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Key to American jobs is in your wallet

By From page A8 | August 18, 2014

Last time, in this Daily Republic column, we talked about why corporations are so cold-hearted. The main point was that the people who run publicly traded corporations have a fiduciary responsibility to their shareholders to make as much money as possible, and thus, in the corporate “Bible,” the concepts of good and evil are replaced by profit and loss.

We also discussed the recent, unprecedented exodus of American jobs and I wrote: “Next time, let’s discuss what we can do to encourage multinational corporations to re-invest in America. Please share your thoughts on the Daily Republic website.”

While there were more than 150 online comments made on the column, and dozens of emails, very few of them offered viable suggestions. One commenter suggested that we should “eliminate the corporate income tax.” Let’s look at that.

While the top federal corporate tax rate is 35 percent, according to the Government Accountability Office, the average tax rate for U.S. corporations is 12.6 percent. How many of you Fairfielders wish that was your tax rate?

Due to creative accounting and manufactured loopholes, the percentage of federal income derived from corporate taxes has dropped from around 32 percent in the 1950s, to less than 9 percent now, with individual taxpayers making up that difference.

One corporate slight-of-hand accounting trick, currently popular, is the “tax inversion.” With that, U.S. corporations purchase foreign companies, or open offices in low-tax countries and then, in essence, “renounce their U.S. citizenship,” and claim that their tax liability now resides in that foreign land.

Not counting banks, U.S. corporations currently have about $5 trillion in liquid assets, with about half of that amount in overseas subsidiaries. Many economic writers claim that money is now “trapped” overseas, unavailable to create jobs in the U.S., but a “tax holiday” would bring it back home, create jobs and stimulate our economy.

Don’t be fooled. Corporate money is not “trapped” anywhere. It floats freely from bank to bank, wherever in the world the corporation wants it. However, since payment of U.S. taxes on foreign profits can be deferred, what is “trapped” is simply the payment of corporate taxes to Uncle Sam. We fell for that “corporate tax holiday” trick in 2004 and besides the lost federal revenue, it resulted in a doubling of corporate overseas cash holdings, and job losses in the U.S.

One solution to the escalating legal avoidance of corporate taxes is the “single sales factor apportioned corporate tax.” The idea is to tax corporations based on where actual sales are made, not some phony-baloney Accountingland where profits are reported. Thus, if 99 percent of a company’s sales occur in the U.S., then the U.S. taxes them on 99 percent of its worldwide profits. This tax would treat large, multinational corporations the same as smaller domestic companies, and eliminates a powerful force driving U.S. businesses abroad.

While the $5 trillion in liquid U.S. corporate assets is a record high amount, our banks are currently sitting on $2.6 trillion in “excess reserves,” also a new record, which is enough to provide $26 trillion in new loans. Clearly, giving corporations more money is not the ticket for stimulating U.S. job growth.

The real key to increasing American jobs can be found in your own pocket. The principal reason a company hires more employees is that they can’t keep up with the demand for their product or service. Since the biggest driver of American jobs is the American consumer, we should all buy American products whenever possible, and the closer you are to the source, the better it is for you and your neighbors.

Look around. Think globally, but shop locally.

Mike Kirchubel grew up in Fairfield and is the author of “Vile Acts of Evil – Banking in America.” He can be reached at [email protected]

Mike Kirchubel


Discussion | 31 comments

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  • John DutcherAugust 18, 2014 - 4:03 am

    Another useful and informative article, Buying American products instead of the lower priced foreign made item. What a concept. Isn't the "Single sales factor apportioned corporate tax" what the states of the USA now use to collect corporate taxes? Also, a major step for the U.S. in terms of jobs and reducing international influence would be for everyone to bank at their local credit union.

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  • Mike KirchubelAugust 18, 2014 - 6:12 am

    That's were I "bank." It works just fine.

