. At the moment, “Panama is one of only 13 countries – and the only current or prospective FTA partner – that is listed on all of the major tax-haven watchdog lists.”

“In this time of economic distress, we can no longer afford to ignore the billions of dollars of tax revenue lost to the U.S. Treasury due to the bank secrecy practices of Panama and other tax havens,” wrote Doggett and Levin. Baucus countered with this:

Noting calls by some Democrats for the White House to address worries about Panama’s banking secrecy before sending the [free trade agreement] to Congress, Baucus said he is concerned about the issue, too — but not enough to delay action. “I want to see progress on tax issues in Panama,” Baucus said at a hearing on the pact, “but we can and should move ahead on a trade agreement right now.”

Baucus seems to be perfectly content with punting the tax issue further and further down the road. But as Sen. John Kerry (D-MA) wrote today in Politico, the free trade agreement presents a great opportunity for pressing Panama to address tax havens:

Just as with every similar country, we need to protect against efforts by U.S. citizens to evade taxes and to stop terrorist organizations, drug cartels and other criminal groups from exploiting bank secrecy havens. In Panama’s case, we have an opportunity to use the prospect of opening our vast markets as leverage to win the long-sought commitment from the Panamanian government to sign and implement a tax information exchange agreement with the United States and to bring its banking laws into compliance with international standards.

The non-profit group Public Citizen found that the proposed free trade agreement with Panama “would remove key policy tools” for fighting tax avoidance and “would also conflict with U.S. government efforts to combat the global economic crisis by re-regulating finance.” It’s all well and good that Baucus keeps acknowledging that tax havens are a problem, but his actions make it seem like he’s hoping the havens will simply disappear on their own.

The Senate Democratic Policy Committee held the 19th in its series of hearings on waste, fraud and corruption in Iraq and Afghanistan yesterday. What we heard was really stunning.

We learned that the Army’s biggest contractor in Iraq, KBR, received bonuses totaling $83.4 million for work done during 2007 under LOGCAP III Task Order 139, which included electrical wiring work throughout Iraq. According to the Army’s own criteria for performance bonuses, in order to properly receive such a bonus, the firm’s work was to have been “excellent.”

Witnesses told our committee KBR’s work was far from excellent. As they described it, it sounds more like a disaster:

– One witness was Eric Peters, a former KBR Master Electrician who worked in Iraq for KBR as recently as this year. He said he quit the company after determining that KBR was incapable of doing the electrical wiring work properly, did not care about the safety of its own employees, and sought to intimidate those who spoke up. Peters also noted that KBR hires third country nationals who are not electricians to do wiring work. Often, workers and supervisors don’t even speak the same language.

– Another witness was Jim Childs, also a Master Electrician. The Army hired him to inspect KBR’s wiring work in Iraq after I asked the Army to take a closer look at what KBR was doing. He told us KBR’s electrical wiring work in Iraq was the “most hazardous, worst quality work I have ever inspected. During my theatre-wide inspections, I concluded that roughly 90 percent of the new construction building work by KBR was not properly wired. This means that over 70,000 buildings in Iraq were not up to code.”

– Our third witness was the former Army contract manager who previously managed KBR’s LOGCAP III contract. He told us the $83.4 million bonus received by KBR was “highly inappropriate” and if he had not been forced out of his position managing that contract – after he refused to rubber stamp nearly a billion dollars in questionable KBR charges – he would have objected to awarding the bonus.

The sad story of Staff Sgt. Ryan Maseth, a Green Beret, really tells it all. He was electrocuted as he showered in a shower stall on a U.S. military base. His mother was told he was electrocuted because he carried an electrical appliance into the shower. She refused to accept that explanation and forced an investigation which determined that the real cause of Sgt. Maseth’s electrocution was faulty electrical wiring.

Did KBR move quickly to correct the wiring? Not according to Jim Childs, who told us that a full 10 months after Sgt. Maseth’s electrocution death, KBR still had not fixed the wiring problems to make the shower safe.

I intend to continue to pursue this issue. I want to know why KBR got these bonuses and who approved them. I also want to know what the Pentagon is doing to hold KBR accountable for its work in Iraq. Tens of millions of dollars in bonuses for slipshod, deadly wiring work sure isn’t holding anybody accountable for anything.

I intend to keep asking these questions, and more, until I get satisfactory answers. American taxpayers and American soldiers, who put their lives on the line, deserve no less.

We’ve noted before that the business lobby is gearing up to challenge these proposals. And today in Politico, the Business Roundtable laid out how serious it really is about preventing these reforms:

“We’re going to spend whatever it takes,” said Brigitte Schmidt Gwyn, senior director of congressional relations for the Business Roundtable, which represents CEOs of the nation’s largest companies.

