# Jobless Rate Down to 9.7%; 20,000 Jobs Lost in January



## WouldaShoulda (Aug 5, 2009)

Who is doing the maths?? :crazy:

The United States economy shed 20,000 jobs in January, the government said Friday, deepening concern that relief from the deepest economic downturn in a generation would be slow to come. But the unemployment rate fell to 9.7 percent from 10 percent in December.

As the broader economy gains steam and crucial sectors like manufacturing spring back to life, analysts say the recovery appears to be intact. But the nation's stubbornly high unemployment rate remains a persistent thorn in the side of optimists, and economists expect the situation to worsen before it gets better.

Some forecasts call for the jobless rate to reach nearly 11 percent by year's end, which would significantly dampen spending by consumers, a critical driver of growth. That has prompted concern that the economy could enter a period of extremely slow growth or even fall into another downturn.

"Businesses are still very cautious," an economist for IHS Global Insight, Nigel Gault, said. "But the plus for jobs is the fact that the economy is growing and firms need to produce more output."
The government revised its job loss numbers for November, saying the economy gained 64,000 in that month rather than 4,000. But the numbers in December were much worse than previously stated; the economy lost 150,000 jobs rather than the 85,000 originally reported.

https://www.nytimes.com/2010/02/06/business/economy/06jobs.html


----------



## agnash (Jul 24, 2006)

WouldaShoulda said:


> Who is doing the maths?? :crazy:


The government doesn't count the people who have given up looking. I wish I could do that with my own accounts. I've given up on that Visa card, so the balance no longer counts on my credit rating.


----------



## nick.mccann (May 3, 2009)

It's called cooking the books.

Real unemployment is getting close to 20%. It's funny how they count people who give up looking for jobs because there aren't any as "employed". Government has perfected the art of book cooking.



> *the Non-Seasonally Adjusted number, hit a new recent record: instead of 9.7%, this number was 10.6%, a 0.9% increase from December!*


https://www.zerohedge.com/article/n...ed-unemployment-rate-both-u3-and-u6-surge-rec

We just experienced a "lost generation", a decade of loss. Equities were down, employment down, real wage down.

https://market-ticker.denninger.net/archives/1936-UnEmployment-Friday-25.html

And don't forget this;


----------



## WouldaShoulda (Aug 5, 2009)

agnash said:


> The government doesn't count the people who have given up looking.


I expect the Government to "mislead," but why did the NY Times let them get away with it??


----------



## CuffDaddy (Feb 26, 2009)

nick.mccann said:


>


Fascinating. The 3 longest ones are the three most recent ones, with each taking longer for the rebound than the one before it. And this one certainly looks likely to continue the trend in a big way. Has something changed in the economy that makes jobs slower and slower to recover? Is it hiring practices? The fact that employers tend to replace shed jobs with outsourcing once a rebound begins? A one-way ratchet with jobs lost being permanently lost, and never re-hired-for, with all job growth coming from entirely new jobs?

If this is a new rule, what does this tell us about what the *next *recession will look like? If job losses are going to take 5-10 years to be recovered from, how are we going to manage? We can't possibly expect people to have enough savings to survive 8 years of unemployment... are we going to have to go back to a sturdier safety net? Or just accept that each downturn will create a generational underclass of essentially permanently and involuntarily unemployed?


----------



## WouldaShoulda (Aug 5, 2009)

CuffDaddy said:


> Fascinating. The 3 longest ones are the three most recent ones, with each taking longer for the rebound than the one before it. And this one certainly looks likely to continue the trend in a big way. Has something changed in the economy that makes jobs slower and slower to recover? Is it hiring practices? The fact that employers tend to replace shed jobs with outsourcing once a rebound begins? A one-way ratchet with jobs lost being permanently lost, and never re-hired-for, with all job growth coming from entirely new jobs?


Or an ever increasing and burdensome government and greater debt??

Perhaps making it larger, more burdomsome deeper in debt will make things better!!


----------



## CuffDaddy (Feb 26, 2009)

WouldaShoulda said:


> Or an ever increasing and burdensome government and greater debt??
> 
> Perhaps making it larger, more burdomsome deeper in debt will make things better!!


