Mission is to promote compassion and creativity in our society. The john d. And catherine t. Macarthur foundation, committed to building a more just, verdant and peaceful world. More information at macfound. Org. Park foundation, dedicated to heightening Public Awareness of critical issues. The kohlberg foundation. Barbara g. Fleischman. And by our sole corporate sponsor, mutual of america, designing customized individual and Group Retirement products. Thats why were your retirement company. Welcome. Heres something to make you really, really mad. Our countrys infrastructure is crumbling. Potholes are becoming sinkholes, axlekillers, tirebusters. Our cities struggle to pay for services. The powersthatbe in bankrupt detroit even cut off the water to some residents. Schools and libraries are closing. Public parks decay. And the war party in washington clamors for billions of dollars more for foreign interventions bombs, rockets, drones, even troops. 20 million americans who would like a fulltime job still cant get one, yet corporations are sitting on more than 2 trillion in cash while revenue from Corporate Income taxes are down from 40 in 1943 to just below 10 in 2012. All this as some of the largest and richest corporations are now resorting to legal hankypanky that allows them to renounce their citizenship, meaning they can pretend to be headquartered abroad and make big profits on which they pay little or no u. S. Taxes. Heres what president obama said recently about that practice, known as inversion. Now, heres the problem is this loophole theyre using in our tax laws is actually legal. Its so simple and so lucrative, one corporate attorney said its almost like the holy grail of tax avoidance schemes. My attitude is i dont care if its legal, its wrong. Now look at this recent headline in the New York Times. Reluctantly, patriot flees homeland for greener tax pastures. Its about a u. S. Generic drug Company Incorporating in the netherlands. Reluctantly, my eye. Skipping out on america means more profits for the company and bigger bonuses for the ceo. Taxdodging is big business, which has one of our worlds most noted economists plenty angry Nobel LaureateJoseph Stiglitz. Hes president of the International Economic association and served as chairman of the White House Council of economic advisers back in the 90s. His bestselling books have shaped worldwide debate. And now hes written one of his shortest but most important works hes done, a 27page white paper for the Roosevelt Institute laying out a taxreform plan to hold corporations accountable, create jobs, and boost the economy. Joseph stiglitz, welcome. Nice to be here. You argue that elimination of corporate welfare, or at least its reduction, should be at the center of tax reform. Why . I want to put it in a broader context. Our country needs, faces a lot of challenges. We, as you mentioned, 20 million americans would like a fulltime job and cant get one. We have growing inequality. We have environmental problems that threaten the future of our planet. I think we can use our tax system to create a better society, to be an expression of our true values. But if people dont think that their tax system is fair, theyre not going to want to contribute. Its going to be difficult to get them to pay. And, unfortunately, right now, our tax system is neither fair nor efficient. Look at the tax rate paid by that one percent. Its much lower than the tax rate paid by somebody whose income is lower who works hard for a living, as a percentage of their income. You know, warren buffet put it very, you know, why should he pay a lower tax rate on his reported income than his secretary . And the interesting thing that he didnt emphasize was most of his income is in the form of unrealized Capital Gains. Unrealized Capital Gains are not taxed as long as the owner keeps them, right, doesnt get rid of them . Thats right. And its even worse if youre a corporation and you even realize the Capital Gains but youre abroad, you dont bring the money back home, theres still no taxes. As long as they dont bring the money back here, it accumulates. It grows and grows and grows, and they get wealthier. But its even worse than that. Because it means that they have an incentive to keep their money abroad. And what does that mean . They have an incentive to create jobs abroad. And with our trade agreements, they can take the goods that are produced abroad with this taxfree money, bring it back in the United States, basically making it unfair competition with the goods produced by americans. Yeah. There are several startling statements in your report. This is one of them. Our current tax system encourages multinationals to invest abroad, and create jobs abroad, as you just said. And yet, these are people who defend their practices by saying, we are the job creators, were the job producers. And yet, you say they have an incentive to send jobs abroad. The whole discussion of who are the job creators, i think, has been misplaced. You know, what really creates jobs is demand. I spend my money to buy things. Exactly. Americans of all income groups are entrepreneurial. You got people across our Income Distribution who, when theres a demand, respond to that demand. But if theres no demand, there wont be jobs. Now, the problem is that the people in the 1 have so much money