Posted by AzBlueMeanie:
Where are all those private sector jobs being created by record corporate profits? I have posted on this topic previously. The new corporate business model: increase profits, not jobs; UPDATE: The new corporate business model: increase profits, not jobs; and Update II: The new corporate business model: increase profits, not jobs; and Update III: The new corporate business model: increase profits, not jobs.
Now the Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute's senior international economist. Where are the Jobs? For Many Companies, Overseas – CBS News (AP report).
The trend helps explain why unemployment remains high in the United States, edging up to 9.8 percent last month, even though companies are performing well: All but 4 percent of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.
But the jobs are going elsewhere. . .
"There's a huge difference between what is good for American companies versus what is good for the American economy," says Scott.
American jobs have been moving overseas for more than two decades. In recent years, though, those jobs have become more sophisticated think semiconductors and software, not toys and clothes.
And now many of the products being made overseas aren't coming back to the United States. Demand has grown dramatically this year in emerging markets like India, China and Brazil.
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"Companies will go where there are fast-growing markets and big profits," says Jeffrey Sachs, globalization expert and economist at Columbia University. "What's changed is that companies today are getting top talent in emerging economies, and the U.S. has to really watch out."
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A key factor behind this runaway international growth is the rise of the middle class in these emerging countries. By 2015, for the first time, the number of consumers in Asia's middle class will equal those in Europe and North America combined.
"All of the growth over the next 10 years is happening in Asia," says Homi Kharas, a senior fellow at the Brookings Institute and formerly the World Bank's chief economist for East Asia and the Pacific.
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The strategy isn't restricted to just the largest American companies. Entrepreneurs, whether in technology, retail or in manufacturing, today hire globally from the start.
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[E]conomists, like Columbia University's Jeffrey Sachs, say multinational corporations have no choice, especially now that the quality of the global work force has improved. Sachs points out that the U.S. is falling in most global rankings for higher education while others are rising.
"We are not fulfilling the educational needs of our young people," says Sachs. "In a globalized world, there are serious consequences to that."
Adding insult to injury these ostensibly "American" (multi-national) corporations recently asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens. Dodging Repatriation Tax Lets U.S. Companies Bring Home Cash – BusinessWeek:
[Cisco’s chief executive officer brought up a repatriation break during the White House meeting, according to a person familiar with the discussion. It could reprise a 2004 tax holiday that allowed multinationals to return profits to the U.S. at a tax rate of 5.25 percent. U.S. corporations brought home $362 billion, with $312 billion qualifying for the relief, according to the Internal Revenue Service.]
The money — including hundreds of billions in profits that U.S. companies attribute to overseas subsidiaries to avoid taxes — is supposed to be taxed at up to 35 percent when it’s brought home, or “repatriated.”
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What nobody’s saying publicly is that U.S. multinationals are already finding legal ways to avoid that tax. Over the years, they’ve brought cash home, tax-free, employing strategies with nicknames worthy of 1970s conspiracy thrillers — including “the Killer B” and “the Deadly D.”
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“Sophisticated U.S. companies are routinely repatriating hundreds of billions of dollars in foreign earnings and paying trivially small U.S. taxes on those repatriations,” said Edward D. Kleinbard, a law professor at the University of Southern California in Los Angeles. “They devote enormous resources first to moving income to tax havens, and then to bringing those profits back to the U.S. at the lowest possible tax cost.”
U.S. companies overall use various repatriation strategies to avoid about $25 billion a year in federal income taxes, he said.
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“The current U.S. international tax system is the best of all worlds for U.S. multinationals,” said David S. Miller, a partner at Cadwalader, Wickersham & Taft LLP in New York. That’s because the companies can defer federal income taxes by shifting profits into low-tax jurisdictions abroad, and then use foreign tax credits to shelter those earnings from U.S. tax when they repatriate them, he said.
They’re aided by a cadre of attorneys, accountants and investment bankers in the tax-planning industry —
— and members of Congress. The Obama-GOP tax compromise included an exemption that allows banks, insurance companies and other financial firms to shield foreign profits from being taxed by the U.S. through 2011. Cost: $9.2 billion. That's right, the banksters of Wall Street got even more breaks from the government. Obama-GOP tax plan has many corporate breaks – Taxes – Salon.com:
The tax break is important to major multinational banks and financial firms, such as Citigroup, Bank of America, Goldman Sachs and Morgan Stanley, and to the financing operations of other international companies, Anne Mathias said.
Why is the United States subsidizing ("corporate welfare") multi-national corporations to ship American jobs oversees and to stick the newly unemployed American taxpayer with the bill? This was the subject of Cenk Uygur's commentary on Wednesday, guest hosting on MSNBC's The Ed Show. No more. This has to stop.