Wednesday, 2 February 2011

Creative Finance - A Tax on Speaking Engagements

At $100,000 a gig, the question is not going to be "How can we tax them?" but "How can we not?"

There is a campaign actively underway to convince the Canadian public that corporations need additional tax breaks.  The government of Canada is so sure about this that they are prepared to make it an election issue.  Corporations, it is argued, are the driving factor in the economy's circle of life, providing goods and services, exporting products and resources, and employing people.  This is why life needs to be made as easy as possible for them.
It is on this last point that the government is hoping to emotionally appeal to you by portraying these shamelessly and unabashedly self interested actors, 100% in it for themselves and unaccountable to the public, as worthy benevolent recipients of public resources.  We should do everything possible for the entities that allow certain people among us to make a living. 
They can allow you to make a living for as little, in Ontario, as 10.25 an hour.  Most of the people over this poverty line wage who earn livings working for them are reimbursed to the tune of 30,000 (23,000) a year, 40,000 (27,000) or 50,000 (31,000) per year.  The approximate after tax incomes at these salaries are listed beside them in parentheses.  From 70,000 per year onward, the government takes a little more than half.
If you are self-employed, you know that you pay taxes AFTER your car, phone, living expenses, eating out, etc are written off.  These people I'm talking about are regular employees, therefore taxed at the regular income tax rate THEN paying all those expenses after the tax is taken off.
So for our rank and file Canadian society proles, we are looking at a 24-36% tax rate for the massive amount of "lower-middle class" earners in this country and a 50%+ tax on a smaller, but not insignificant, amount of "mid-upper middle class" earners.
And yet somehow, these people's interests are conflated with corporations', whose rates have been progressively lowered over a relatively short period of time from 21% to 15% to the now 12% they are asking for and will eventually receive from the conservatives.  These are taxes on PROFITS - after wages, rent, depreciation, and all other operating costs.
So even though we have now established we are preparing to allow less than half the tax for gravy that we put on bread and butter, let's suppose they were right and they really did need this relief to remain "competitive" and "certain of their ability to operate here" so that all these heavily taxed people can continue to toil 40+ hours per week for them.  What do you think would happen in a year, or six months, or two months?
They'd be asking for it to be lowered again.
See, the Conference Board of Canada, the Canadian Council of Chief Executives, Chambers of Commerce, Bay Street and the other diverse organizations and institutions that make up what I will refer to as the "business lobby" don't really care where the money comes from.  They just know that they need more, all the time, to meet their needs.  Which are profit, growth, dividends, beating the forecast, and capital.  I think you can see where this is going.  You can bet they are eventually going to say the rates are too high as sure as you can bet you're eventually going to take a trip to the urinal after downing a pitcher of beer.  They will be asking for the rates to be lowered until they are at zero.
And when they are at zero, they will start asking for subsidies.  Not that that will represent anything new, because they receive those already, but why not ask for more and bigger ones?  What do they have to lose by asking? It doesn't cost them anything and the government always says yes.  When a business finds a guaranteed, low-cost way to increase its revenue, you can bet they will be doing that as long as they can get away with it.
There was a time when businesses expanded based on demand.  Now it seems like you can't read about a plant opening or a company setting up in Canada without the lucky provincial government publicly kicking in millions of dollars (Again, the feds have trouble getting away with this, so their subsidies are much murkier in little noticed-little scrutinized bailouts, transfer payments, and corporate tax rates).  There are no plans to pay this back or justifications why public money should be directed to these uses; it is merely portrayed as an "investment" in the province or country"s "future" because it "creates jobs" and "strengthens the economy".
The bottom line is that these corporations are all driven by, well, their bottom lines.  Meaning their profit.  All profit means is taking in more money than you put out.  I don't think any of them are too concerned about where the money is coming from.
