Wednesday, May 6, 2009

Put credit practices into the recycle bin

Americans who faithfully pay taxes and meet credit card payments with usurious interest rates should rejoice in President Obama's double demand for fairness from U.S. corporations.

First up, and passed by the House, is legislation to freeze, then roll back, credit card interest rates and fees. Banks have been prodigious in flooding the mail with unsolicited cards, especially targeting young people and students with enticing offers of no payments for a few months and initial low interest rates.

Shopping sprees have led to unwieldy monthly payments and insidious "fees" for late payments that compound balances and lead to bankruptcy for so many.

Bankers can hardly plead that more reasonable credit card rates would impoverish them. Industry reports have Chase earning $780 million in credit card profits in 2008; Bank of America, $520 million; American Express, $850 million; Capital One, $1 billion; and so it goes. Some also have received stimulus bailout funds because of losses on their other ledgers.

The president also wants to end perhaps the most shameless of corporate America's schemes, created by an accommodating Congress—foreign tax havens where corporate subsidiaries are established only on paper to avoid U.S. tax laws.

In the Caribbean's British Cayman Islands, 18,857 such corporate entities have been established in mailboxes in a single five-story building. Among them are 24 of the largest 100 U.S. government contractors paid by U.S. taxpayers.

Scattered around the world are other island nations and midget kingdoms that provide U.S. companies ways of evading the 35 percent corporate tax.

Among them are Wall Street giant Morgan Stanley, which set up 273 subsidiaries; Bank of America, 115 subsidiaries; and Citigroup, 427 subsidiaries.

In a 2004 study, J.P. Morgan Chase & Co. estimated that $650 billion of profit earned overseas by U.S. companies for decades had never been taxed.

The congressionally engineered generosity has encouraged U.S. companies to move jobs overseas in search of cheaper labor at the expense of American workers and picayune local taxes, and to skim off huge bonuses for senior corporate executives from added profits.

Meanwhile, middle-income wage earners pay their 25 percent income tax rate because laws don't allow them to claim a post office box in the Cayman Islands as their source of earnings.

Members of Congress who claim President Obama is punishing business by asking for tax fairness are as hostile to U.S. taxpayers as their patrons in finance who want to dodge tax responsibilities.

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