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As of last year, there were 73,608 pages of tax loopholes in theU.S. tax code, loopholes that most Americans in the middle-class (or poor)couldn't use to their own advantage when filling out a 1040-EZ form. The tax code isrigged for the wealthiest among us, and has been since the preferential capitalgains tax was first introduced backin 1921.
Over the past 40 years, for people who grew up and worked during this time,many of us have known that something was terribly wrong, but we weren't quitesure why; because no matter how hard we worked, we just couldn't seem to getahead.
Many of us have always thought it was a combination of high taxes, politicalcorruption and corporate greed. But because we were so busyworking and raising families (and trying to get ahead), most of us had justaccepted the status quo thinking, there was very little we could do tochange the system, except to vote. Phone calls and letters to congress, as wellas letters to the editor of the local newspapers, accomplished very little.
And while although we complained, it seemed as though our voices were neverheard. After decades, most of us still didn't fully understand, despite our bestefforts to find out, why rather than getting ahead, we were always falling behind.
It wasn't until 2008, since the Great Recession, when the massive layoffs putmillions of Americans out of work, did many of us begin searching for the answers.Movements such as Occupy Wall Street helped increase our awareness as the unemployedbegan using their collective idle time researching the cause our demise.
We discovered that wealth inequality, and the exceedingly wide gap in income disparityover the past 40 years, wasn't a mirage at all, but a deliberate decades-longeffort by domestic forces working against us, those who were once part of themiddle-class, but now find ourselves poor.
As for myself, no other resource better exemplifies this than the website Too MuchOnline | Inequality and Excess (from which I receive their weeklynewsletters). They provide us with a wealth of information --- using thelatest research, data and thoughtful insights ---- as to how staggering incomes andexcess wealth has exploded at the expense of the middle-class and poor.
Through the extrapolations of people such as the notable Paul Krugman, we'velearned that themiddle-class had peaked around 1973 --- that was 40 years ago when I, as anunskilled worker who had just dropped out of high school in my senior year, and because I belonged to a labor union, was earning $7.25 an hour while working ina sheet metal shop in Massachusetts. Today, that would have been equivalent to $36.95 an hourin today's dollars (Trythe inflation calculator here). 40 years later, $7.25 an hour is now thefederal minimum wage.
But why is there so much disagreement as to why this is happening, whenwe've already known the answers for the past 40 years...political corruption andcorporate greed, and too little taxes on the ultra-wealthy and thelargest corporations --- and not because we were necessarily over-taxed.It was also because of depressed wages that didn't keep pace with thecost-of-living (and/or inflation). That's what kept us from getting ahead.
It started a long time ago when the very wealthy amongst us gave bribescampaign donations to members of congress to write the tax laws that arethe most favorable to them. And when large corporations were allowed to bribelobby congress to write laws that were also very favorable for them. Eventhough we've known these things, and although most of us want change, congressrefuses to reform the election and campaign finance laws.
The ultra-wealthy (the top 1%) and congress (the top 2%) has had a wonderfulrelationship together and enjoy the status quo; and despite whatever the rest ofus think, congress refuses to make the changes we seek --- no matter whatpolitical party we vote into power (although, the Republicans have usually beenmore pro-business for the last 100 years).
Someone had commented on another articleI wrote about corporate taxes, saying "Businesses don't gain much from being incorporated in the United States, so they have little incentive to incorporate here."
Oh really? I have found the exact opposite to be true.
The Organization for Economic Cooperation and Development (OECD)estimates the United States (the richest country on earth), collectsless corporate taxes (relative to the overall economy) than almost any othercountry in the world.
Nobel-prize winning economist Paul Krugman rebuttedthe right-wing talking points that claim "the U.S. has the highestcorporate tax rate in the world" (which is currently 35%). Krugmanpoints out that "in the 1950s, incomes in the top bracket faced a marginaltax rate of 91%, while taxes on corporate profits were twice as large, relativeto national income."
Theright -wing blames a lack of education and growing entitlements (aka government debt)for holding back our economic growth; but the economy of the rich has been doingvery well. Not long ago the Dow Jones Industrial Average hit a 52-weekhigh of 14,058 and is on track to match its all-timehistorical high of 14,164 --- when almost four yearsago on March 9, 2009 it was down to only 6,547.
Just as Mitt Romney had said last year, "I'm not concerned about the very rich, they're doing just fine."
The middle-class economy grew and peaked between 1946 and 1973. It's THEOTHER ECONOMY that's been suffering since then --- the economy of themiddle-class and poor, which has been declining for the past 40 years. The economyof the rich has been doing "just fine".
And in arguing the other right-wing talking points, wouldn't low tax rates on the ultra-wealthy and largest corporations, in conjunction withstagnant and declining wages, contribute to lower tax revenues (as a share of the economy),and driving up our debt? Wouldn't a more fair tax code help us to stave of government debt?There was no deficit BEFORE the Bush tax cuts.
And doesn't low wages also contribute to the growing need for governmententitlements (aka government debt); and aren't "government entitlements"really just wagesubsidies, with the largest corporations (such as Walmart) being thegreatest beneficiaries?
And who is it that wants to cut funding for education, is it the Democrats?
But no matter which side of the argument you take, what difference does itreally make what the corporate tax rate actually is, whether it be 35% or 52%,when with all the tax loopholes, they're ultimately only obligated to pay 10% to20%? --- and sometimes they pay no taxes at all --- or they might even get a taxcredit! ("What part don't you understand?")