The Business Roundtable alone spent more than $13 million lobbying Congress last year, and has already spent $1.2 million this year.

The business lobby’s main claim is that the tax changes will cause widespread job losses, a charge that is overblown. The real concern is that the corporate tax status quo is completely off kilter, as corporations can take advantage of myriad loopholes to simply avoid taxation. As Matthew Yglesias noted, “check the box” was meant to simplify classification of corporate subsidiaries, but it unintentionally created a huge tax loophole:

[A]s soon as it was noted, an effort was put in place to change it. But a ferocious lobbying battle opened up…The availability of this loophole is a significant incentive for companies to invest in their overseas subsidiaries and take advantage of the tax shell game. It’s a loophole that nobody ever intended to create, and that should be done away with forthwith.

These corporations aren’t doing anything illegal, but they are gaming the system to their advantage. So this debate shouldn’t be about whether the corporate tax rate is too high or too low, but about the responsibility that corporations have to pay the rate that’s on the books. The Obama administration is proposing common sense reforms so that corporations can no longer dramatically lower their tax rate by taking advantage of loopholes. And the business lobby has made it clear that it’s willing to go to great lengths to keep these loopholes open.

Predictably, the business lobby immediately cried foul over the changes, claiming that they will destroy business as we know it and “eliminate American jobs.” But Congressional roadblocks have also emerged, with Rep. Joseph Crowley (D-NY), for one, saying he’s “wary because the tax changes would hurt Citigroup Inc., his New York district’s largest private-sector employer.”

Sen. Max Baucus (D-MT), meanwhile, has called for “further study” of the administration’s proposals. Hopefully these facts will help him out:

- Tax havens like the Cayman Islands have “helped scores of U.S. companies, including Coca-Cola Co. and Oracle Corp., to legally avoid billions in tax payments to the U.S. government.” Companies lower their effective tax rate by more than 20 points thanks to stowing profits offshore.

- A $100 billion annual tax burden is shifted onto U.S. based companies and taxpayers due to tax avoidance.

- The United States collects below the OECD average in corporate tax revenue — even though it has a higher marginal rate than most countries — because of sheltering.

- In 2004, the most recent year for which statistics are available, U.S. multinationals paid an effective U.S. tax rate of just 2.3 percent on $700 billion in foreign profits.

The Oxford Centre on Business Taxation has found that no matter their home country’s tax rate, if loopholes and shelters exist, companies will exploit them. And as for the supposed damage to U.S. growth, Barrett Sheridan at Wealth of Nations had this to say:

The argument against taxing corporations more is that it will damage their international competitiveness, and we’ll lose jobs and business to overseas firms. Color me skeptical. Of the $103.1 billion raised by cutting down on tax arbitrage, $74.5 billion will go to making a permanent tax credit for companies that invest in R&D in the U.S. That hardly sounds like a plan that will damage U.S. growth prospects.

Indeed, the whole premise of the administration’s approach is to stop incentivizing overseas investment, and start rewarding domestic. And maybe some of the increased revenue raised from corporations could go toward funding health care reform? Whatever the case, cracking down on havens is an important matter, and deserves Congressional support.

“Just imagine a world 10 years from now where there are no U.S. multinationals because they’ve all been bought by foreign competitors,” says tax lobbyist Kenneth Kies. “This is bigger than ‘card check,’ bigger than cap-and-trade, and people don’t realize it.”

“Everything else pales in comparison,” says National Foreign Trade Council President William Reinsch, whose group is partnering with the Business Roundtable, the U.S. Chamber of Commerce, and the National Association of Manufacturers to preserve the deferral rule.

The business lobby’s rhetoric is similar to that used by Sen. Orrin Hatch (R-UT), who warned that “companies are going to leave” because of Obama’s “stupid, dumb-ass” tax proposals. But their scaremongering ignores the fact that U.S. corporate tax revenue as a share of the economy is below the Organization for Economic Cooperation and Development (OECD) average.

The U.S. raises less revenue from corporations than countries like the United Kingdom and Ireland, even with a technically higher rate. As we’ve noted before, loopholes and shelters contribute to a skewed idea of what the U.S. corporate tax system really looks like, but suffice to say, it’s not the crippling system that businesses make it out to be.