that they cant spend it all. The people at the bottom are spending all of their income and hardly getting by. In fact, a very large fraction of those in the bottom 80 are spending more than their income. And its part of the instability of our economy. So, the point is this inequality contribute to which our tax system contributes, actually weakens our demand. And thats one of the main messages of my report, which is if we had a more progressive tax system, we could get a more efficient economy. Because there would be more jobs being created. So, these 20 Million People i referred to, and you referred to in your report, who are looking for fulltime work but cant find it, if they had that work, theyd be spending their money. Theyre not going to send it to the Cayman Islands, right. Exactly. And theyre going to be paying taxes. Because they dont have the opportunities for tax avoidance that the people who have the Cayman Islands and can use these unlimited i. R. A. S and other ways of tax avoidance. You know, they dont keep the money in the Cayman Islands because the sunshine makes the money grow better. Dark money, money in the shadows, money now going into our political process, as you know so well, to reinforce this tax code. Thats right. Reinforce the tax code, which has led america to be the country with the highest level of inequality of any of the advanced countries. Give us a working definition for the laity of corporate welfare. Well, this was an idea that i began talking about when i was serving as chairman of the council of economic advisers. 20 years ago. 20 years ago. And everybody was talking about how much money you were giving to the poor people. It wasnt if you actually looked at the amount of money, it wasnt that much. But we said, well, youre also giving away a lot of money to rich corporations, directly and indirectly. Most of the indirect way is through the tax system. So, for instance, if you give special tax provisions for oil companies, so they dont pay the full share of taxes that they ought to be paying, thats a welfare benefit. Lots of other provisions in our hidden in our tax code basically help one industry or another, that cant be justified in any economic terms. And, so, thats where we coined the term corporate welfare. Its caught on. And because it says its a subsidy, but not a subsidy, help going to a poor person, which is where welfare ought to be going, but going to the richest americans, going to our rich corporations. So, we have a tax code that encourages companies to send their profits abroad, to send jobs abroad, and to reward owners of their Company Whose money may not come back to the United States . It doesnt make any sense, you might say. And the fact it doesnt, you know, one of the reasons i wrote the paper was, you know, theres a lot discussion going on about we have a budget deficit. And we have to slash this, and slash that, and cut back education, and cut back research, things that will make our economy stronger, cut back infrastructure. And i think thats counterproductive. Its weakening our economy. But the point i make in this paper is it would be easy for us to raise the requisite revenue. This is not a problem. This is not as if its going to oppress our economy. We could actually raise the money and make our economy stronger. For instance, were talking about the taxation of capital. If we just tax capital in the same way we tax ordinary americans, people who work for a job, who pay taxes we pay on wages. If we eliminate the special provisions of Capital Gains, if we eliminated the special provisions for dividends we could get, over the next ten years, over, you know, approximately 2 trillion. And those are numbers according to the cbo. And so, were talking about lots of money. The figures make sense to me. But the politics doesnt. Because these are the people, once again, who dominate our system with their contributions to the politicians who then have no interest in changing a system that rewards their donors. We have this vicious cycle where economic inequality gets translated into political inequality. It gets translated into rules of the game that lead to more economic inequality, and which allow that economic inequality to get translated into evermore political inequality. So, my view, you know, the only way were going to break into this viscous cycle is if people come to understand that there is an alternative system out here. That there is an alternative way of raising taxes, that we are not really faced with a budget crisis. Its a manmade crisis. You know, when we had the government shutdown, we realized that that was a political crisis. That wasnt an economic crisis. And the same thing about our budget crisis, you know. Its not that we couldnt raise the revenues in a way which actually could make our economy stronger. We can. If we just had a fair tax system, to tax capital at the same rate that we tax ordinary individuals, if we just made those people in that upper 1 pay their fair share of the taxes. They got 22. 