Listening to President Trump, you’d think the socialist barbarians were at the gates of America preparing to over-run the U.S. with a Soviet-style state-run economy where every car would be the same make and color, everyone would be wearing Mao suits and freedom and social mobility, those great mythical assets that we supposedly have in unique abundance here in the land of the free and home of the brave, would vanish.
Socialists like Bernie Sanders and Alexandria Ocasio-Cortez want the U.S. to be like Venezuela, Trump warns in his whiney little voice. Speaking to an audience of wealthy Venezuelan self-exiles in Florida, he said, “The socialists have done in Venezuela all of the same things that socialists, communists, totalitarians have done everywhere that they have had a chance to rule…This will never happen to us.”
In most parts of the world, Trump’s over-the-top and wildly ignorant denunciation of socialism would be greated with uproarious laughter, as would his cartoonish characterization of Venezuela’s current crisis (which is really the result mainly of the collapse in oil prices and economic sanctions by the U.S.). But there’s little amusement here in America, where socialism is, for many, still a dirty word, akin to Stalinism.
That’s because almost uniquely in the world, Americans have been insulated and cut off from information about how in many very democratic nations, especially in Europe, socialist-influenced policies and programs, like free college education, generous unemployment benefits, highly progressive tax rates, retirement schemes that actually allow people to retire without falling into poverty, state-funded health systems that guarantee quality care to everyone, labor laws that guarantee generous vacations to all workers, and publicly funded, modern mass transit systems that make it so families don’t need to pay for and drive two cars can exist and thrive in societies that are often freer and that boast more social mobility than the U.S.
That’s why we can have people like Marc A. Thiessen, a right-wing columnist at the Washington Post, get away with publishing something like the syndicated column he wrote last week headlined, “Why economic illiteracy is dangerous.” In it, he condemns AOC for her “dangerous economic illiteracy” in “celebrating the tanking of a deal negotiated by her fellow Democrats” that would have brought HQ2, a second headquarters for giant e-retailer Amazon to New York City, allegedly producing “25,000-$40,000 new jobs.” In so doing, he displayed both his own ignorance of economics and taxes, and also a sterling example of the kind of pro-capitalist propaganda that passes for intelligent journalism in the U.S.
Thiessen, in condemning AOC’s success in helping to kill that humongous tax give-away deal by New York City to a mega-company that last year and in 2017 paid no corporate profit taxes to the IRS on total net earnings over those two years of $13 billion, and in calling the feisty new young Congresswoman “economically illiterate,” really is a suck-up offering a wet kiss to his boss, Jeff Bezos, not giving readers a reasoned lesson in economics. After all, while the brief bio at the end of his column doesn’t mention it, the newspaper he writes for is owned by Bezos, Amazon’s founder, CEO and – at least subject to whatever divorce settlement he manages to reach (with no pre-nup agreement) from the wife he recently got caught cheating on and to the fluctuating value of his company’s stock – the world’s richest man.
Thiessen’s reasoning: In attacking the Amazon deal, AOC was claiming that the $3 billion tax holiday offered as a lure by New York’s politicians in return for Amazon building a second headquarters in the city, is money that could instead go towards the city hiring more teachers, fixing the subway, and putting people to work in other jobs at companies that pay their taxes.
“No, you can’t,” writes Thiessen. “Ocasio-Cortez does not seem to realize that New York does not have $3 billion in cash sitting around waiting to be spent on her socialist dreams. The subsidies to Amazon were tax incentives, not cash payouts.”
Except that is true economic ignorance on Thiessen’s part.
Ocasio-Cortez’s objection to the tax giveaway to America’s largest company is partly that it is just the latest in a decades-long extortion campaign by corporate America (and foreign firms too) to force local and state jurisdictions in the country to compete with each other in cutting the taxes on companies to try to keep them in or lure them to their jurisdictions. It’s a classic race to the bottom, and she didn’t want New York playing that game any more. It is also real money because if Amazon wouldn’t pay $3 billion in property taxes or sales taxes or whatever on its facility and operations for some period of years under the deal. Other companies currently struggling to survive in the city will pay those taxes for it, because the city has bills to pay, including for services to what would have been Amazon’s huge new headquarters – things like increased demand on subways, increased wear and tear on local streets, increased police protection, increased numbers of students in local schools, etc.
If Amazon gets to skip out on paying for those services it will need, someone else will, and they’ll respond by putting downward pressure on the pay of their own workers, by cutting back on their own investment and expansion plans, and perhaps by moving out of the city and taking their jobs with them.
Thiessen’s economic ignorance is simply appalling. What do they do over there at the corporate funded American Enterprise Institute anyway? It sure isn’t studying economics. AIE, according to SourceWatch, is heavily supported by donations from the Koch brothers, with brother David sitting on its National Council. Other major right-wing funders funders include the DeVos Foundation, the Searle Freedom Trust and the John M. Olin Foundation.
