The Republican members of Congress evidently love taking hostages… Debt Limits, Budgets, and any other victim conveniently available. Their litany is perfectly predictable: We’ll vote for __________ if YOU will privatize Medicare, privatize Social Security, cut spending for social safety net programs, give us everything we want in defense spending even if the Department of Defense doesn’t want it, criminalize abortion and birth control, and most importantly — if we can repeal the Affordable Care Act and Patients’ Bill of Rights.
However, there’s a bit more on their wish list. While not as headline grabbing and eye-catching as their well publicized items mentioned above, the Party has talked about “tax reform” in high generalized terms and has concentrated on sound bites, slogans, and simplistic gimmicks.
Underneath their concern for taxpaying Americans lies a commitment to insure that some Americans are not-quite-so-tax-paying.
Exhibit A As of April 15, 2013 the core of the Republican Party was sitting on a lovely pile of corporate tax breaks:
“The annual cost of corporate tax breaks, including one that eases shifting profits offshore and out of the U.S. taxman’s reach, has more than doubled to $180 billion since 1987, according to a report released on Monday.” [Reuters] (emphasis added)
About 25% of this total comes from corporate tax deferral, “the potential indefinite postponement of U.S. taxes on profits held offshore,” [Reuters] So, that’s approximately $45 billion per year uncollected by the Internal Revenue Service because corporations have figured out marvelous ways to keep their profits offshore, and their corporate welfare programs domestic.
The March 18, 2013 GAO Report was more specific:
“Corporate tax expenditures span a majority of federal mission areas, but their relative size differs across budget functions. The 80 corporate tax expenditures had estimated revenue losses in 12 of the 18 budget functions in 2011. Of the $181 billion in estimated corporate tax revenue losses, 81 percent was concentrated in the international affairs and housing and commerce budget functions, exceeding federal outlays in those budget functions.”
We can drill down even further:
“The 24 tax expenditures used only by corporations in 2011 provide support intended to encourage certain activities, such as energy production, or provide support for certain entity types, such as credit unions. A corporate tax expenditure may have multiple purposes: one narrowly focused on a specific activity or entity as well as broader or additional purposes pursuing national priorities or other activities. For example, 7 of the 24 corporate-only tax expenditures are aimed at encouraging or supporting specific energy sources and technologies, and these tax expenditures may also have broader national purposes such as promoting domestic energy production and energy security. In examining their narrowly focused reported purposes, one-third of the 24 corporate-only tax expenditures appear to share a similar purpose with at least one federal spending program.” [GAO] (emphasis added)
It was probably unnecessary to underline the “energy” references in the report.
Exhibit B Speaking of the energy business… The energy giants have leases on some 40 million acres on on-shore land, and another 40 million + acres in off-shore drilling leases. [NewYorker] Nowhere is this process more evident than in western states with lots of BLM managed land. [DenverPost] This is all supposed to be acceptable because the oil companies are supposed to be paying the landowners, or the federal government in the case of public lands, for these leases. But wait… can we say “underpayment?” A Pro Publica report in August 2013 found that not only were the energy companies deliberately underpaying the federal government, they were also finding multiple and creative ways to underpay royalties due to private land owners.
The GAO had a bit to say on this subject as well, and reported on December 6, 2013:
“In fiscal year 2012, companies received over $66 billion from the sale of oil and gas produced from federal lands and waters, and they paid $10 billion to the federal government for developing these resources according to the Department of the Interior. The federal government seeks a fair return on its share of revenue from leasing and production activities on federal lands and waters through the federal oil and gas fiscal system. Under the fiscal system, companies pay royalties, rents, and other payments–payments generally specified in lease terms– and taxes on profits from the sale of oil and gas produced from federal leases. In May 2007, GAO found, based on several studies, that the government received one of the lowest percentages of value of oil and gas produced in the world. In September 2008, GAO found that Interior had not evaluated the federal oil and gas fiscal system for over 25 years and recommended that a periodic assessment was needed.”
The Department of the Interior recently initiated a contract for the assessment work necessary to determine if the U.S. taxpayers are, in fact, getting a “fair rate of return.” That’s the good news. The bad news is that this will be the first such assessment in the last 25 years.
Exhibit C Oh, to be a hedge fund manager, to be carried by carried interest. The carried interest loophole in the tax code is a beauty, and even earned a place in the top four CNN Money’s “Worst Tax Breaks.” CNN Money explains why it bestowed this ranking:
“That portion, known as carried interest, represents a share of profits from the funds they manage. They are paid that share even if they were not required to invest their own money in the funds. Carried interest is taxed at the long-term capital gains rate of 20% — well below the top two income tax rates of 35% and 39.6%.” (emphasis added)
Ah, but gee! Whine the proponents of the loophole, we risk our reputations, our client’s money (not ours) sometimes in long term investments. We provide “hands on” money management. And, precisely there is the problem. If I were to provide consulting services to you we would be in a “fee for service” situation, and the fees I earn would be taxed as regular income. If, however, I agree to manage your money, agreeing to be one of your financial consultants, and provide that “hands on” service, I get to collect the fee and pay a lower rate than what you would pay on your regular earnings.
The Republican members of the Congress give every appearance of demanding payment up front for SNAP (food stamp) benefits, for Meals on Wheels, for Headstart funding, for Veterans’ programs, for Job Training initiatives, for OSHA inspection improvements, for implementing EPA standards, for education, for the maintenance of national parks, and for anything else which benefits working Americans. However, when asked how they would pay for these public services the answer is always Austerity Econ 101 — make CUTS.
Increasing the revenue side of the equation is unthinkable — Raising Taxes! Whatever taxation reform is suggested it would the THE LARGEST TAX INCREASE IN HISTORY! Somehow it always is. However, think what might be done with that $45 billion a year stashed away by corporations indefinitely keeping their offshore profits in hand while bemoaning that “too many Americans don’t pay taxes.”
Or, consider what we could invest in energy research and technology if the oil giants were paying a fair return on the profits from their oil and gas leases on public lands? And, what if hedge fund managers and other financialists were to pay the same rate of taxation on their income coming from investment earnings as the rate paid by other consultants, advisers, and managers?
“But, but, but…”, sputter the advocates for corner offices — Increasing taxes is Anti-Business and Punishes Success! Balderdash. It really doesn’t do to whinge about the “47% who aren’t paying taxes” — because they don’t earn enough income to be liable for federal taxation — while consistently opposing any and all efforts to collect tax revenues from those who are the in best position to contribute, and would be contributing more if they’d not figured out ways to make their creative accounting practices align with their greed.
Worse still, they’d like their cake and to have the opportunity to chow down on it as well. Consider the recent illumination of a fast food franchise which supports lower taxation while advising its employees on how to apply for SNAP program assistance [HuffPo], or how both McDonald’s and WalMart have become the new Welfare Queens. [BloombergNews]
So, here’s the offer. Americans would like (1) improved infrastructure construction, maintenance, and rehabilitation. They’d like (2) more readily available educational opportunities and job training programs. (3) They’d like Veterans to get better transition assistance to civilian life. (4) They’d prefer to have SNAP benefits available for working families. (5) They’d like to see the day when a college education is a realistic dream for their children. (6) They’d like to see their elderly parents and other relatives retire assured that their medical and social needs are being considered so that they can remain independent as long as possible.
And, we could do all this — IF we’d start talking about how to reform our tax collection system such that those who should pay are paying. However, it’s very difficult to bargain with people who say, “What is mine is mine, and what is yours is negotiable.” — John F. Kennedy —