5 of the income, well, lets make sure that they pay a commensurate part of our income tax. If we had taxes that would be designed to improve our environment. If we you mean by taxing pollution . Taxing pollution. Carbon emissions. A general principle that weve known for a long time, a lot better to tax bad things than good things. Rather than tax people who work, lets shift some of that burden into things that are bad, like pollution. You make it sound so easy. And im still hung up on your saying, you know, it would be easy to do these things. And yet, if they were easy, why havent we done them . Well, thats the politics. The fact is that we have a political process that i wont say is broken, but is certainly not functioning the way we think a democracy is supposed to function, you know. In democracy, supposed to be one person, one vote. And theres a welldeveloped theory about what does that imply for the outcome of a political process . We talk about it, called the median voter. It should reflect the middle, you know. Some people want more spending. Some people want less spending. Some people, you know, so the nature of democracy is compromise. And its supposed to be compromise sort of in the middle. But thats not we have today in the United States. We have a tax system that reflects not the interest of the middle. We have a tax system that reflects the interest of the 1 . Let me cite some examples of the biggest tax dodgers. These come from the organization, americans for tax fairness. Citigroup had 42. 6 billion in profits offshore in 2012 on which it paid no u. S. Taxes. Exxon mobil had 43 billion in profits offshore in 2012 on which it paid no u. S. Taxes. General electric made 88 billion from 2002 to 2012 and paid just 2. 4 in taxes for a tax subsidy of 29 billion. I could go on. Pfizer, honeywell, verizon, fedex, apple. What goes through your mind when you hear these figures . Well, so many things go through my mind. But, you know, one of the things is how unfair this is, and how angry americans ought to be about this. I also think of the ethics of the question. If i were a ceo, take of a company like apple, use the ingenuity of america, based on the internet. Internet was created, in large measure, by government right. By government spending. Theyre willing to take but not to give back. So, theres really a whole set of problems that concern it, ethics, equity, fairness, resource allocations. What they dont seem to understand is our society cant function if these large corporations dont make their fair share of contributions. Arent they likely to say, though, in response, well we do this because the law permits it. This is what the system incentivizes. Well, the law does permit it. They use their lobbyists to make sure that the law gives them the scope to avoid taxes. So, this argument, oh, were only doing what the law allows, is disingenuous. The fact is they created, their lobbyists, their lobbying helped create this law that allows them to escape taxes, pushing the burden of taxation on ordinary americans. So, thats the big impact on people, right. They somebody has to make up the difference between somebody has to make up the difference. I mime, we cant survive as a Society Without roads, infrastructure, education, police, firemen. Somebodys going to have to pay these costs. Summarizing what you say in here about your proposal, raise the Corporate Tax rate, but provide generous tax credits for corporations that invest in the u. S. And create jobs here. Eliminate the loopholes that distort the economy, increase taxes on corporations, the profits of which are associated with externalities such as pollution, reduce the bias toward leverage by making Dividend Payments tax deductible, but imposing a withholding tax. I mean, these seem so commonsensical that a journalist can understand them. But they dont get into the debate. Yeah, well, i hope this paper will help move that along. You notice when you were listing them that these are very much based on incentives. As i said your plan is based on incentives . On incentives that weve created a tax system that has an incentive to move jobs abroad. And what i want to do is create a tax system that has incentives to create jobs. And if you tell a corporation, look it, if you dont create jobs, youre taking out of our system, youre not putting anything back, youre going to pay a high tax. But if you put back into our system by investing, then you can get your tax rate down. That seems to me, common sense, particularly in a time like today, when 20 million americans need a job. When we have so much inequality and this unemployment is contributing to that inequality. You know, in this, the first three years of the socalled recovery, between 2009 and 2012, 95 of all the gains went to the upper 1 . So, the American Workers are not participating. And the reason theyre not participating is theres just not enough job creation here at home. And, so, this is a way of trying to incentivize all these corporations who are sitting on all this money abroad to start using some of their huge resources, some of all those benefits that weve given them, for the benefit of the american people. You move in circles where you come into contact with the ceos of these companies, many of whom are deficit hawks, you know. They keep theyre on committees. They keep testifying in washington. They call for deficit reduction. What do they say when you make this argument to them face to face, as youre making it to me . Most of them are not economists. And most of them are concerned with their corporations own bottom line and with their own salary. So, weve created a