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  • TJ BairdAugust 18, 2014 - 6:59 am

    Mike, good article. I'm certain that you get many more responses when you are snarky and call individuals and groups silly names, but I like when we deal with the facts. I don't always agree with your interpretation of facts, but at least we then have a foundation for an intelligent discussion. A complete tax overhaul (corporate and individual) is long overdue. I hope that DC will screw up the political courage to do it. It may not end up perfect, but it has got to be better than what we have, hopefully!

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  • Tired-of-itAugust 18, 2014 - 7:47 am

    Well, let's see, where to start. U.S. corporations currently have "$5 trillion in liquid assets" care to provide "facts" that support this number? Then there's "Many economic writers claim...". Really, which ones? List them. In addition, it would appear you are using these "economic writers claims" for "your" ideas. Once again, the word for you is "Hypocrite." Look it up.

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  • JimboAugust 18, 2014 - 9:15 am

    Its called Google look it up: http://www.stlouisfed.org/publications/re/articles/?id=2314

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  • JimboAugust 18, 2014 - 9:43 am

    "Profits have grown five times faster than jobs at America's largest corporations over the last 12 years"-Reuters, 8/11/14 But lets keep giving them tax breaks 'so they can 'create jobs'....(rolls eyes)

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  • mike kirchubelAugust 18, 2014 - 9:54 am

    Jimbo, yes. If only the wealthy "job creators" had a few trillion more dollars, maybe some of that would tinkle down on us pee-ons. I mentioned that the corporate tax cuts are made up by the individual income taxes. The less they pay, the more we do.

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  • SteveAugust 18, 2014 - 12:26 pm

    Actually, Doug Ose, who is running for Congress from California is pushing for a law that would allow US Companies to bring overseas corporate profits back to the US at a reduced rate. His idea is to take the tax windfall that would result from this and fund the US Highway Trust fund for the next 8 years. What a novel idea, take a tax windfall and use it to repair and improve infrastructure, create jobs and hopefully generate some economic growth without raising taxes on individuals. What a novel idea, and from a Republican no less.

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  • mike kirchubelAugust 18, 2014 - 2:31 pm

    Steve, it is not a new idea. I mentioned it in the article. Repubs always want to give tax breaks to the rich. What is new?

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  • SteveAugust 18, 2014 - 4:53 pm

    This is no tax break for the rich. It is taxing dollars that would never come to the US in the first place. And putting them to a good use.

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  • rlw895August 19, 2014 - 10:27 pm

    Sounds like a fine idea to me, as I'm in favor of eliminating the corporate income tax anyway. Not for nothing mind you. I would want to have some resolution on the federal minimum wage that keeps us from revisiting it all the time and an increase in the personal income tax for high income.

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  • mike kirchubelAugust 18, 2014 - 9:44 am

    TOI, your education is showing. If you were to read the column, you would see that i do not agree with the opinion of the "many economic writers." I go against them and back up my position with facts. A technique you won't see across the page here.

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  • Tired-of-itAugust 18, 2014 - 2:10 pm

    Gee Mike, are you sure its my education in question? I didn't say you agreed with the critics, just that you were using their claims for "your" ideas. Agreeing or not wasn't the issue. You were using them to write your drivel. You're right, I rarely read your whole column because I don't want to hurl. I did go back and darn, I just can't find the "facts" to back up your claims. Apparently, you're more arrogant than I originally thought if you believe it's "fact" simply because you wrote it. Newsflash: Your opinion piece didn't have anymore "facts" than Earl's. At least when he cited a quote, he wrote where it came from. You simply list a bunch of numbers and say " Many economic writers claim..." Who claims, what were their exact words? Instead, you just interpret their words as you want to form "your" opinion, just like Earl did. If that sounds ridiculous, it's because it is. It was just as ridiculous when you did it to Earl. I was simply pointing out your hypocrisy. Get it now? The opinions of either of your columns wasn't the issue. Education? Perhaps reading comprehension wasn't your strong skill.

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  • mike kirchubelAugust 19, 2014 - 9:30 am

    ToI, please tell me what is untrue in my column and what is true in Earl's. You shouldn't have to write anything.