What is funny is that it is a revolving door consortium of government and business elites who push these endless demands to accommodate businesses, while the vast majority of workers who power these businesses earn in a week what these guys consider a modest lunch tab.  In the middle of the 2nd working day of 2011, Canadian CEOs had already earned a year's salary of the average worker.  But there is no point on dwelling on this obvious fact: we know that eat the rich, glaring inequality rants get nowhere because people have accepted the two falsehoods that these people are better than them and they have earned it.  The real question is how anti-tax governments and anti-tax businesses propose to cover the state's massive operating costs and expanding budget deficits, if they are so sure that the taxes on business are such an unnecessary source of revenue.
What we should focus on is thus productive discussion on how to raise state revenues without sacrificing our businesses competitiveness.  Well, we know deficits are at record levels and entitlements are only going to rise.  We've seen in this post that workers are pretty well maxed out. And now the single easiest source of revenue, companies who make their money OFF OF US, are untouchable. What to do?  Wait, I have an idea. Lets look at our well-meaning elite. They are examples of how to succeed in this society. So how do these enlightened folks make livings after leaving business leadership or public life? Maybe we can draw inspiration from there.
Because I will tell you that regardless of their unpopularity, irrelevance or total failure, come hell or high water, they fill up their calendar with speaking engagements.  Typically at $100,000 a gig.  Just ask Jack Welch, Lee Iacocca, Rudolph Giuliani, Jean Chr├ętien, Bill Clinton, Sarah Palin, George Bush, Tony Blair, Dominique Strauss-Kahn.  $20 million per film celebrities, multimillionaire bestseller authors, and recording artists whose tours gross in the tens and hundreds of millions have also joined this fold.
The annual DAVOS conference that takes place in the eponymous Swiss resort is really their one collective freebie; the world elite's group speaking engagement that they don't get paid for.  And I don't want to spend a lot of time criticizing this conference, which is about as hard for me as it is for a three-time Cy Young award winner to hit the side of a barn.  What is common to this conference and the various paid speaking engagements this cabal spends its time traipsing between are the dramatic passion with which they describe the problems of this world and infuse their $200-a-word, ghostwritten discourses (that is probably too generous of a term).  Child poverty. Slumping economies. Anaemic Growth. Climate change. Very general and exotic sounding problems at the same time, which could change depending on the persons' superficial political leanings, with the constant being the person taking themselves seriously while describing how they are now "giving back" by "raising awareness".
These are the same people, when they were passing from Goldman Sachs to their government's cabinet, then back on the board of the IMF, before going over to a plum post at an embassy before finally setting up their foundation, had no problem doing what they were supposed to do when they were on either side of the same coin.  Which was asking the government for money when they worked in business, and saying "yes" to business when they were in government.  It's pretty funny to hear them talking about the need for governments to "tackle poverty" and "do more".  it seems that in fact that they may have been the root cause impeding governments to do such things at one time, when they were in business (or was it government)?

I don't want to spend all day pillorying these folks (because after all, they're (pompous and self-aggrandizing) humans too) or be a negative nancy who sends you fleeing to a popular celebrity gossip site, so I will get on with the solution: A global speaking engagement tax, levied at 95% on all appearances 5 figures and over. What better way for our public figures perturbed and concerned about the state of the world to “give back”? Now, for 45 minutes they will only make $500-$5000 dollars. I think they will set a real example by consenting to receive such a working class sum. Best of all, the other 95% will flow directly into the coffers of whichever overextended and perpetually indebted “rich” country they find themselves in...those same empty coffers they are in the middle of hectoring them to open up! It's not the only reason for Western insolvency, but cuts of the colossal sums many of these people are worth are not paid to the relatively high-taxing (in their minds) governments of Western nations of which they are nationals. They are rather stored in an international network of “paradises”, countries who exist for the sole reason of sheltering rich people's money from the 90% on earth who have none: Switzerland, Cayman Islands, Turks and Caicos, Aruba...So let's end this irony, surely one of the greatest on earth, and grab the icing on the cake that flows into these accounts: appearances and speaking engagements.

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