Good points. I suppose we need to return to the fiscal responsibility of the pre-Reagan years, when we had to ask wealthy people to pay quite a bit more in taxes. :icon_smile_wink:


----------



## JDC (Dec 2, 2006)

It's absurd to expect any kind of robust economy, with a workforce consisting of 150,000,000 hamburger flippers and bedpan cleaners.

What's different about this "recession" is that it's not a recession. It's the end result of 30 years of intentional gutting of America's manufacturing, technology, R&D and other high-end sectors by multinational corporations, a corporate tax policy that rewards our corporations for this traitorous behavior, and a corrupt major media/political cartel which is bought and paid for by the exact same corporate interests.

In the next few years, watch as president Obama attempts to place the smallest of bandages on this gaping wound, e.g. by finally correcting our corporate tax code. If you think Fox News tea baggers were manipulated into throwing a tantrum over health care reform, you ain't seen nothing yet.


----------



## nick.mccann (May 3, 2009)

CuffDaddy said:


> Good points. I suppose we need to return to the fiscal responsibility of the pre-Reagan years, when we had to ask wealthy people to pay quite a bit more in taxes. :icon_smile_wink:


Or we could massively cut the size of government and spending across the board and not increase taxes. As history and research has shown, less government and taxes mean a better economy. It's been proven over and over again, yet people still dismiss the facts and believe what they want to instead of what history and research has shown.
Increasing taxes on the wealthy will only lead to more money flowing into other countries along with jobs. Fiscal responsibility will only come with a small government and low taxes along with sound a monetary policy and balanced trade.



> What's different about this "recession" is that it's not a recession. It's the end result of 30 years of intentional gutting of America's manufacturing, technology, R&D and other high-end sectors by multinational corporations, a corporate tax policy that rewards our corporations for this traitorous behavior, and a corrupt major media/political cartel which is bought and paid for by the exact same corporate interests.


Well said. However the high taxes and regulation in America are what is pushing business overseas where they can get cheap labor along with lower taxes and less restriction. We have a popular shoe at my store made in Texas that is quite expensive. When customers complain about the price, I have to tell them it's 3x more expensive than the Chinese shoe because you're paying for extra taxes and regulations that come from being made in America.


----------



## iclypso (Jan 10, 2009)

I heard an interesting report on NPR last night regarding the under-employed: those people who have have gone from a full-time job to only working part-time, often for a lower hourly salary and a reduction or elimination of benefits. They are not distinguished from a full-time employee in these statistics even though their salaries have been reduced by more than half and they can no longer support their families.


----------



## JDC (Dec 2, 2006)

nick.mccann said:


> Well said. However the high taxes and regulation in America are what is pushing business overseas where they can get cheap labor along with lower taxes and less restriction. We have a popular shoe at my store made in Texas that is quite expensive. When customers complain about the price, I have to tell them it's 3x more expensive than the Chinese shoe because you're paying for extra taxes and regulations that come from being made in America.


Nick, we're the only industrialized country on Earth who rewards its corporations for eliminating domestic jobs. And as for China, we've had this discussion before. As long as they're the only ones who dictate the value of their currency, completely ignore worker rights, benefits, environmental issues etc, the rest of the world is playing with a stacked deck. Is a trillion dollar annual trade deficit not adequate proof of this?


----------



## Mike Petrik (Jul 5, 2005)

CuffDaddy said:


> Good points. I suppose we need to return to the fiscal responsibility of the pre-Reagan years, when we had to ask wealthy people to pay quite a bit more in taxes. :icon_smile_wink:


We may have asked, but they didn't oblige. Before Reagan's '86 Act rates were higher but shelters abounded. The '86 Act did not change income tax distribution by real income much at all. And we don't tax the wealthy in this country, and never have; we tax high income earners. Wealth and income are not the same thing.


----------



## WouldaShoulda (Aug 5, 2009)

Mike Petrik said:


> We may have asked, but they didn't oblige. Before Reagan's '86 Act rates were higher but shelters abounded. The '86 Act did not change income tax distribution by real income much at all. And we don't tax the wealthy in this country, and never have; we tax high income earners. Wealth and income are not the same thing.


It won't matter.

