Higher taxes (for some) have to be on the table

Bill Humphrey in The Boston Globe: Should higher taxes be off the table in state budget talks? No.
In early 2015 and again last month, Democratic Massachusetts House Speaker Robert DeLeo promised that the House of Representatives would not pass budgets that involved new revenues of any kind. This goes beyond Governor Charles D. Baker’s Republican standard of no-new-taxes.

Anti-tax conservatives in both parties have been dominant for a full generation now. The unchallenged politics of tax cuts — and spending cuts to offset them — has become self-sustaining. There has been comparatively little defense of what spending actually means: programs and policies that deliver vital public services.

Speaker DeLeo, explaining his position, cited pre-existing pressures on family budgets. It’s true, many Massachusetts families have been struggling to get by. Unfortunately, further cuts likely will worsen that pressure.

Nobody disputes the importance of fiscal efficiency, but after decades of cuts there is virtually no fat left to trim in the state budget. Even the rainy day fund has been exhausted to plug other budget gaps. Without new revenues, even deeper cuts will necessarily be made in vital arenas that intersect directly with family budgets.

Transportation infrastructure, public education, economic development, social safety nets, our courts, and more are funded in large part or wholly by government spending. “Consolidating” services often means reduced access for citizens, particularly the most vulnerable. Cutting back public investment in these areas hurts families, costs good-paying public employee jobs, and shrinks the economy.

How we raise revenues most effectively and fairly is a good question – and a political one.

Our current state tax system is regressive. It shouldn’t be. The proposed Fair Share constitutional amendment would fund transportation and education via an additional millionaire’s tax on those whose family budgets won’t be broken by an extra contribution to our society’s shared coffers. Increased tax compliance by large corporations likewise would ease the burden on small businesses without access to offshore tax shelters.

What is not debatable – given our fiscal situation and our public investment needs – is that we need more revenues from somewhere. Taking revenue increases off the table is fiscally irresponsible and ultimately harmful to the very people the speaker says he wants to help.

Regressive income pressure in the tax code of U.S. states

arsenal-bolt-logo

“Robin Hood in Reverse:” “State and local taxes in the United States take the most from those who have the least, undermining efforts to redress inequality.”The Atlantic:

Those who earn the least pay the most in nearly every state across America. Or rather, the poorest citizens pay the highest proportion of their incomes to local and state governments—twice as much in fact, as the top one percent.

According to The Institute on Taxation and Economic Policy, as cited by The Atlantic:

…in every single state “at least some low- or middle-income groups pay more of their income in state and local taxes than wealthy families.”

On the other hand:

Some of the most regressive aspects of the tax code are designed to advance broadly popular goals. The gas tax, for example, falls hardest on middle-class families, but it may promote environmentally friendly modes of transportation [and infrastructure?]. Tobacco taxes discourage tobacco consumption.


But:

Yet combining America’s regressive state and local taxes with the progressive federal code reveals a system that barely asks more of its most comfortable citizens than of the middle-class.



 

Fortune 500 firms may have avoided $620B in recent taxes

A new Citizens for Tax Justice / US PIRG study of IRS/SEC filings indicates that 358 of the 500 largest companies in the United States are stashing $2.1 trillion in legal tax havens.

The lost U.S. tax revenue from just 57 of them who admitted the difference in what they would have paid on those profits without havens versus what they actually paid (legally!) was $184.4 billion in total. The report then extrapolates that the lost U.S. tax revenue from the full Fortune 500 due to offshore tax avoidance may be around $620 billion total, or $90 billion yearly over the period in which the untaxed offshore stash was earned.

The tax haven countries themselves often have yearly GDPs smaller than the profits supposedly being “earned” in those countries by the “subsidiaries” of US megacorporations “based” in those countries.

Also:

Between 2008 and 2014, the study added, the amount of offshore cash holdings for American multinationals doubled.

 
Ah, I guess big U.S. firms can’t hire more people or pay better wages (duly earned through higher productivity!) because they “only” have over $2 Trillion in offshore savings. You see, it’s very tough as American megacorporations to pay living wages when you’re collectively only avoiding $90 billion a year in taxes.