corporate system in the United States where the ceos pay is related to the shareholder value. The shareholder value is related to how little taxes they pay. Because if they can get the taxes down, profits look high and people will pay more for their shares. So, when theyre making an argument for, lets lower the Corporate Income tax, lets lower taxes that i have to pay, lets expand corporate loopholes, they dont use those words. But what theyre really saying is, pay me more, because if i succeed in Getting Congress to do that, my pay goes up, not because ive worked harder. You might say, lobbying is hard work and taking congressmen out to dinner is hard work, and, you know, doing all those other things you have to do to get congress to do what you want them to do, thats hard work. But its not because ive really made the company more profitable in a fundamental sense. I havent invented something new. I havent made my customers happier. Ive made my company more valuable by succeeding in getting provisions that allow my company to avoid taxes. And then, my shareholder value goes up, my salary goes up. And you argue that the proposals you make in here for ending these loopholes, for ending tax avoidance, would actually create a more efficient economy than we are getting because of the tax avoidance that sends the money and the jobs abroad. How would ending corporate welfare benefit the economy here . Well, let me just give you one example that we were talking about before. Right now, we have a special tax provisions for Capital Gains. If we had had less encouragement to so much financial transactions, you know, the highfrequency trade, all those kind of things that dont create any value for our society. But we subsidize them implicitly by the advantages that the tax system gives. So if we had a tax system that discouraged some of this kind of excessive financial activity, if we actually taxed not only environmental pollution but the kinds of other activities that dont contribute to our society. We would divert more of our resources, scarce resources, more of our talents, to the kind of entrepreneurial activities, innovative activities, that americans have, and into activities that would create jobs. And that would make our economy more competitive, globally. And that would create a stronger economy here at home. My conversation with Joseph Stiglitz will continue next week. Corporations and their ceos arent the only ones raking in profits by wiggling through a tax loophole and faking an overseas address. Heres a column by Andrew Ross Sorkin in the New York Times headlined banks cash in on inversion deals intended to elude taxes. Inversion, remember, is the word for the technique corporations use to renounce their citizenship. And sorkin reports that wall street banks, the very Financial Institutions saved by taxpayer bailout billions when the markets crashed in 2008, are making a mint, nearly a billion dollars, advising corporate clients to take advantage of the inversion rules and dodge their tax responsibilities here in america. At the head of the pack, Jpmorgan Chase and goldman sachs. Heres jamie dimon, chief executive of Jpmorgan Chase, quote, you want the choice to be able to go to walmart to get the lowest prices, he told reporters. Companies should be able to make that choice as well. And then he said this, im just as patriotic as anyone. Sorry, mr. Dimon, its not patriotism, its a travesty, the corporate equivalent of moral treason. And all the rest of us have to pay for it. Theres more from Joseph Stiglitz on our next edition of moyers company. We already have a tax system that has contributed to making america the most Unequal Society of the advanced countries. That doesnt have to be. We can have a tax system that can help create a fairer society, only ask the people at the top to pay their fair share. And take a look at our website, billmoyers. Com. Ill see you there and ill see you here, next time. Dont wait a week to get more moyers. Visit billmoyers. Com for more essays and video features. Announcer funding is provided by anne gumowitz, encouraging the renewal of democracy. Carnegie corporation of new york, supporting innovations in education, democratic engagement and the advancement of International Peace and security at carnegie. Org. The ford foundation, working with visionaries on the front lines of social change worldwide. The herb alpert foundation, supporting organizations Whose Mission is to promote compassion and creativity in our society. The john d. And catherine t. Macarthur foundation, committed to building a more just, verdant and peaceful world. More information at macfound. Org. Barbara g. Fleischman. And by our sole corporate sponsor, mutual of america, designing customized individual and Group Retirement products. Thats why were your retirement company. Up next, a special edition of kqed newsroom making a bet on rehabilitation for prisoners serving life sentences. I committed first degree murder back in 1982. California has some 26,000 lifers behind bars. Now more, many more, are being paroled due to changes in the criminal justice system. Do they pose a risk to Public Safety . In my humble opinion, some of these parolees are ticking timebombs. Will rehabilitation work . A strong Public Safety interest in making sure theyre prepared when they do get released