Even when decreased taxes are proved to increase revenue we have an administration that would rather do what's "fair" over what will pay the bills!!


----------



## JDC (Dec 2, 2006)

Mike Petrik said:


> We may have asked, but they didn't oblige. Before Reagan's '86 Act rates were higher but shelters abounded. The '86 Act did not change income tax distribution by real income much at all. And we don't tax the wealthy in this country, and never have; we tax high income earners. Wealth and income are not the same thing.


Excellent post IMO.

When a true fiscal conservative is raised by the electorate, he/she is immediately marginalized and discredited by both major parties and by our major media, and can attract no more than 10 or 15% of the vote. So the only remaining alternative for our country is eventual bankruptcy.


----------



## Mike Petrik (Jul 5, 2005)

A couple points. It is true that the unemployment rate is an imperfect datum, but the imperfection is not politically motivated. The rate is simply the result of using a superficially fair definition that counts only those who are actually seeking work. This definition has been in place since at least the 1970s when I was studying economics. Counting those who are not seeking work would pretty obviously lead to an even less useful datum. In particular, as suggested above the rate does not count as employed either so-called "discouraged workers" (i.e., unemployed persons who are not seeking work because they are discouraged) and does not take into account that some of the employed are actually "under-employed" (i.e., employed persons who are working at jobs beneath their skill level). 

Contrary to an assertion above, discouraged workers are not counted as employed. They are neither in the numerator nor the denominator of the calculus. The fact that the rate does not take into account such workers is hardly a secret. It is reported all the time by major news outlets including the NYT (the example mentioned), and estimates are routinely circulated -- those rates are indeed very soft estimates. It is hard to capture various subjective matters in statistics. Most discouraged workers could secure jobs, just not jobs they are interested in doing for pay they will accept. But that describes almost all adults who are not employed, including my wife, who has not worked outside the home for 20 years but would readily take a Monday/Wednesday/Friday morning position with a six-figure salary.

Similarly, identifying under-employed workers suffers from similar ambiguities. Subjectively, many (probably most) employed persons believe they are under-employed in that they believe that they are qualified to perform the work required for higher-paid positions. The market says otherwise, however, and it is exceedingly difficult to discern a workable objective standard other than the market.

This is not to say that the discouraged worker and under-employed phenomenon are not real or important; it is just to point out (i) they are widely recognized and reported and (ii) the methodology used to compute the unemployment rate, while imperfect, is almost certainly not a politically motivated one.


----------



## Mike Petrik (Jul 5, 2005)

WouldaShoulda said:


> It won't matter.
> 
> Even when decreased taxes are proved to increase revenue we have an administration that would rather do what's "fair" over what will pay the bills!!


Our current president has said many things I disagree with, but frankly most are matters of opinion over which reasonable people can disagree. But his campaign statement to the effect that we should consider raising capital gains rates even if it resulted in decreased revenue because it was the "fair" thing to do was just downright nuts.


----------



## agnash (Jul 24, 2006)

*Productivity*

With the possible exception of the 1980 recession, all of those listed in the chart were accompanied by increases in worker productivity. People working longer and harder to keep their jobs in difficult times. I am certainly in that boat. For the last quarter the increase was more than 7%.

Employees reward their employers for not laying them off by working harder than ever, which gives employers less reason to hire replacement workers.

Add to that the increased savings rate for this downturn. Our economy is driven by consumer spendig, so we have people working harder and spending less. Even the payroll cuts the administration put in place did not increase spending, they just saved more. I don't fault the Obama administration, as that policy did work (somewhat) for Bush.


----------



## ksinc (May 30, 2005)

Is that before or after the 840,000 adjustment they need to make (reported the last few days)?

I think/guess that because of the "search for work" requirement for unemployment - when peoples' unemployment runs out the government considers them "no longer looking for work?" This is the only theory I can come up with for this crazy number of "discouraged workers."

Since they (I think) extended unemployment to 18 months - this should really probably be called current and longterm unemployment.


----------



## agnash (Jul 24, 2006)

Mike Petrik said:


> Our current president has said many things I disagree with, but frankly most are matters of opinion over which reasonable people can disagree. But his campaign statement to the effect that we should consider raising capital gains rates even if it resulted in decreased revenue because it was the "fair" thing to do was just downright nuts.