According to one report,Boeing paidless than nothing in taxes on its billions of dollars in profits over threeyears --- and General Electric received atax benefit of $3.2 billion. And Facebook is also getting a multi-billion-dollartax break. It seems as though the bigger they are and the more they earn,the less they have pay as a percentage of their profits in corporate taxes.
The NewYork Times reported, "Companies have been increasingly using a mazeof shelters, tax credits and subsidies to pay far less in corporate taxes."
Citizens for Tax Justice and the Institute on Taxation andEconomic Policy released a report: Corporate Taxpayers and Corporate Tax Dodgers,2008-2010” --- with a study that shows 280 of the most profitable U.S. corporationsshelter half their profits from taxes --- and naming 30 U.S. companies whopaid less than ZERO in taxes. (Full Reportas pdf)
The Wall Street Journal reported that U.S.corporations are hoarding a huge pile of cash --- well over $2 trillionaccording to federaldata, and the Federal Reserve figures don't even include thesubstantial amount of cash being held at many U.S. companies' foreignsubsidiaries, which would be subject to taxation if the companies repatriatedit.
And a separate Wall Street Journal study found,byusing numbersfrom the Congressional Budget Office, that with tax breaks, corporationsare paying an effective rate of 12.1%, the lowestin at least 40 years, while the nominal tax rate had been 35%. By contrast,all throughout the 1950s the corporate tax rate was 52%.
But what does it matter --- whether the corporate tax rate is 35%, 52%, or91% --- if with all the tax loopholes, the largest U.S. corporations are onlylegally obligated to pay 12%...and sometimes pay no taxes at all?
And who benefited the greatest from our lop-sided tax code.? The Congressional Research Service found that the Bush tax cuts primarily benefited the rich, and werethe primary driver of the growth in income inequality over the past decade, whencapital gains and dividends were taxed at 15% (and now, only 20%). "Since rich people have the majority of the investment income, they get the majority of the tax break,"said Clint Stretch, managing principal for federal tax policy at DeloitteTax.
As an aside: The Revenue Act of 1862 was passed by Congress to help fund the Civil War.The War Revenue Act of 1917 was passed to fund WWI. The crisis of World War II led Congress to pass four excess profits taxes between 1940 and 1943. The Korean War induced Congress to re-impose the excess profitstax from 1950 to 1953. Various taxes were raised in 1969 because of Vietnam. Butno additional revenue was ever raised during the Bush years to fund the wars in Iraqand Afghanistan. Instead of raising taxes, taxes were cut.
In a reportby TooMuchOnline, we learned that the IRS revealed 400 Americans (who maybe or may not be on the Forbes Fortune 400 list) reported that they had at least $110 million in income on their2008 federal income taxreturns, but averaged $270.5 million each.
In the study "Executive Excess 2011 - The Massive CEO Rewards for TaxDodging",we learned that 25 major U.S. corporations paid their CEOs more money than they paid in corporatetaxes. And on average, American CEOs took home 325 times more in pay than their averageemployees.
In 1953 GM’spresident, “Engine Charlie” E. Wilson, took home $586,100 a year whenthe minimum wage was $0.75 an hour. Between the 1940s and 1970s CEOs only receivedgradual and modest increases in the pay. Since then, with stock options and"incentive payments", their salaries have skyrocketed. (Study: Historicaltrends of executive compensation from 1936 to 2003 (pdf)
Now the AFL-CIO reportsthat the average CEO pay of companies in the S&P 500 Index is justunder $13 million a year, and they will pay a 20% capital gains tax rateon their stock options, a lower tax rate than Warren Buffett's secretary. Peoplelike Mitt Romney averages$20 million a year and sometimes is only legally required to pay a 13% taxrate. (Remember, congress write the tax laws, but sometimes go on TV to complainabout these tax loopholes.)
While people are collecting a weekly unemployment checkof $300 they are still obligated to pay federal income taxes, when peoplelike Mitt Romney, who are worth over $250 million, can take a $77,000tax deduction for a horse.
Mitt and Ann Romney can also leave their children aninheritance totaling $10 million tax free, but a waitress who is workingat a diner on Interstate 40 in Oklahoma (and only earning only $27,000 ayear) is taxed on all her tips.
According to their latest figures, the Social Security Administration reportsthat 50% of U.S. workers earn $26,965 or less a year. In his State of Union AddressPresident Obama said he'd like congress to slowly raise the minimum wage to $9.00 an hour by2015 (that equates to only $18,720 a year.) But if the minimum wage were to keeppace with inflation, by 2015 that $9.00 should already be at $10.56.
If corporations refuse to pay better wages (which would also increase federalincome tax revenues to the Treasury), then our only recourse would be in theform of a "claw back" --- by extracting more by way of corporatetaxes.
We can accomplish this by NOT raising corporate tax rates at all(keeping the current 35% statutory rate), but just by eliminating all the taxloopholes that congress has endowed them with over the past 40 years.
And despite what some on the right might claim, any additional tax revenuesfrom the corporations willnot be passed on to the consumers in the form of higher prices.
The top 1% likes to refer to the money they put in THEIR pockets as"investment income" (aka capital gains), money they earn ontheir company stocks --- as opposed to the money you put in YOUR pockets,the money they pay you as "hourly wages" by working in their fast-foodjoints, warehouses, big-box stores and factories.
Capital gains ("investment income") hasn't been taxed as ordinaryincome for over 90 years; and corporate tax revenues (as a share of their corporateprofits) have continually gone down for the past 50 years. But will members of congress ever reform the tax code?
The answer to that question is best answered with another question, "Whenwas the last time congress has ever reformed the tax code to better address thisinequality in income?"
***For more, read TheSecond Gilded Age: History Repeats Itself
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