Plus, according to research by Dhammika Dharmapala at the Oxford University Centre for Business Taxation, allowing corporations to defer taxation on offshore profits means they will leave that money offshore regardless of their home nation’s tax rate:

Delaying repatriations in this way can confer a substantial deferral advantage on the [Multi National Corporations] by reducing the present value of its US tax liability. Moreover, this deferral advantage is magnified for tax haven affiliates (because the immediate source-based tax paid to the tax haven government is low or zero). Thus, MNCs have incentives to use tax havens to reduce or defer their tax liabilities, regardless of whether they happen to be based in countries with territorial or worldwide tax systems.

This deferral actually encourages corporations to invest overseas, costing America jobs and lost revenue. And in 2004, when the U.S. opened “a one-year window in which companies could bring their profits home at a 5.25 percent tax rate,” most of the money “was used to buy back stock from shareholders, not to invest in domestic operations.” Incidentally, for every $1 that corporations spent lobbying for that tax holiday, they saved $220 in taxes.

Groups including the Business Roundtable, the U.S. Chamber of Commerce, the National Association of Manufacturers and the National Foreign Trade Council “have helped form a lobbying coalition called Protect America’s Competitive Edge that is devoted specifically to the issue,” and according to a new report from researchers at the University of Kansas, a corporate dollar put towards lobbying for tax breaks can go an awfully long way.

Three Kansas professors found “that when Congress in 2004 granted firms a one-time pass to bring [overseas] income home at a reduced tax rate, the lobbying paid off — big time“:

Their study found that every dollar companies spent on lobbying for that tax break — which they tried to revive during the economic stimulus debate this year — saved them $220 in taxes. [...] The three Kansas professors analyzed the financial reports and lobbying disclosure forms of 476 firms that repatriated about $298 billion. On average, the companies generated a 22,000 percent return from their lobbying efforts, with companies spending the most getting the biggest tax savings. For example, drugmaker Eli Lilly & Co. reported spending $8.52 million in lobbying but saved $2 billion in taxes.

“Perhaps it is time for a national conversation about the role of lobbyists in tax reform,” said Stephen Mazza, one of the three authors of the study. “We should be concerned when a corporation’s most lucrative investment is in lobbying the government for tax benefits.”

The move to tax offshore profits should be part of a wider effort to repair our unfair and loophole-ridden corporate tax system. As James Kvaal explained in September:

The United States does not tax foreign profits unless they are returned to the United States. Alongside low tax rates in some foreign countries, the result is a strong incentive to invest overseas. As many as 3 million American jobs have been moved offshore, and the U.S. Treasury loses tens of billions of dollars a year in offshore tax evasion. The next president could greatly reduce these problems by taxing corporate profits earned in tax havens and other low-tax countries.

According to The Joint Committee on Taxation, the failure to tax foreign income of U.S. controlled corporations will cost the government $56.4 billion in lost tax revenues between 2008 and 2012.

At the AHIP conference today, ThinkProgress asked Sen. Orrin Hatch (R-UT) about some issues other than health care, and Hatch wound up expressing his distaste for the Obama administration’s tax policy. In particular, Hatch railed against Obama’s tentative proposal to no longer allow U.S.-based companies to defer paying taxes on profits made overseas:

The Obama approach is to tax the profits of domestic corporations overseas. I can’t tell you — companies are going to leave. I had one of the leading pharmaceutical company’s leaders tell me, he said, if that goes through we’re moving to Switzerland, we’re moving the whole company. We’ve lost a lot of our Fortune 500 companies because of these stupid, dumb-ass tax laws. And they are really stupid.

Watch it:

Actually, by only taxing these profits when they are repatriated to the U.S. — but leaving them untaxed overseas — the government is encouraging overseas investment and the exporting of jobs. As James Kvaal explained:

The United States does not tax foreign profits unless they are returned to the United States. Alongside low tax rates in some foreign countries, the result is a strong incentive to invest overseas. As many as 3 million American jobs have been moved offshore, and the U.S. Treasury loses tens of billions of dollars a year in offshore tax evasion.

The Joint Committee on Taxation has found that the failure to tax foreign income of U.S. controlled corporations will cost the government $56.4 billion in lost tax revenues between 2008 and 2012.

Closing these offshore loopholes can’t be done on a unilateral basis, however. The U.S. needs to work with its allies abroad to confront tax havens and prevent harmful tax competition, as “we all have an interest in protecting our economy, collecting the taxes that are owed, and maintaining the progressive nature of our tax codes.” In any case, the status quo, which costs the U.S. tax revenue and jobs, is unacceptable.