But it played well to his base. Politicians on both sides frequently say and do stupid or insane things in order to get elected or to stay in office.


----------



## ksinc (May 30, 2005)

FrankDC said:


> It's absurd to expect any kind of robust economy, with a workforce consisting of 150,000,000 hamburger flippers and bedpan cleaners.
> 
> What's different about this "recession" is that it's not a recession. It's the end result of 30 years of intentional gutting of America's manufacturing, technology, R&D and other high-end sectors by multinational corporations, a corporate tax policy that rewards our corporations for this traitorous behavior, and a corrupt major media/political cartel which is bought and paid for by the exact same corporate interests.
> 
> In the next few years, watch as president Obama attempts to place the smallest of bandages on this gaping wound, e.g. by finally correcting our corporate tax code. If you think Fox News tea baggers were manipulated into throwing a tantrum over health care reform, you ain't seen nothing yet.


+1. Well said Frank.

It's also the result of 30 years of an education system that teaches social engineering and values clarification instead of marketable skills and career training.


----------



## JDC (Dec 2, 2006)

Mike Petrik said:


> Our current president has said many things I disagree with, but frankly most are matters of opinion over which reasonable people can disagree. But his campaign statement to the effect that we should consider raising capital gains rates even if it resulted in decreased revenue because it was the "fair" thing to do was just downright nuts.


If it weren't for the political cartel now entrenched in D.C., a virtually unlimited number of solutions would be possible. Just one constitutional amendment -- a single one, to prohibit unfunded federal mandates to the states -- would put a major dent in our disease. But with the current situation these solutions are impossible to propose.


----------



## JDC (Dec 2, 2006)

ksinc said:


> +1. Well said Frank.
> 
> It's also the result of 30 years of an education system that teaches social engineering and values clarification instead of marketable skills and career training.


Absolutely IMO. If I were King the first two useless bureaucracies on my chopping block would be the Depts. of Education and Energy.


----------



## ksinc (May 30, 2005)

FrankDC said:


> Absolutely IMO. If I were King the first two useless bureacracies on my chopping block would be the Depts. of Education and Energy.


The most sickening feeling in my life other than thought of a loved one being hurt is to hear a political rally and hear the speaker say "America can compete with anybody in the world! USA! USA!" And my heart just breaks. There's no reason we shouldn't be #1 because we have the greatest Constitution, freedom & liberty, and coalition of diverse people, but to think we are still competitive is to 'swallow the worm' IMHO. Usually, this is followed by a statement that speaker is not just going to tell people what they want to hear ... yeah. okay. sure.

Frank, I think you may need to re-consider that the tea party'ers get this stuff and that is also what they are angry about. Not just gay marriage and the black guy. I'm probably technically a tea party'er I hate the GOP, I'm registered Republican, but more conservative-libertarian and I haven't voted in a primary for the eventual winner in my lifetime. If GHWB ran unopposed; that's right? I voted for Kemp, Buchanan, and Romney. I don't know anyone that voted for Dole, Bush, and McCain. And as you know I'm pretty "conservative" on most issues or classically liberal - however you want to label me.


----------



## iclypso (Jan 10, 2009)

Mike Petrik said:


> Similarly, identifying under-employed workers suffers from similar ambiguities. Subjectively, many (probably most) employed persons believe they are under-employed in that they believe that they are qualified to perform the work required for higher-paid positions. The market says otherwise, however, and it is exceedingly difficult to discern a workable objective standard other than the market..


Great post but I'd like to clarify the term "under-employed". Rather than over-qualified, these people are performing the same work as before, just on a part-time basis and, often, for a lower hourly rate. The example on NPR was a Human Resources employee who now works 20 hrs/wk and gets paid less per hour than when she was fully employed. Loss of benefits is a corollary to this issue.


----------



## ksinc (May 30, 2005)

iclypso said:


> Great post but I'd like to clarify the term "under-employed". Rather than over-qualified, these people are performing the same work as before, just on a part-time basis and, often, for a lower hourly rate. The example on NPR was a Human Resources employee who now works 20 hrs/wk and gets paid less per hour than when she was fully employed. Loss of benefits is a corollary to this issue.


