Gop Budget Taxes Her Sense Of Fairness

Judging the GOP budget by the simple premise “Thou Shalt Not Make Things Worse” (aka the First Rule Of Holes: “When In One, Stop Digging”), the budget flunks. Skipping gracefully over the entire spending side of said budget - and the blighted lives of children writ therein - let us examine only the tax side and, in particular, what this budget does to and for corporate taxation.

The finest investigative reporters in America are Donald Barlett and James Steele of The Philadelphia Inquirer; they have received three Pulitzer Prizes and are held in the highest esteem by their fellows. In 1994, Barlett and Steele produced a book, “America: Who Really Pays the Taxes?” which cuts through oceans of rhetoric and mountains of misleading information - much of it put out by “think tanks” funded by corporate special interests. This is a straight, tough, merciless look at how our tax code favors the rich, rips off the middle class and lets corporate America write its own tax bill - and all this before the Republicans took over Congress.

During the 1950s, which conservatives like to idealize as the Good Old Days, corporations paid 31 percent of the federal government’s general fund tax collections. And the sky did not fall, the economy did not shrink, and people were not laid off in droves. They now pay 15 percent. If corporations currently paid taxes at the same rate they did in the 1950s, the U.S. Treasury would collect an extra $250 billion a year, two and half times what they now pay. And there would be no federal deficit.

A simple tax rule from the book: “When corporations pay a smaller share of overall taxes, individuals must make up the difference.” In the 1950s, individuals paid 49 percent of total taxes; today they pay 73 percent. (Excise and other miscellaneous taxes make up the difference.)

To take just one of Barlett and Steele’s examples, in 1991-1992, Chase Manhattan Corp. reported before-tax income of $1.5 billion and paid $25 million in U.S. income tax, a rate of 1.7 percent. The official corporate rate in those years was 34 percent. By contrast, individuals and families with incomes between $13,000 and $15,000 paid a tax rate of 7.2 percent - four times what Chase Manhattan paid. Chase did pay $170 million in income taxes in other countries, or $145 million more than it paid in the United States.

The variety of tax rip-offs detailed by Barlett and Steele is enough to get any taxpayer’s blood boiling (I’m especially fond of the exemption for purchasing a race horse), but the larger issue here is not just tax fairness but economic wisdom. Unlike individuals, corporations pay taxes on total income after expenses. Once corporations get through deducting expenses (including the company Christmas party), many of them pay a rate of less than 0.1 percent; middle-income individuals pay a rate 100 times that. Corporate deductions have soared during the past few decades - for net operating loss deductions, enormous executive salaries and runaway interests payments.

“A part of the tax code for decades, the interest deductions once served a useful purpose,” write Barlett and Steele. “That was back in the years when corporations borrowed money to build and equip new plants, and thereby create middle-income jobs. But beginning in the 1980s, many corporations borrowed money to finance restructurings, takeovers or buyouts of other companies, leading to closed factories and the elimination of middle-income jobs.

“Running at $200 billion a year, the virtually unlimited deduction for interest on corporate debt has enabled companies to transfer an increasingly larger share of the income tax burden onto individuals.”

The Center on Budget and Policy Priorities reported last week that the wealthiest 1 percent of the population has as much after-tax income as the bottom 40 percent of the population and that the top 20 percent has as much income as the bottom 80 percent. The Republican tax plan aggravates an already gross disproportionate wealth situation by giving more tax breaks to the corporations and the wealthiest people. (See reports from the Congressional Budget Office, the Office of Management and Budget and the Treasury Department.) It also retains almost all corporate welfare programs, taxpayer-funded subsidies to corporations for marketing abroad and research, at a time of the highest corporate profits in 25 years. Very few of the $53 billion a year in corporate tax loopholes have been eliminated. However, $400 billion has been cut from social and welfare programs.

And do these goodies go to good corporate citizens? According to the Project on Government Oversight, since 1990 General Electric has engaged in fraudulent activity 16 times. During the same period, GE received $25 million in technology subsidies, cut its own research budget, made $4.7 billion in profits and cut 80,000 jobs.

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