Meanwhile, a major Democratic Party candidate for president wants to give tax breaks to big firms to pay workers more fairly, even though they already legally skip $90 billion annually in taxes now.

This is ludicrous. You don’t pay companies to do things they need to do anyway. You really don’t do it when they’re effectively stealing tax revenue now. As the head of the World Bank just said, legal tax avoidance schemes are a form of corruption. This needs to end. It just does.

Sept 16, 2015 – Arsenal For Democracy 143

Posted by Bill on behalf of the team.

AFD-logo-470

Topics: How to redirect hundreds of billions of dollars in subsidies for the wealthy toward low-income programs; the low-wage service economy recovery; should the US accept more Syrian refugees? People: Bill, Kelley, Nate. Produced: September 13th, 2015.

Episode 143 (55 min):
AFD 143

Discussion Points:

– CFED.org: “Redeploying $540 Billion in Federal Spending to Help All Families Save, Invest, and Build Wealth”
– Why it doesn’t feel like a recovery: So many new jobs in retail services get paid less now than before the recession’s peak.
– Should the U.S. accept more than just 10,000 Syrian refugees in the coming year?

Related Links

Corporation for Enterprise Development (CFED): “Redeploying $540 Billion in Federal Spending to Help All Families Save, Invest, and Build Wealth”
NYT: “Low-Income Workers See Biggest Drop in Paychecks”
AFD by Kelley: “United States to accept (a few) more Syrian refugees”

Subscribe

RSS Feed: Arsenal for Democracy Feedburner
iTunes Store Link: “Arsenal for Democracy by Bill Humphrey”

And don’t forget to check out The Digitized Ramblings of an 8-Bit Animal, the video game blog of our announcer, Justin.

The tax policy of Trumponomics

A recent New York Times headline blared “Republicans Wary of Donald Trump’s Populist Tone on Taxes.”

On the one hand, this development is hilarious because he’s slamming a huge wedge into the Republican Party. On the other hand, oddly enough some (though not all!) of these tax proposals are pretty legit, at least in theory.

He has threatened to increase taxes on the compensation of hedge fund managers. And he has vowed to change laws that allow American companies to benefit from cheaper tax rates by using mergers to base their operations outside the United States.
[…]
“The one problem I have with the flat tax is that rich people are paying the same as people that are making very little money,” Mr. Trump said. “And I think there should be a graduation of some kind.”

 
Implementing his “ideas” is of course another matter, and he would undoubtedly do that wrong if he were actually to become president.


Previously on AFD on this topic:

– Op-Ed (for The Globalist) | Pfizer: Tax havens or bust!
Treasury Dept acts to discourage tax avoidance mergers
Are Trump’s bankruptcies worse than other business law manipulations?

Tax savings that cost more than social expenditures

From a 2013 Baltimore Sun piece, “Cut tax breaks, not food stamps”, how U.S. executives can save more in taxes in a single dinner than poor families can receive in food stamp money in a month:

Imagine that the tab for dinner and drinks for 10 executives comes to $1,600. Current tax law allows companies to deduct half of the cost of business meals — in this case, $800. With a corporate tax rate of 35 percent, each dollar of deductions yields 35 cents of tax savings — so that $800 deduction saves $280 in taxes. This means one dinner for 10 people provides more public food assistance than the $279 an average household receives in food stamps for the whole month.

 
But somehow we can’t possibly afford such programs.

h/t Wonkblog: “The rich get government handouts just like the poor. Here are 10 of them.”

I suspect I’m going to have a lot more to say on this particular topic of tax savings that cost more than social program expenditures in future posts and episodes of the radio show. Particularly after I started reading through various Corporation for Enterprise Development (CFED) reports on tax subsidies to the wealthy, including their 2014 report “Redeploying $540 Billion in Federal Spending to Help All Americans Save, Invest, and Build Wealth” (PDF). Spoiler alert: Hundreds of billions of dollars in revenue is lost each year to Federal tax credit programs disproportionately (and needlessly) benefiting wealthy households.