Yep ... Very true.

Recruiters usually look at things in $10K increments. So you're a 60s guy or a 70s guy, etc. etc. ...

They are saying that a person is getting a job one-to-two levels below their qualifications and getting paid another one-to-two levels below that for an average of three levels below previous market. A lot of people are at -4.

So, on average, a guy making $70k in his previous job may take a job that did pay $50k and only get $40k. Or vice-versa.

I know a recruiter at a big IT company that just hired for a system engineer. Of course he got 1,000s of resumes. He settled on a guy with full certs and 10 years of real experience with a Fortune IT company for $32,500. That position used to start at $45k with no certs and $55k with certs no experience. With full certs and 10 years that would be $75k or more in place or $65k on transistion. The guy told me he was going to offer $28,500, but the HR people just wouldn't let him do it to the guy. He says, he knows the guy would take it for the benefits (kids).

It's not a recession - it's a resetting of values - not just homes, but wages too. A lot of people think they are worth more than they are. It's why I spent the last 4 years going back to school to get my MBA & CPA. The world is more competitive than when you just needed a B.S. and 10 years of experience to pull good coin ... it's not 1996 anymore.


----------



## nick.mccann (May 3, 2009)

FrankDC said:


> Nick, we're the only industrialized country on Earth who rewards its corporations for eliminating domestic jobs. And as for China, we've had this discussion before. As long as they're the only ones who dictate the value of their currency, completely ignore worker rights, benefits, environmental issues etc, the rest of the world is playing with a stacked deck. Is a trillion dollar annual trade deficit not adequate proof of this?


How are we rewarding corporations for eliminating domestic jobs? I'm not disagreeing, but I'm not familiar with what rewards we have for shipping jobs overseas. What I see is if we made it more easy to produce in America with less laws and less taxes, we'd create more producing jobs.
China's currency manipulation has kept the value of the dollar up. They've subsided the US consumer.
China should let their currency float and their people would benefit from it and the country would do better.


----------



## Mike Petrik (Jul 5, 2005)

iclypso said:


> Great post but I'd like to clarify the term "under-employed". Rather than over-qualified, these people are performing the same work as before, just on a part-time basis and, often, for a lower hourly rate. The example on NPR was a Human Resources employee who now works 20 hrs/wk and gets paid less per hour than when she was fully employed. Loss of benefits is a corollary to this issue.


Indeed, thanks, and the problem is that the market is currently saying that this is what her skills now command. One might suggest that the market is wrong, I suppose, but why then was it right before? Perhaps she was overpaid until recently. One might suppose a hypothetical full-employment market price, but it doesn't take to long to realize that such a hypothesis is unworkable.

I think the problem that many commenters are having with the unemployment rate is that it understates the rate of employment damage, and that is certainly true.


----------



## JDC (Dec 2, 2006)

ksinc said:


> The most sickening feeling in my life other than thought of a loved one being hurt is to hear a political rally and hear the speaker say "America can compete with anybody in the world! USA! USA!" And my heart just breaks.


I'm usually branded a GOP-hating left-wingnut, but this is one case where that label is accurately applied. Richard Nixon was the one who "opened the gates to China" and took our country off the gold standard, and I distinctly remember Ronald Reagan using your own quote, nearly verbatim and relentlessly during his first presidential campaign. What I don't know is whether Reagan's "America can compete with anybody" mantra was a bald-faced lie, or just the result of abysmal ignorance. Given Reagan's overall intelligence I can't imagine it was the second of those possibilities.


----------



## ksinc (May 30, 2005)

FrankDC said:


> I'm usually branded a GOP-hating left-wingnut, but this is one case where that label is accurately applied. Richard Nixon was the one who "opened the gates to China" and took our country off the gold standard, and I distinctly remember Ronald Reagan using your own quote, nearly verbatim and relentlessly during his first presidential campaign. What I don't know is whether Reagan's "America can compete with anybody" mantra was a bald-faced lie, or just the result of abysmal ignorance. Given Reagan's overall intelligence I can't imagine it was the second of those possibilities.


Well "we can"; we just aren't. At the time of Reagan we were. Now it's just a bad joke. The 30 year problem (more like a 40 year problem) was only 10 years old back then ... I think if Reagan were alive today he would smack somebody in the head and you would be glad he was here.


