by Jack Lee
WARNING: READING THE FOLLOWING COULD RAISE YOUR BLOOD PRESSURE TO UNSAFE LEVELS. BY CONTINUING ON YOU ARE CERTIFYING THAT YOU CAN HANDLE IT.
WASHINGTON (Aug. 12) – At least 2/3rds of American corporations did not pay any federal income tax between 2005 and the previous 7 years, says a new Congrerssional report. Now hold that thought and lets look at another facet of taxation. Way back in 1965 individuals paid 62% of the total tax revenue, but by 2000 that burden had grown to 82% and it’s even higher in 2008! And to make this tax structure even more weird, the top 10 percent of wage earners now pay 65 percent of the taxes and the bottom 50 percent pay a mere 3.7 percent. That’s almost like a dis-incentive, something counter productive for a capitalist society.
So, why do corporations need the big tax breaks? What do we get out of it anyway? Is it to create good jobs? I like that part, but it seems like more and more of those good jobs are being given to people in foreign countries. We’re told it’s only necessary in order to hold back labor costs and keep us competitive in the era of globalization! Poor ol management has been forced to turn to cheap non-American laborers overseas, but they tell us this is good for the bottom line. I suppose so… at least for awhile. But, this begs the question, so what happens to our labor force when most of the good jobs are gone?
This is a bit off my main subject of corporate taxes, but if shareholders and CEO’s are so worried about holding down high labor costs then I think it’s only fair to take a look at management costs too. Let’s see how their salaries have grown. For starters please look at the chart below and you will see CEO wages have far outpaced blue collar wages by miles. The CEO’s have become so expensive that without that fat corporate tax break there might not be any crumbs left to give to the shareholders! Also its would be fair to contrast the growth in CEO salaries to the growth in profits..let’s see if they are worth it!
“Economists argue that the increasing exposure of the American economy to globalization, along with other forces — including soaring health insurance costs that leave less money for raises — is putting pressure on wages that could leave millions of workers worse off. ” Falling Fortunes NY Times.
In 2005, an average Chief Executive Officer (CEO) was paid 821 times as much as a minimum wage earner, who earns just $5.15 per hour. An average CEO earns more before lunchtime on the very first day of work in the year than a minimum wage worker earns all year.
The CEO (mgmt) salaries have really helped to consolidate the wealth of America, and the advantage of that is they have been able to employ lots of domestic helpers at minimum wage. So lets not be too critical here. Big CEO salaries have greatly increased the number of nifty jobs for chauffeurs, gardeners, pool boys, upstairs AND downstairs maids, butlers, and let’s not overlook the party catering business. It’s all good! Sorry, my pent up frustrations are showing. The whole mess, the IRS with all its stupid tax laws, the slow destruction of the American labor force from outsourcing, looting by CEO’s of company coffers….well, it’s all got me going! OK, I’ll get back on track now, because there’s much more to say on….CORPORATE TAXES:
The latest Congressional study says citizens are far more likely to pay income taxes than corporations that earn billions, but also enjoy tax shelters not afforded to regular citizens. Is it any wonder that as this is going on tax fraud is on the rise! Tax fraud is estimated at $311 billion this year, more than the entire budget for Medicare, and more than last year’s revenues at Walmart or General Electric. That fact should be a wake up call to Congress that the tax system is broke.
Did you know that investors pay lower income taxes than workers? Roughly 85% of stock market wealth is owned by a mere 10% of American households and there is no logical reason why income from those investments (called capital gains by the tax code) should be taxed less than income from your work. The top tax rate on wages is 35% while the top tax rate on capital gains is only 15%.
The IRS needs a serious overhaul, like moving to a simple flat tax, no deductions, no exemptions, no special treatment to a favored class, just a flat tax for everyone. It would eliminate so many convoluted tax laws that the savings in overhead would allow us to pay far less and for Congress to actually get more revenue to where it would do the most good or at the very least Congressional spending would be more efficient at squandering our tax dollars!
The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.
Collectively, the companies reported trillions of dollars in sales, according to GAO’s estimate.
“It’s shameful that so many corporations make big profits and pay nothing to support our country,” said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.
An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called “S” corporations pay taxes under individual tax codes.
“Half of all business income in the United States now ends up going through the individual tax code,” Edwards said.
The GAO study did not investigate why corporations weren’t paying federal income taxes or corporate taxes and it did not identify any corporations by name. It said companies may escape paying such taxes due to operating losses or because of tax credits.
More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.
The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005. For 2005, for example, it reviewed 110,003 tax returns from among more than 1.2 million corporations doing business in the U.S.
Dorgan and Levin have complained about companies abusing transfer prices — amounts charged on transactions between companies in a group, such as a parent and subsidiary. In some cases, multinational companies can manipulate transfer prices to shift income from higher to lower tax jurisdictions, cutting their tax liabilities. The GAO did not suggest which companies might be doing this.
This is a very difficult situation to resolve from fair pay to fair taxes…it’s really, really tough!And obviously there are many more opinions than those expressed here, which only adds to the complexity of it all. But, the one thing we can probably all agree on is this: The IRS is too confusing to be understood by anyone, even the IRS and that needs fixing. I suppose we can agree that we also need tax reform that is fair for everyone. There has to be an equitable system and this current system sure isn’t t! It’s way past time to demand Congress to fix it or be voted out of office…period. No more bandaide solutions.
Want to know more? Try reading this book…”America: Who Really Pays the Taxes?” by Donald Barlett. Theres a lot of books out there, I just grabbed this title because it is a best seller and it comes reccommended.