Thiessen quotes Mayor Bill de Blasio as saying that had Amazon located its HQ2 in New York, the operation would have over the years contributed “$27 billion” in new tax revenue to the city. But that’s an absurd and meaningless projection. For one thing, it doesn’t state a time frame, nor does it explain what those taxes would be on or how they’d be calculated. Companies like Amazon, Apple and Google are geniuses at dodging taxes. They do this my internal pricing schemes that shift how and where their income and expenses get booked in order to end up reporting expenses in the highest tax locations in which they operate, and profits in the lowest taxing jurisdictions.
As Forbes magazine reporter Stephanie Denning reported in that d magazine in an article titled “Why Amazon pays no corporate taxes,” in 2017 and 2018, years that Amazon paid no federal taxes on its massive net profits of $3 billion and $10 billion, it did pay $1 billion and than $1.18 billion in combined state, local and international taxes. It’s a fair bet that the local share – what would go to a jurisdiction like New York City – would be the smallest of that triad. But let’s for the sake of argument assume those taxes were distributed equally. That would amount to $726 million, or about $363 million per year, with one-third of that or $121 million, being property taxes. But remember, Amazon would be getting an extended tax holiday of $3 billion in property taxes. That means that for the first eight years, Amazon would only be paying the city $242 million a year in profit and sales taxes for having its HQ2 in New York.
But hold on. That tax figure was for all of Amazon’s top-line figure for Amazon’s annual tax bill included its global operations. How would Amazon’s army of brilliant tax accountants figure out what share of their corporate income is attributed to HQ2 in New York? If they did it by number of employees, there are 600,000 of them in the whole country and only some 25,000 planned for New York. That would be roughly 4% of total employment, ergo, 4% of corporate taxes or just $9.7 million a year in taxes.
Of course, it’s more likely that any calculation of what income taxes would get paid by Amazon to New York City would be based upon how Amazon booked its corporate profits and expenses and what percent of those would be booked at the HQ2 operation. And given the history of “creative” internal pricing Amazon has already used internationally and in the U.S., it can safely be assumed that Amazon’s accountants will do an excellent job of minimizing its taxes in New York City. Whether they’ll get it down to $9/7 million a year, or perhaps lower will never be known now that the company’s not going to set up shop there. But clearly Thiessen either has no clue about how these economic decisions get made, or he knows but is pretending it’s all a matter of simple math.
But assuming Amazon tax payments to New York would only be about $10 million a year for the first eight years of its operation in the city, that would be a total of $80 million in tax proceeds over that time. At that point, assuming Amazon’s tax holiday was over, its payments would then include whatever property taxes the company would be paying – a figure that is normally calculated not based on the income of the operation but on the assessor’s calculation of the square-foot rental rate of the floor space of the building in question. Believe me, that rate would not be that impressive in Queens, where HQ2 was slated to be located, and the assessment and resulting tax payment would not be all that big.
Thiessen, in his service to Bezos, also accuses Ocasio-Cortez of ignoring all the income taxes that would be paid to the city on Amazon wages to its employees. Outrageously, he even throws in the “payroll taxes” that would be paid to them by Amazon. If course, as Theissen surely must know, payroll taxes don’t go to the city; they go to the U.S. Treasury for the Social Security Account, and end up boosting each employee’s future Social Security benefits. But in any event, it’s not even clear that all the employees of any Amazon HQ would have been NY City residents. Many would likely have opted to commute in from the burbs and would be spending their incomes and sending at least some of their local taxes to their residential community. Furthermore, many would be actually moving from other jobs to work for Amazon, so if they live in NYC, they would already be contributing income and income taxes to New York City.
The more you look into this, the more you realize what an economic illiterate Theissen really is.
And the more correct AOC looks in having gone after the Amazon deal as a sell-out to a greedy corporation, and as a screw-job for the people of New York City.
So three cheers for AOC! Maybe citizens of other cities across America will now start looking more closely at this obscene process of driving down tax payments that corporations start up in when they force communities and states to compete with each other in a desperate downward race to give away the most in tax abatement in order to lure companies to move to them.
Contrary to Trump’s cartoonish version, socialism is actually a political/economic system where people are put before profits, where political decisions are made with the priority being how to improve the lives of the people, not the profits of rich people and rich companies, and where corporations aren’t allowed to buy their way into favored treatment at the expense of the public good. Under socialism, there can be plenty of freedom, but there are additional freedoms that don’t exist in the U.S.: freedom from hunger, freedom from economic insecurity, freedom of access to quality healthcare, and freedom to get a full education, for example. It doesn’t mean no family stores, no private enterprise, no individual initiative, but it does prevent exploitation of workers, desecration of public spaces and resources, and destruction of the environment by those private enterprises.
Not such a bad idea really. We should try it in the U.S. some time. The capitalist system we have now clearly isn’t working very well for the majority of people.