Cincinnati CityBeat: Here’s Why the ’99 Percent’ Are Pissed
media mentionBy Kevin Osborne · November 9th, 2011 · Porkopolis
Even the most ardent political junkie probably missed the news amid all the other reports last week about Ohio Issue 2, Cincinnati Issue 48, the looming City Council elections and the drama over the Occupy protests being busted up across the nation.
While the broadcast TV networks were busy covering Andy Rooney’s death, Kim Kardashian’s divorce and the Royal Couple’s visit to America, they barely mentioned a disturbing study that found 30 of the most profitable U.S. corporations had a “negative tax rate” during the recent three-year period it covered. Those same firms had combined pre-tax profits of $160 billion during that time.
The study also found that 78 of the corporations paid no taxes in at least one of the three years, and that 280 companies shelter at least half of their profits from taxes.
The comprehensive study was conducted by Citizens for Tax Justice and the Institute on Taxation and Economic Policy. It covers the years 2008-2010, and examines data from the companies’ financial reports about their pre-tax U.S. profits and their U.S. federal income taxes.
In all, 280 companies are included in the report, all of which are from the Fortune 500 list.
Those factoids would be surprising enough by themselves, but the study contains more revelations. Chief among them is that the average effective tax rate for all 280 companies in the study over the three-year period was 18.5 percent; for the period 2009-2010 it was just 17.3 percent, far below the statutory corporate rate of 35 percent.
That finding pretty much demolishes the primary argument of the national Republican Party, in its never-ending quest for lower taxes and other perks for Big Business, regardless of the disastrous effect the policy has on local, state and federal governments.
But wait, it gets even more maddening.
The study also found that U.S. corporations with significant foreign profits — totaling 10 percent or more of their total worldwide profits — paid tax rates to foreign nations that were almost one-third higher than they paid to the IRS on their domestic profits. Those nations are mostly free of demagogues like Grover Norquist, Rush Limbaugh and Sarah Palin, or at least their counterparts wield much less clout than here, and politicians realize that companies are expected to contribute their fair share for the common good.
What a crazy notion.
And you remember President Eisenhower’s warning about the rise of the Military-Industrial Complex during his farewell address in 1961? Well, it’s here, it’s entrenched and it’s powerful.
The study found that the top 10 defense contractors saw their combined tax rate decline from 19.3 percent in 2008 to a mere 10.6 percent rate in 2010. Outrageous.
During the same three-year period, those 280 companies were given tax subsidies of one form or another totaling $222.7 billion. Incredibly, despite the mess they caused during the financial crisis of 2008, the financial services sector received the largest share of all federal tax subsidies at 16.8 percent.
Keep those figures in mind the next time that some politician wants you to accept cuts to your Social Security or Medicare benefits, instead of raising taxes on the wealthy.
“These 280 corporations received a total of nearly $223 billion in tax subsidies,” said Robert McIntyre, director at Citizens for Tax Justice. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”
Noting that corporations continue to lobby for lower tax rates and an exemption for profits they shift offshore, McIntyre added, “Our study provides proof that too many corporations are already being coddled by our tax system.”
This is the 10th comprehensive review of corporate taxation policies released by the two groups. Their first report, released in 1984, helped lead to the landmark Tax Reform Act of 1986, signed into law in October of that year by President Reagan. It curbed tax shelters for corporations and lowered taxes on lower- and middle-income families.
The 1986 law was created to be tax revenue neutral, as individual taxes were decreased while corporate taxes were increased. Also, it simplified the tax code by reducing the number of tax brackets from 15 levels of income to four levels.
Since then, the two groups have worked diligently to keep Americans informed about the complicated — some would say rigged — federal tax code. During the debate on the effect of President Bush’s proposed tax cuts in early 2001, the GOP-controlled Treasury Department and Congress were discouraged from crunching the numbers about who would benefit the most. According to The New York Times, then-Treasury Secretary Paul O’Neill said that figuring out the benefits of Bush’s plan at various income levels would result only in ‘’a nonsense set of statistics.’’
At that point, Citizens for Tax Justice stepped into the fray and produced a computer model showing that the wealthy would benefit the most, with dire consequences for the rest of us. It led an unsuccessful effort to oppose the cuts. Nevertheless, we know what happened next: When Dubya couldn’t get the 60 votes needed in the Senate to pass the tax cuts, he used the reconciliation process to enact them. The United States went from a projected surplus to a deficit, with the tax cuts costing about $1.35 trillion over 10 years.
Then Bush borrowed about $489 billion from China to pay for the wars he started in Afghanistan and Iraq, rather than raise the tax rate on his affluent cronies. Since then, we’ve had a decade of economic despair, capped by the Great Recession. The United States has seen the widest income disparity develop between wealthy Americans and the rest of us in three decades; while the the top 1 percent of Americans had its largest share of income since 1928, incomes for the other 99 percent stagnated or declined.
As a result, I tend to trust what Citizens for Tax Justice has to say on fiscal matters.
In its current report, the group recommends that Congress consider fixes like reinstating a strong corporate Alternative Minimum Tax; reforming the way multinational corporations allocate their profits between the United States and foreign nations, so that U.S. taxable profits aren’t artificially shifted offshore; and repealing the rule that allows U.S. corporations to “defer” their U.S. taxes on their offshore profits, so there wouldn’t be a tax incentive to shift profits overseas.
Congress and the president, however, seem to have little stomach for these ideas, even though polls show most Americans like them.
“Unfortunately, corporate tax legislation now being promoted by many in Congress seems stuck on the idea that as a group, corporations are now either paying the perfect amount in federal income taxes or are paying too much,” the study concludes.
“Real, revenue-raising corporate tax reform, however, is what most Americans want and what our country needs,” it adds. “Our elected officials should stop kowtowing to the loophole lobbyists and stand up for the vast majority of Americans.”
Left unchecked, such festering inequity eventually is a recipe for disaster. Or violent social change. Let’s begin working to force politicians to deal with the problem now.