Liberals need to learn the ways and thought patterns of right wingers. They have quite apparently put in a great deal of time learning about us. Notice how deftly they can carve the working class up, separating the religious from the intellectual, the employed from the jobless, the men from the women, the homosexual from the straight and of course and as always, the black and brown from the white. In my state of Minnesota, for instance, the growing amount of right wingers in state government win the argument about tax increases on the wealthy with depressing regularity by the simple ruse of bringing up the S corporation.
Many fast growing, job creating small businesses, they say, are organized in this simple closely held corporate form, and we must not tax them because it will slow down their job creation. Well, as is very slowly becoming apparent, the whole job creator argument is bogus upon its face. Businesses from sole proprietorships to corporations in all their forms, hire when they have customers, no matter what their tax burden is. But in the legislature here, the Republicans are able to strike the Democrats dumb just by bringing up the S corporation, as if it were some kind of holy grail. Come on folks. Lets grow up. We are supposed to be the articulate ones. Are we scared of a word?
Our small meats business is organized as an S corporation. Here is the deal. That form of corporate structure should be immune to the tax debate, because it pays no income taxes. All profits in an S corporation go directly and by a strict formula for division among the owners, if more than one person, to the owners Schedule 1040. The taxes are paid there. This means that any and all business expenses, from labor hired to supplies bought, to inventory increased, serve to decrease the amount that is charged to the owners 1040. Tax liability on the 1040 will encourage the owner to make sure the corporation is well invested in before each year end. The real argument about S corporations is exactly the reverse of the one the Republicans are making and the Democrats are too dumb or lazy to catch it. We wont take the time to study it.
The current national debate over drilling for more oil is a similar situation. There the confusion and the opportunity for the drillers rest on a lack of understanding of the word fungible. Suppose I go to my field this spring to plant corn. Suppose my meats business has failed, meaning that I no longer have to worry about what the customers might think of how the pigs are fed. So I have semi-retired to crops farming. I plant the corn in the easiest way, by buying the new biotech seeds and using the Roundup herbicide and a pile of fertilizer to produce the crop. When I take it to the elevator in the fall, there is nothing at all to distinguish it from every other load of corn being brought in. Each kernel of it is essentially the same as each kernel of everyone elses corn and it joins the mountain of corn being sold all across the Midwest each fall. The price I receive is the standard price. It varies only by my corns distance from the imagined center of world corn production, which is the Chicago Board of Trade. The corn is fungible. One bushel of it is pretty much equivalent to every other bushel.
The right wingers avoid talking about this in regard to oil. They want the electorate believing that if their cronies are allowed to drill at will, producing a bit of additional oil, the price for us Americans at the pump will go down. This is nonsense. Extra North American oil will impact the world price of oil. It is doubtful that it would be enough to push that price down. The only way to make the oil found and produced here impact the American pump price is to make it special, i.e., not fungible. The only way I know to do this is as Norway does, that is, for the nation to take an ownership interest in the oil resource. I will never live long enough to see that happen in the US. So the entire argument about oil drilling is based on an illusion, which keeps winning the day, because the party of the working people is afraid to speak up. Or is it too ignorant to know that oil is fungible and the oil industry means to keep it that way? Whatever the case, the Democrats cannot begin to win any of these battles about business and finance until they pick up a few tools and learn the use of them.
Jim Van Der Pol farms near Kerkhoven, Minn. A collection of his columns, Conversations with the Land, was published by No Bull Press (nobullpressonline.com).
From The Progressive Populist, June 1, 2012
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