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  • Tired-of-itAugust 19, 2014 - 2:04 pm

    Good grief, there's that reading comprehension problem again. Go back and read my reply again. Slower this time. I never said he was right and you were wrong. You do understand your column is on the "Opinion" page, right? Opinions aren't right or wrong. They are simply someone's take on an issue. I'll tell you a little secret. I agree with your opinion that we should be buying products made in American. Me agreeing doesn't make you or I right. It just means we share the same opinion on that issue. Of course, I can also tell you, it's my opinion that buying American in and of itself won't solve this country's financial woes. My point was, you didn't agree with his opinion, so you insult him instead of just disagreeing with his opinion. Then you usually ask for facts to prove someone's opinion while never offering any facts to prove your own. Guess what? Opinions aren't based in fact. That's what makes them opinions. I'll bet just about everyone else gets my point, except you. What I did say is he cited the sources he based his opinion on. You just rattled off numbers with no reference to where they came from. Also, you stated, "Many economic writers claim...". Again, no reference to those writers. You are constantly demanding other writers provide facts for their opinions, which is ridiculous. However, you won't even provide facts (references) to statements you want us to believe are factual. If you ask me to explain it again, I'll assume you're just playing dumb. At least I would hope you are just playing. Now, I have a question for you. What is your constant need to attack others personally just because you don't agree with their OPINION? Does it make you feel superior? Do you perhaps have little man syndrome or something? Yes, I too can be a class A smart alec. I usually just don't start off that way.

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  • HeeHawAugust 19, 2014 - 2:40 pm

    T-O-I: Mr. Kirchubel just can't stand for anyone else to play in what he thought was his exclusive sand box. His only recourse is to attack, demean, belittle, and PARAPHRASE. Best solution for us is to ignore him. That will drive him even nuttier.

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  • Tired-of-itAugust 19, 2014 - 10:08 pm

    You're right, HeeHaw, most people should ignore his boorish behavior and inane columns. I just find pointing out his hypocrisy too much fun.

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  • rlw895August 19, 2014 - 10:32 pm

    TOI: I don't get your point. Opinions are not based on facts? Opinions are not right or wrong? What kind of fuzzy world are you living in?

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  • rlw895August 19, 2014 - 10:38 pm

    Mike: Maybe you'd better instead ask TOI to name one fact you wrote that needs citation. Jimbo tried above and TOI seems to have ignored it. TOI will probably say "all of them," but TOI, please just name your favorite. Then Mike, you are on the spot to give some references.

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  • Mike KirchubelAugust 20, 2014 - 6:22 am

    RLW, it's like Earl is arguing that the moon is made of green cheese and cites The Cartoon Network as his foundation, while I discuss the moon rocks brought back and their actual chemical composition. People like TOI say both are valid because they are based on someone's "opinion." Ever notice that arguing with TOI is like arguing with FDC? It's no wonder they vote Republican.

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  • rlw895August 20, 2014 - 6:36 am

    Mike: Well put, and in terms even a child can understand. I don't expect TOI will take up my challenge, so you will win by default. However it won't make any difference. TOI will just come back later, probably using a new name.

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  • JimboAugust 18, 2014 - 9:07 am

    It has gotten harder to buy American made. Unfortunately I find many 'American' companies who do all their manufacturing in China just leave off completely where the item was made until you open the box and turn it over.

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  • SteveAugust 18, 2014 - 12:20 pm

    It's interesting of all the solutions offered up, you pick "elimination of corporate income tax" as the one to lament on. Your point seems to be if we don't buy products made oversees, corporations would begin manufacturing here and bring all their money back (and pay the highest corporate tax rate in the developed world, while they're at it.) The problem is much more complex, and you should know that. Without regulatory and employment law reform, without tax reform or incentives, manufacturing on a major scale is not coming back to the United States, period. You can talk about corporate greed all you want, but if you can make products better, faster, cheaper with less hassle and greater profits elsewhere, you ain't coming back here. So yes, buy your food from your local farmer. But when you go to buy your TV, phone, printer, or computer, good luck finding one made in the US that you'd want to own. Of course we could just pass a law that says what you sell in the US you must make in the US. That would solve all our problems, wouldn't it Mike?