----------



## Mike Petrik (Jul 5, 2005)

nick.mccann said:


> How are we rewarding corporations for eliminating domestic jobs? I'm not disagreeing, but I'm not familiar with what rewards we have for shipping jobs overseas. What I see is if we made it more easy to produce in America with less laws and less taxes, we'd create more producing jobs.
> China's currency manipulation has kept the value of the dollar up. They've subsided the US consumer.
> China should let their currency float and their people would benefit from it and the country would do better.


The answer is that we do not tax profits earned in other countries. Tax treaties allow each country to tax the earnings attributable to that country. Since the US corporate tax and rates are among the highest in the world, multinational corporations choose to earn manufacturing profits in other lower cost jurisdictions.

Many of these lower cost jurisdictions are incredibley resource and capital starved and people live in comparative misery; accordingly labor rates are much lower too. Job creation in these places is hugely important and helpful to these societies, but it often comes at the expense of the comparatively more comfortable people in more developed nations.

It is clearly scandalous for corporations to choose to build plants and earn profits in lower tax rate jurisdictions, and it is downright immoral for them to give jobs to the poor at the expense of the comfortable.


----------



## JDC (Dec 2, 2006)

nick.mccann said:


> How are we rewarding corporations for eliminating domestic jobs? I'm not disagreeing, but I'm not familiar with what rewards we have for shipping jobs overseas.


In 1986 Democrats (who controlled Congress during Reagan's terms) proposed amending our corporate tax code, to place a surtax on income from foreign production, like every other industrialized country does, to eliminate the financial incentive for our corporations to outsource American jobs. This proposal died in committee under intense pressure from Reagan, and the mass exodus of U.S. jobs began shortly thereafter.


----------



## nick.mccann (May 3, 2009)

FrankDC said:


> In 1986 Democrats (who controlled Congress during Reagan's terms) proposed amending our corporate tax code, to place a surtax on income from foreign production, like every other industrialized country does, to eliminate the financial incentive for our corporations to outsource American jobs. This proposal died in committee under intense pressure from Reagan, and the mass exodus of U.S. jobs began shortly thereafter.


This is very interesting. Now I'm curious to research other developed nations and see how much of their production has left their nation versus America. Thank you for the information.


----------



## Mike Petrik (Jul 5, 2005)

FrankDC said:


> In 1986 Democrats (who controlled Congress during Reagan's terms) proposed amending our corporate tax code, to place a surtax on income from foreign production, like every other industrialized country does, to eliminate the financial incentive for our corporations to outsource American jobs. This proposal died in committee under intense pressure from Reagan, and the mass exodus of U.S. jobs began shortly thereafter.


Frank,
Can you shed some light on these foreign surtaxes? I've not heard of them. I would have thought they'd violate every Convention and Tax Treaty entered into since WWII. Thanks in advance.


----------



## agnash (Jul 24, 2006)

Mike Petrik said:


> Frank,
> Can you shed some light on these foreign surtaxes? I've not heard of them. I would have thought they'd violate every Convention and Tax Treaty entered into since WWII. Thanks in advance.


I believe most industrialized nations allow a tax credit for income taxes paid to foreign governments on foreign earnings, as does the United States. The United States disallows the portion of the credit that exceeds the tax that would have been paid at the U.S. rates, but the U.S. rates are among the highest in the world.


----------



## JDC (Dec 2, 2006)

Mike Petrik said:


> Frank,
> Can you shed some light on these foreign surtaxes? I've not heard of them. I would have thought they'd violate every Convention and Tax Treaty entered into since WWII. Thanks in advance.


Mike, this change was proposed in Reagan's Tax Reform Act of 1986. In this bill Reagan increased taxation of domestic corporate income by $120 billion over five years, while he insisted that an offsetting tax on corporate income from foreign production (proposed by Democrats in the U.S. House to protect U.S. labor and investment) be dropped.

