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Raising revenues must be central goal of budget talks
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The recent US federal budget agreement was a missed opportunity.
It is good news that conservative ideologues did not force another government shutdown. But our political leaders missed the chance to create a better budget and a fairer tax system by closing loopholes.
For instance, this budget does not close a single tax loophole benefiting corporations or the wealthy.
Closing corporate loopholes would not only force them to pay more of their fair share, but it would provide revenue needed for new investments to improve education, repair crumbling roads and bridges, and invest in research for new medical cures.
And new investments are desperately needed. Since 2010, Congress has approved US$2.7 trillion in spending cuts to reduce the deficit, and just US$620 billion in new revenue from higher taxes on the wealthiest 1 percent. That’s a ratio of spending cuts to revenue increases of more than 4 to 1.
Big picture
Looking at the big picture, domestic spending as a share of the economy is now at its lowest level in 50 years. And all those cuts have taken a toll.
The Coalition on Human Needs documented some disturbing examples. For 2013 alone: 100,000 low-income families were denied rental vouchers; 57,000 kids were excluded from Head Start; hundreds of thousands of Meals on Wheels were not delivered to home-bound seniors.
To create a budget that works for everyone, Congress should have raised significant new revenue. It’s time for a more balanced approach to budgeting. There are scores of tax loopholes benefiting the wealthy and big corporations that could be closed, which could raise more than US$1 trillion over the next decade, as documented in an Americans for Tax Fairness report.
Let’s look at just three reforms to our loophole-riddled tax code that could raise the money we need to avoid more painful service cuts and embark on an investment renaissance.
American multinational corporations have US$2.1 trillion in untaxed profits stashed offshore. They are avoiding paying up to US$600 billion in US taxes on these profits, according to Citizens for Tax Justice.
More than half of the money is sitting in tax havens virtually untaxed. Just 50 companies control three-quarters of these profits. Apple alone has nearly 10 percent of the offshore profits — US$181 billion — on which it owes about US$59 billion.
Army of lobbyists
These companies have an army of lobbyists pressing Congress to let them bring the money back home at a fraction of what they owe. Instead, lawmakers should repeal the tax loophole that lets corporations dodge paying US taxes on these offshore profits.
Exploding CEO pay is a contributor to our nation’s destabilizing income inequality. Yet, middle-class taxpayers subsidize outsize pay packages for America’s corporate chieftains.
A CEO bonus pay loophole lets corporations deduct unlimited amounts from their income taxes for the cost of executive compensation, if it is in the form of stock options and other so-called “performance pay.” This loophole serves as a massive subsidy for excessive corporate executive compensation and leaves other taxpayers to pick up the tab.
Another way America’s top percent use the US tax code to subsidize their huge salaries is by pretending they’re not salaries at all.
Wall Street money managers mischaracterize a big chunk of their pay as investment income, qualifying it for a 20 percent tax rate, rather than the nearly 40 percent rate on salaries and wages. Shutting this “carried interest” loophole would raise US$16 billion over a decade.
Budget math is tough enough without ignoring half the equation. Raising significant revenues from corporations and the wealthy should have been a central goal of the budget negotiations. That would have been a big step towards a budget that is more balanced, fairer, and works for all of us.
Clemente is executive director of Americans for Tax Fairness. Shanghai Daily condensed the article. Copyright: American Forum
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