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  • mike kirchubelAugust 18, 2014 - 2:26 pm

    I only have 600 words and that was not enough to give this one aspect sufficient coverage. If nothing interesting happens in the next two weeks, i'll talk about regulations. What is your solution?

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  • SteveAugust 18, 2014 - 9:01 pm

    Riddle me this Batman. Steve Jobs and Pres Obama are at a dinner. Obama asks Jobs how much more would it cost to make iPhones in the US. Jobs replies Apple has studied it. About $69.00. Obama says I think Americans would pay that. Jobs replies Apple has studied it. They would. Obama lights up. Then we will make that happen. Jobs says not so fast. Cost is not the problem. Obama is perplexed. Jobs gives him this example. When Apple decided to use a glass screen, it's supplier, Corning, came up with the prototype. Apple needed manufacturing in weeks or the phone would be delayed. Corning repurposed a factory in China in six weeks. In the US, It would have taken years to permit a facility. Jobs said, we deal in months. We don't have years. That's why the iPhone won't ever be made here. There Mike is your problem. And in this country, there is no solution.

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  • Good job!August 18, 2014 - 12:46 pm

    Michael........ What the dickens, Thou art a rare tiger-booted true-penny! Fare thee well...

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  • http://readersupportednews.org/opinion2/299-190/25192-rahm-emanuel-cuts-schools-pensions-while-funding-corporate-subsidiesAugust 18, 2014 - 1:16 pm

    Google......Rahm Emanuel Cuts Schools, Pensions While Funding Corporate Subsidies By David Sirota, International Business Times 07 August 14...... The Democrats are controlled by the Bankers also.... WAKE UP DEMOCRATS

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  • Wikipedia..... /GoogleAugust 18, 2014 - 1:25 pm

    Chicago Mercantile Exchange ....then the owner .... CME Group....... Notice all the consolidation of the exchanges.... Google....Terrence A. Duffy....Company Bio... notice the Federal Pension plan connection...The Honorable Mr. Duffy has served as our Executive Chairman and President since 2012. Previously he served as Executive Chairman since 2006, when he became an officer of the Company. He served as Chairman of the board since 2002 and our Vice Chairman from 1998 until 2002. Mr. Duffy has been a member of our Board since 1995. He was President of TDA Trading, Inc. from 1981 to 2002 and has been a member of CME since 1981. Duffy was appointed by President Bush and confirmed by the U.S. Senate in 2003 as a member of the Federal Retirement Thrift Investment Board (FRTIB), a position he held until 2013. The FRTIB administers the Thrift Savings Plan, a tax-deferred defined contribution (retirement savings) plan for federal employees. Mr. Duffy currently serves as Co-Chair of the Mayo Clinic Greater Chicago Leadership Council. He is Vice Chairman of the CME Group Foundation, whose mission is to enhance economic opportunity, health and education, especially for disadvantaged youth. He also is a member of the Economic Club of Chicago, the Executives' Club of Chicago and the President's Circle of the Chicago Council on Global Affairs. Since 2003, Mr. Duffy has been recognized as one of the top 100 Irish Business Leaders by Irish America Magazine. Mr. Duffy attended the University of Wisconsin-Whitewater. In 2007, he received a Doctor of Humane Letters from DePaul University.

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  • rlw895August 20, 2014 - 6:33 am

    Mike: Well put, and in terms even a child can understand. I don't expect TOI will take up my challenge, so you will win by default. However it won't make any difference. TOI will just come back later, probably using a new name.

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  • Rick WoodAugust 19, 2014 - 3:14 pm

    Mike: I can't glean from the column whether you favor or disfavor eliminating the corporate income tax.

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  • mike kirchubelAugust 19, 2014 - 10:40 pm

    Not sure/doubt it would affect job growth.

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