After saying that people who want to hear pro-Employee Free Choice guests need to “turn to PBS,” Beck gave McKinnon free rein to spew talking points:

Well, we call it the Forced Choice Act, Glenn. It’s the most radical rewrite of labor law in 80 years. And it is a political nightmare and a public policy disaster. It’s a Trojan horse for labor to put through everything they have ever wanted. It is just a huge goody bag…[I]t eliminates the ability for workers who are being organized to cast a secret ballot, a democratic principle that we hold dear…They have private ballots in America, but not in other countries where there are tyrannies and socialism.

Watch it:

Not surprisingly, Beck failed to identify McKinnon for what he really is: the head of a corporate front group — “founded by several longtime Republican operatives” — that is lobbying against the Employee Free Choice Act.

According to the National Journal, the Workforce Fairness Institute will not identify its funders, “but sources familiar with its creation speculate that such big retailers as Wal-Mart and Home Depot — which are high-profile opponents of EFCA — are likely among the group’s donors.” It seems odd that someone so concerned with safeguarding the democratic process is willing to engage in lobbying using dollars from secret corporate interests.

Beck also didn’t challenge McKinnon’s false assertion that the bill would eliminate the secret ballot, or note that the Employee Free Choice Act would simply allow workers to decide how they want to form a union, instead of leaving the choice up to their employers. But maybe hearing the truth is also something for which viewers should “turn to PBS.”

Sen. John McCain (R-AZ) proposing a massive tax cut for corporations?

I liked this movie better the first time, when it was called the 2008 Presidential campaign:

As McClatchy reported, the Senate included provisions “desperately sought by corporate America” that are not in the House’s version of the bill. However, the Chamber suggested “other provisions” — like “reduc[ing] the corporate capital gains rate to 15%” — to further transform the legislation into a corporate tax cut goodie bag.

Useful provisions — like investments in mass transit — have already been booted from the stimulus to make space for ineffective, industry driven tax breaks. With its letter, the Chamber is only encouraging these poor decisions.

Today, Rep. Eric Cantor (R-VA) convened a hearing to further discuss the ideas that the RSC laid out, with testimony provided by former Gov. Mitt Romney (R-MA), former Ebay CEO Meg Whitman, and Grover Norquist, president of Americans for Tax Reform. During the hearing, all the witnesses continued to beat the drum for permanent tax cuts, especially for corporations:

ROMNEY: The best medicine for a sick economy is permanent tax relief…[Corporate tax cuts] would remove fear and replace it with confidence and prosperity.

WHITMAN: The number one thing that I would look at for this group is: can we lower business taxes?…I would argue that permanency and clarity are what to look for.

NORQUIST: I would argue for permanent tax cuts…That would create real and permanent stimulus.

Cutting corporate taxes is a tired conservative solution to just about everything. Remember, it was a centerpiece of Sen. John McCain’s (R-AZ) presidential campaign, even before the economic crisis hit. But as the Center for American Progress’ Will Straw wrote, permanent corporate tax cuts simply fail to provide stimulus:

The track record for such steps is poor in general, but they are particularly ill-suited for a recessionary period. After all, the reason that businesses and individuals are not investing at the moment has little to do with the taxes they may pay in the future and everything to do with a fear of losing money because there is no demand in the economy, asset prices are highly volatile, and credit is hard to come by.

Citizens for Tax Justice noted that “every dollar lost from cutting the corporate income tax would increase real GDP by just 30 cents.” That’s hardly the sort of stimulative effect that would justify slashing the corporate rate.

IRS Deputy Commissioner Linda Stiff said 2008 was “a very challenging year,” since enforcement staff levels declined 2 percent and “some enforcement staff were re-directed to help field calls from taxpayers related to tax rebates that Congress ordered as part of economic stimulus legislation.” While this may be true, the turn away from corporate audits comes on the heels of reports that Bush’s IRS is expending a lot of effort to cut corporate taxes.

As Time’s Stephen Gandel found, in 2008 the IRS has been “unusually aggressive in doing what it can to lower corporate taxes, going above and beyond what has been allowed in the past.” The IRS this year has issued 113 notices — breaking the record of 111 set in 2006 — “many of which will lower the taxes companies will pay this year and in the future.”

Furthermore, Dean Zerbe, national managing director of the public accounting firm alliantgroup LP, said that the IRS — in a “disturbing” trend — is simply shifting its focus away from large corporations and onto “small and medium-sized firms“:

Audits of small and mid-sized firms don’t produce as much tax revenue, and about one-third of the time produce no change in taxes assessed, according to Mr. Zerbe. “They spend a lot of time doing root canals on people who are basically compliant,” he said.

The amount that the IRS collected from audits fell by about $3 billion this year. And while Goldman Sachs paid a 1 percent effective tax rate in 2008, the IRS thought its time would be better spent auditing the little guy and finding more ways to lower corporate taxes.