Nobody likes to pay unnecessary taxes but, thanks to a generation of proselytizing by the Republican Party, many people don’t understand the concept of the common good and view all taxes as bad.
Apparently, items like roads and bridges, water and sewage systems and food and drug inspectors will all just magically pay for themselves, according to the anti-taxers.
The deadline for filing federal and state income tax returns arrives again this week. Of course, there will be the usual long lines at the post office of people who waited until the last minute to file their paperwork.
Some probably have good reasons for the delay, like having little time while juggling two jobs or fearing they can’t pay an anticipated tax liability. Others are just lazy or procrastinators.
And then there’s the moaning and griping from the Tea Party crowd, who will be holding their now traditional Tax Day rally. This year it’s at the University of Cincinnati’s Fifth Third Arena and features a motley crew of guests including Fox News host Sean Hannity, actor Jon Voight and know-nothing blowhard Joe the (not quite a) Plumber. Way to milk those 15 minutes of fame, Mr. Wurzelbacher.
If tax protesters really wanted to make an impact, they’d focus on making sure large corporations pay their fair share. Warning: There’s a lot of numbers ahead, but they’re important ones.
Earlier this month, Forbes magazine reported that General Electric had $10.3 billion in pre-tax income last year but ended up paying nothing in federal income tax. Instead, it recorded a tax benefit of $1.1 billion.
Forbes also wrote that although ExxonMobil had a recordbreaking $45.2 billion in profits last year, it paid no taxes to the federal government. Of the $15 billion it owed in taxes, all of it was legally channeled to corporate tax shelters in nations overseas.
Spokespersons for GE and ExxonMobil quickly declared that Forbes was wrong and had misunderstood their tax filings.
GE Spokeswoman Anne Eisele told CityBeat: “GE’s U.S. tax expense reflects the fact that we had losses in our financial services business in 2009, which resulted in tax benefits. Because we file a consolidated tax return, we could use these tax benefits to offset income earned by our U.S
“Our industrial business had a 21 percent tax rate in 2009, down slightly from 2008. But when combined with the losses and tax benefits associated with GE Capital’s global operations, we end up with the negative rate.”
GE’s cumulative U.S. taxes from 2000-09 totaled almost $7.4 billion, and the company paid almost $23 billion in taxes to governments around the world during the same period, she said.
Similarly, Exxon’s Alan Jeffers told us, “ExxonMobil applied an overpayment from our 2008 taxes to our 2009 tax bill and the remaining overpayment was refunded to us. The Forbes reporter incorrectly thought the refund, which was recorded on our books, was an indication that we paid no U.S. federal income taxes in 2009. Not true. We had a significant tax liability and paid it just like all other taxpayers.”
While those corporations can dispute the Forbes article and its interpretation of their tax filings, here’s a fact they can’t dispute: In 2008 the Government Accountability Office (GAO) found that two out of every three U.S. corporations paid no federal income taxes during an eight-year period, from 1998 through 2005. The GAO’s study covered 1.3 million corporations with a cumulative $2.5 trillion in sales.
As The New York Times reported at the time, two Democratic senators requested the study after they urged “officials and regulators to examine whether corporations were abusing tax laws by shifting income earned in higher-tax jurisdictions, like the United States, to overseas subsidiaries in low-tax jurisdictions.”
I bet that sounds familiar to Exxon. In 2009 the U.S. tax rates for individuals and families ranged from 10 percent to 35 percent, based on income levels. The top tax bracket was for individuals and families making more than $372,950 annually.
For the same year, corporate tax rates ranged from 15 percent to 39.1 percent. The top bracket is for companies that have taxable income of more than $18.3 million, although many corporations qualify for a flat 35 percent rate.
It doesn’t sound too bad until you consider other factors.
Conservative economists like to complain that the top U.S. corporate rate is second highest among the 30 nations that belong to the Organization for Economic Cooperation and Development (OECD); only Japan’s 39.5 percent rate is higher, they note.That, however, is only on paper. In reality, the effective tax rate for corporations — due to loopholes and tax shelters — is around 22-28 percent, experts say. That puts the United States firmly in the middle of the OECD pack. Moreover, most corporations also pay a Value Added Tax in other nations they don’t pay here.
Some people contend the situation is actually worse as corporations bend and twist the tax system to their advantage.
As a commenter on the Forbes article correctly noted, U.S. multi-national corporations in 2004 paid roughly $16 billion in taxes on about $700 billion in foreign earnings, which equals a tax rate of 2.3 percent.
The net result is some U.S. citizens end up paying a higher rate than many multinational, billion-dollar corporations. That's maddening.
But the mere discussion of capitalism’s excesses and possibly changing them makes many Americans squeamish, showing just how indoctrinated we are by Big Business. Suggest any modest redistribution of wealth, and you’ll be called a socialist or worse.
Still, tax rates were much higher under Presidents Eisenhower, Nixon and — yes, Tea Partiers — Reagan (until his last year in office) and the gap between average pay for workers and CEOs was much lower. That ended when, under the myth of “trickle down economics,” excessive corporate greed became a virtue instead of an embarrassment.
Many corporations like to say lower taxes are good for the economy and create jobs, but most of those jobs are shipped overseas, where people are told to be grateful for working long hours under grueling conditions for a pittance. The savings from labor costs are then used to line executives’ pockets. Shameful.
This has led to a situation where the top 1 percent of U.S. society has more wealth than the bottom 95 percent combined, while the annual incomes of the top 20 percent equal the total of the bottom 80 percent.
Any system that promotes such radical and destabilizing inequality needs repair.
I’ve said it before and I will repeat it here: The excesses of Big Business have far more of a direct, harmful impact on the average person than the excesses of Big Government.
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