Whatâs
Wrong Today:
Our tax
code is keeping $billions out of the US Treasury. In Corporate
Tax Dodges Hurt Everyone, the Wrongologist talked about a GAO report which showed that corporate tax breaks cost the
US government $181.4 billion in 2011 alone. As Bud Meyers points out, the tax code favors the wealthy and corporations:
almost 75,000 pages long — because loopholes are constantly being added
to favor the wealthy,
and occasionally (only after a public outcry) will Congress pass an amendment
to the tax code, making the tax code that much longer and even more
complicated.
Wealthy taxpayers
hire lots of tax attorneys. But the median wage in America is $27,000, so 50%
of us may only need to file the single page 1040EZ form which has about 100
pages associated with it. So in reality, there are two tax codes, one for the
average salaried wage earner and the other for the corporations and their 1%
owners and managers.
The
corporatists use Congress as pawns in their strategy for continuing war on the
middle and lower classes. And their weapon of choice is the tax code. Starting
with capital gains taxes in the Revenue Act of
1921,
the top 1% has received most of the tax breaks; and that’s because they have
the means and the connections to lobby members of Congress for special tax
provisions.
The top 1%
earns most of their wealth with investments in stocks. The top 10% holds about 80%
of all stock market wealth. Those who derive income from stocks pay capital gains
taxes on realized gains, as do CEOs who earn stock options as the majority of their
pay. After holding an option for a one year period, they pay a maximum of 23.8%
for federal taxes when they sell it, less than the top marginal rate of 39.6%for
regular wages. And capital gains income is not subject to any Social Security
taxes. In 1977, the capital gains tax rate was 40%. Changes in the tax law that
reduced the federal tax rate on capital gains income is by
far the largest contributor to rising income inequality in the United States.
Remember
that 48% of Congress —
257 to be exact, up seven from the previous year — have an estimated net worth
of more
than $1 million. They
invest in the same real estate and the same stock market (and pay the same capital
gains taxes), so they also benefit from the very same preferential tax laws
that they themselves write and pass —sort of like having the fox guarding the
henhouse.
To be
clear, corporations take more advantage of the tax code than do individuals. As
the Center for Economic and Policy Research has pointed out, the latest
Congressional Budget Office (CBO) report suggests strongly that in containing
projected long-run deficits, the US has a tax problem, not a spending problem:
under-appreciated part of this tax problem is the continued tax avoidance (and sometimes outright tax
evasion) by many US multinational corporations. The CBO assumes that corporate
tax revenues will average 2.2% between 2014 and 2023âbasically falling from 2.5%
of GDP in 2015 to 1.9% by 2023. After 2023, CBO assumes that corporate tax
revenues will remain at 1.9% of GDP, which is about what the average was
between 1973 and 2012.
But the
importance of corporate income tax revenues has steadily fallen since 1946. In
the 1950s, corporate income tax revenue was about 4.5% of GDP and the average
between 1946 and 1986 was 3.2% of GDP.
An interesting
poster boy for the tax loophole team is that quintessential team sport, the National
Football League. Although Roger Goodellâs salary
is $29.5 million per year, the NFL is a not-for-profit organization. A provision in the tax code says the NFL is just like the
Tea Party and the American Cancer Society, a not-for-profit organization. Here
is the enabling sentence: (emphasis by the Wrongologist)
of the Internal Revenue Code provides for the exemption of business leagues,
chambers of commerce, real estate boards, boards of trade and professional football
leagues, which are not organized for profit and no part of the net earnings
of which inures to the benefit of any private shareholder or individual.
From the Atlanticâs report, How the NFL Fleeces Taxpayers: While the Congress was debating Public Law
89-800 in 1966, which offers the NFL an anti-trust exemption, NFL lobbyists
tossed the sort of obscure provision that is the essence of the lobbyistâs art
into another law. The phrase âand professional football leaguesâ
was added to Section 501(c)(6) of 26 USC. So, in 1966, Congress gave the
NFL tax exempt status.
Recently
Tom Coburn (R-OK) introduced a bill called the PRO Sports Act, which would amend the tax code and would
revoke the 1966 exemption. Weâll see if anything comes of it.
Our
society works best if those who enjoy its benefits are also prepared to pay
their share of the costs. This chart shows that individuals have paid about the
same percentage of total federal revenues since the 1930âs, while corporationsâ
share has fallen dramatically:
These same corporations are leading the charge for austerity, to cut
social safety nets like Medicaid, Medicare and social security, while they
demand Congress lower corporate tax rates even further and add even more
loopholes.
And they are doing little to create more jobs for all of this trickle
down.
Right now politicians
claim they are for the middle class. They feel
our pain and empathize
while enacting policies and agendas by and for corporations. Congress says they
vote their conscience. But they vote only with their wallets.
They vote for lower corporate taxes.