The text of this amendment (or any other amendment which dies in committee) is impossible to find online, especially on 20+ year-old legislation. However some discussion and background on the issue can be found here:

https://www.piie.com/publications/chapters_preview/4051/03iie4051.pdf

https://www.washingtonmonthly.com/features/2003/0301.green.html


----------



## Howard (Dec 7, 2004)

Just the other day,they laid off at Pathmark a woman from the Deli dept and a woman from the Seafood dept so there are plenty of jobs being lost but thank god that I have a job or else I wouldn't be in this position.


----------



## Mike Petrik (Jul 5, 2005)

agnash said:


> I believe most industrialized nations allow a tax credit for income taxes paid to foreign governments on foreign earnings, as does the United States. The United States disallows the portion of the credit that exceeds the tax that would have been paid at the U.S. rates, but the U.S. rates are among the highest in the world.


That is correct re the US (but not most other countries) and has nothing to do with surtaxes. Moreover, it is not all that relevant insomuch as multinational businesses avoid this regimen by doing business through multiple corporations that are usually nation-based. In other words Japanese businesses establish US companies to do business in the US and these companies pay US taxes on all US income. Intercompany transactions are required to be at arm's length pricing under Treaty and IRC 482, and these transactions are vigorously tested by the IRS and other revenue authorities. The same is true of US businesses doing business in Japan. All companies throughout the world try to establish profit centers in (i.e., manufacturing companies) in lower tax jurisdictions, and that never is the US for the reason you note.


----------



## Mike Petrik (Jul 5, 2005)

FrankDC said:


> Mike, this change was proposed in Reagan's Tax Reform Act of 1986. In this bill Reagan increased taxation of domestic corporate income by $120 billion over five years, while he insisted that an offsetting tax on corporate income from foreign production (proposed by Democrats in the U.S. House to protect U.S. labor and investment) be dropped.
> 
> The text of this amendment (or any other amendment which dies in committee) is impossible to find online, especially on 20+ year-old legislation. However some discussion and background on the issue can be found here:
> 
> ...


Thanks, Frank.

I admit that I did not read each of these carefully, but could find no mention of other countries imposing surtaxes on income from foreign production, which was my question.

Reagan actually reduced individual and corporate tax rates significantly while broadening the base for each. Corporate tax revenues did increase, but it is a bit sloppy to characterize this fact as a tax increase even though it is often done for polemical reasons. Corporate tax revenues increased mostly because corporate profits increased, arguably in part because overall the 86 Act reduced a number of dislocative features that had exisited in the Code, most importantly high tax rates.

I am a bit confused by the notion of an offsetting tax on corporate income from foreign production. First, very few US corporations derive substantial foreign income, especially from production; they create foreign affiliates to generate such income which is then taxed by the appropriate foreign jurisdictions. Those limited numbers of US corporations that do business on a world-wide basis are taxed at a single rate on worldwide income subject to credits for foreign income taxes paid on income attributable to those jurisdictions.

In any event, what I'm really interested in is the widespread use by industrialized countries of surtaxes imposed on income from foreign production. I am unfamiliar with such surtaxes.


----------



## JDC (Dec 2, 2006)

"Criticisms of U.S. corporate income tax, however, often ignore comparisons of overall corporate tax systems. Meaningful comparisons of tax systems account for income, value-added, employment, sales and other taxes affecting businesses. For example, the United States does not have a value-added tax, while the remainder of the industrialized world has value-added tax typically ranging from 15-25% (Canadian and Japanese rates are 5%)."

https://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States

Mike, I think surtax was the wrong term for it. It was simply a proposal to increase the tax on foreign production, to offset Reagan's increase in taxes on domestic production. One of the links I cited claims Reagan increased corporate taxes $120B over five years, and closed another $300B in corporate tax "loopholes".


----------



## Asterix (Jun 7, 2005)

ksinc said:


> Yep ... Very true.
> 
> Recruiters usually look at things in $10K increments. So you're a 60s guy or a 70s guy, etc. etc. ...
> 
> ...


 Excellent and factual points.


----------



## WouldaShoulda (Aug 5, 2009)

Mike Petrik said:


> Our current president has said many things I disagree with, but frankly most are matters of opinion over which reasonable people can disagree. But his campaign statement to the effect that we should consider raising capital gains rates even if it resulted in decreased revenue because it was the "fair" thing to do was just downright nuts.


Thank you for noticing!!


----------

