Saturday, March 12, 2011

Food for action

I got these links from cartoonist Mike Thompson, who starts out like this:
Some interesting items to consider during the coming months as Republicans in Congress and in Michigan tell you that there simply isn’t enough money in the public coffers and so we must cut money for a tsunami warning center, slash funding for the government program that offers nutrition assistance to the poor, squeeze public employee unions and slash funding to your child’s school...

He's right. These are interesting items - so interesting that I thought I'd comment on each of them.

First, there's this examination at of Michael Moore's seemingly wild claim that, "Right now, this afternoon, just 400 Americans -- 400 -- have more wealth than half of all Americans combined."

Guess what? That's true. The wealthiest 400 Americans have more combined wealth than 155 million of the rest of us.

Imagine that. And these are the people to whom Republicans keep giving tax cuts. These are the people for whom Republican keep working to cut estate taxes, so that we can have a permanent aristocracy of wealth in this country. These are the people who can't pay just a little more in taxes at a time when everyone is screaming about how broke we are (mostly because we gave them tax breaks in the first place).

In fact, they just got another big tax cut, thanks to the GOP. Think about it. Why couldn't we have used that money to pay down the deficit, if we really thought that deficit-reduction was important? But what's really important to these people, and therefore to their purchased politicians, is their never-ending tax cuts.

OK, that's pretty shocking, but how about this, from Robert Reich's blog? (Reich served as Secretary of Labor under Bill Clinton.)
Last year, America’s top thirteen hedge-fund managers earned an average of $1 billion each. One of them took home $5 billion. Much of their income is taxed as capital gains – at 15 percent – due to a tax loophole that Republican members of Congress have steadfastly guarded.

If the earnings of those thirteen hedge-fund managers were taxed as ordinary income, the revenues generated would pay the salaries and benefits of 300,000 teachers. Who is more valuable to our society – thirteen hedge-fund managers or 300,000 teachers? Let’s make the question even simpler. Who is more valuable: One hedge fund manager or one teacher?

So think about that, why don't you? This guy made $5 billion last year, and he probably paid a lower tax rate than you do. That's not a measly $5 million a year, which I'm sure you'll agree (with Fox "News") is barely over the poverty limit, but a thousand times that much.

But we can't tax him as much as we tax you. (And, according to the GOP, his heirs should inherit all that money tax-free.)

It's bad enough that we've lowered the capital gains tax so much, since it's overwhelmingly the rich who make significant capital gains. If you get a paycheck, you pay ordinary income taxes on it. But you pay far less if you're wealthy enough to own stock.

(I should admit here that I live on investment income, myself, and so I benefit personally from lower tax rates on capital gains. But I still don't think it's right.)

Yes, that's bad enough. But what's really disgusting about this is that hedge fund managers shouldn't get this kind of tax break, not really. There's a loophole in the tax code written just for them. Well, we wouldn't want to tax these poor billionaires, would we? Making them pay as much as the rest of us would just be "class warfare."

So what about corporate taxes? Republicans are always claiming that they're too high (anything that benefits the wealthy is a concern to the GOP). And now that corporations are just people, too - according to our loony right-wing Supreme Court - we want to treat them right, don't we? Otherwise, how could they afford to buy all those politicians?

Well, here's Thompson's final link, to a report from The Center on Budget and Policy Priorities:
Corporate tax revenues are now at historical lows as a share of the economy, at a time when the nation faces deficits and debt that are expected to grow to unsustainable levels. Although the top statutory corporate tax rate is high, the average tax rate — that is, the share of profits that companies actually pay in taxes — is substantially lower because of the tax code’s many preferences (deductions, credits and other write-offs that corporations can take to reduce their taxes). Moreover, when measured as a share of the economy, U.S. corporate tax receipts are actually low compared to other developed countries. ...

During the 1950s, federal corporate tax revenue averaged 4.7 percent of the gross domestic product (GDP). But by the most recent decade (2000-2009), corporate taxes had fallen to just 1.9 percent of GDP (see Figure 1). As a result of this trend and other policy changes, the corporate tax now contributes considerably less to federal revenues than it once did: between 2000 and 2009, 10.7 percent of federal revenues were collected through the corporate tax, down from 29.8 percent of revenues in the 1950s.

In recent decades, and especially since the start of the 1980s, corporate profits have increased as a share of GDP — but corporate revenues have not followed suit. The non-partisan Congressional Research Service (CRS) recently summarized the upshot of this trend: “Despite concerns expressed about the size of the corporate tax rate, current corporate taxes are extremely low by historical standards, whether measured as a share of output [i.e., GDP] or based on the effective tax rate on income.”

Between 2000 and 2005, the share of corporate operating surplus that U.S. corporations pay in taxes — a proxy for the average tax rate — was the second lowest among the studied G7 leading industrialized nations and nearly 3 percentage points below the average of member nations in the Organisation for Economic Co-operation and Development (OECD), according to a 2007 Treasury Department report...

(For sources, and other good information, check out the report itself. In fact, all of these links are work checking out directly. I'm just trying to summarize, since it's hard to find the time to read everything online.)

The top statutory corporate tax rate is relatively high. But that doesn't tell you anything by itself, since there are so many loopholes and exemptions in our tax code. You really have to look at what corporations actually pay.

And that brings up another issue:
This reduces economic efficiency by creating an unlevel playing field for different forms of investment, which encourages firms to invest in areas that would not have merited such investments in the absence of the tax breaks.  In fact, there is a strong case for tax policy changes that raise revenue and reduce the deficit even as they lower the statutory tax rate, increase economic efficiency, and boost competitiveness.

This kind of tax code is horribly inefficient. What we see are corporations playing political games in order to get subsidies and tax breaks. That's inefficient, it's unfair, it almost guarantees corruption in our political process, and it keeps us from being as competitive globally.

As this report suggests, we might indeed be better off lowering statutory corporate tax rates, but only if we get rid of all those loopholes (which are determined more by political power than merit).

Still, corporate taxes in general aren't too high. In fact, at a time of record-breaking deficits, when we're constantly told we're too broke to afford good schools or efficient infrastructure, I'd say it's pretty clear that corporate taxes are too low. And so are taxes in general, especially those for the wealthiest of Americans.

That's not "class warfare." It's just common sense.

PS. My thanks to cartoonist Mike Thompson for the above links. They are indeed food for thought and action.

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