Tax Shaming Works

Posted on by Caleb Newquist

Martin Sullivan cites a KPMG study from 2005 that was ahead of its time: 

"The main point is not that accusations are often unjustified, but the fact that they are made at all. Tax has news value now and, although often unfounded, 'naming and shaming' attacks on alleged tax avoiders can damage their reputations in the eyes of important stakeholders, which can lead to sharp short-term share price falls and the unwelcome attention of more than one tax authority." 

The above quote is from a 2005 KPMG Report entitled "Tax in the Boardroom" (no longer on-line). Seven years later it is clear the report turned out to be exactly right. All the aggressive tax planning in the news is legal tax avoidance and not illegal tax evasion. But corporations–especially those that sell consumer products or depend on government contracts–need to be careful not to incur the wrath of the public who do not understand that CFOs are just trying to fulfill their obligations to shareholders.

Everyone from General Electric to Apple to Starbucks to Willard Mitt Romney can attest to this. Starbucks is voluntarily (!!!) paying more taxes in the UK because of all the heat they've taken there.

You idiots. You've allowed idiots make you feel shame for doing exactly what you're supposed to do. You're Starbucks! Despite your legal "people" status, you don't have feelings. Do whatever the hell you want. Have some flak issue a press release that simply says, "Everyone who doesn't like our tax liability can fuck right off." No one can resist your free WiFi, enormous pastries, CDs at the register and $5 off one pound of your Christmas Blend (ground). Just go about your business. YOUR VERY, VERY LUCRATIVE BUSINESS.

Sigh. Much like people that throw around tax terms they have no understanding of, tax shaming is something that goes on unabated and people seem willing to accept it because it's inconvenient to a populist narrative to explain the difference between "tax avoidance" and "tax evasion" and it's probably too difficult to have "explanatory journalism" explore the actual root of the problem, which is a tax system that's as tidy as 2-year-old's coloring.

I hope The New York Times is pleased with itself.

The Most Important Intangible Asset: Reputation [Martin Sullivan]

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Brazilian Soccer Star Romario Proves that Hating Taxes is a World-Wide Institution

romario.jpgIn another demonstration that the rich and famous either hate taxes or simply play dumb to their existence, Brazilian soccer star Romario has been convicted of tax evasion and faces three and a half years in prison. He’s appealing the conviction so it’s likely that he will end up coaching soccer to troubled youth for five years.
The allegations were that he skipped on paying $500,000 in taxes in 1996 and 1997. Romario’s attorney claims he is innocent because “it’s not his fault” which is a similar excuse that might be used by a third grader who tripped someone at recess.
According to USA Today, Romario also has trouble paying child support having been arrested for it twice, once in 2004 and just a few weeks ago. He was released in both instances after paying what he owed or proving that he had already paid.
Can somebody get this guy an accountant? He’s having a hell of a time with non-soccer responsibilities.

David Cay Johnston: President Obama Has Out-Norquisted Grover Norquist

Granddaddy of tax gazetteers, David Cay Johnston, is poking at Grover Norquist again, this time over the quagmire that the Republicans find themselves in over President Obama’s payroll tax cut proposal. The very proposal that could make Obama the biggest Grinch of 2011. Ruined holidays aside, DCJ points out that if the Republicans shoot this down, they do so at the behest of what seems to be a very popular idea:

[N]umerous opinion polls show overwhelming public support for continuing tax cuts for workers and for raising taxes on millionaires. That has left Republican leaders no choice but to silently cry uncle and agree to the president’s request to extend and possibly expand the payroll tax cut.

The reason that Republicans aren’t so hot on the payroll tax cut is that it’s “temporary.” They’d rather see “permanent” tax cuts enacted, although those “permanent” tax cuts are never “permanent.” The “permanent” Bush tax cuts, for example, had to be “extended” last year because they were about to “expire” which basically makes them “temporary.” The payroll tax cut was originally enacted last year with the Bush tax cuts but as Paul Ryan says, it’s supposed to be like a holiday, which is to say, “We lived through it and we’ll just move on with our lives and never to speak of it again.” DCJ writes that this means Obama has beat the Republicans at their own game:

Having outsmarted Norquist, Obama gets to run for a second term as the champion of at least a $100 billion tax cut. Obama can even say that if Republicans had had their way, working people’s taxes would have gone up while taxes on billionaires would have gone down. And he gets to tell small business owners that, but for Republicans, their taxes would have gone down too.

This is a marketing fiasco for Republicans to rival the Ford Edsel and New Coke. Already more than 40 congressional Republicans have taken steps to distance themselves from Norquist, who scowls at the mere mention of what could have been his, but is now Obama’s, very popular tax cut.

In other words: Whose shorties are snagged now?

Republicans paint themselves into a tax-cut corner [DCJ/Reuters]

Latest Poll Suggests That Most People Think Paul Ryan’s Deficit Reduction Plan Is a Lousy Idea

[A McClatchy-Marist] poll reported that roughly two out of three registered voters — 64 percent — would be in favor of increasing taxes on annual income over $250,000. President Obama reiterated in his deficit-reduction speech last week that he favored allowing taxes to rise on families in that income level. Independents favored that plan of action at roughly the same percentage as the country at large, with more than eight in 10 Democrats also behind the idea. A majority of Republicans, 54 percent, opposed it. The poll was conducted both before and after Obama’s Wednesday speech, with support for higher taxes on wealthier Americans picking up afterward. Meanwhile, fully four in five registered voters oppose cutting Medicare and Medicaid. The House GOP’s fiscal 2012 budget, largely crafted by Rep. Paul Ryan (R-Wis.), makes fundamental long-term changes to both health entitlement programs, converting Medicaid into a block grant and turning Medicare into a type of voucher system. [The Hill, Earlier]