As the Washington crowd desperately seeks means of life support for an economy that seems in cardiac arrest, and presidential wannabes flit around the country claiming to have the magic potion needed to bring the patient around, one can only marvel at their ongoing insistence that it can be achieved through spending cuts alone.
And it will be a cold day in you-know-where, they staunchly aver, when they support any kind of tax, regardless of how much it might help the country’s anemic revenues.
All the while, tax breaks and tax loopholes enacted by previous administrations and Congresses to benefit major corporations and the wealthiest individuals result in a loss to the U.S. Treasury of billions of dollars.
Billionaire Warren Buffet, perhaps one of the most astute businessmen of modern times, frequently points out that he and fellow billionaires pay taxes at a lower rate than many of their salaried office workers, and calls on the government to remedy the situation.
Yet, every time there’s even a hint of increasing taxes on the super wealthy, the screaming reaches crescendo level by the congressional cadre that would rather have sent the nation into catastrophic default than to agree to such a move.
Consider, for example, top tier hedge fund managers, whose income may run to hundreds of millions of dollars per year. The top 25 managers last year earned $22 billion collectively, according to AR magazine, which tracks the industry.
Most of that, however, is taxed at the favorable capital gains rate of 15 percent. So, while the wheeler-dealers avoid millions in taxes, millions of middle class Americans (who’ve seen their salaries decline over the past decade) are paying taxes at a 25 percent top marginal rate.
Closing just this one loophole, analysts say, would bring in more than $4 billion a year from just those 25 top hedge fund managers.
They aren’t the only ones given favored tax status by Uncle Sammy. While the average salaried employee has taxes withheld from each paycheck, another elite class — entertainment stars, sports stars, corporate executives — have all manner of options for paying their taxes later, often years later.
The average employee's tax bite is taken in advance before they ever get what’s left of their salary; the stars pay sometime or other, and in the meantime they can invest that money and make even more money.
(One example of how modern day corporations are raking in big bucks by reaping the benefits of outmoded tax policy was cited in this recent New York Times article: http://www.nytimes.com/2011/09/11/technology/rich-tax-breaks-bolster-video-game-makers.html)
Citizens for Tax Justice, in a study of Fortune 500 companies, cited a dozen major corporations that had a collective negative 1.5 percent tax rate on $171 billion in profits for the 2008-10 period, and got $62.4 billion in taxpayer subsidies. They included the likes of Boeing Aircraft, Exxon Mobil, FedEx, General Electric, IBM, and Wells Fargo.
Had the 12 companies paid the 35 percent corporate tax rate, the Treasury would’ve received $59.9 billion, the study notes. “These companies are just the tip of the iceberg of widespread corporate tax avoidance,” said Bob McIntyre, Citizens for Tax Justice director.
Bruce Bartlett, a domestic policy advisor for President Reagan and a top Treasury official in the Bush I administration, noted in a New York Times column that the U.S. has the lowest corporate tax burden of any of the world’s wealthiest nations.
Further, he says, the federal income tax rate on the 400 richest people in America was 18.11 percent in 2008, down from 26.38 percent in 1992. The loss to the Treasury: an estimated $300 billion annually.
While the average worker’s wages have showed little or no gain over the past 20 years, the super wealthy, thanks to the generosity of our elected lawmakers, have been making out like bandits.