tax breaks for wealthy; corporate tax shouldn’t be reformed away; seed patents are a real scandal
by Linda Beale
Tax breaks for wealthy; corporate tax shouldn’t be reformed away; seed patents are a real scandal
No time for lengthy commentary today, but worth calling attention to some noteworthy items.
(1) The CBO released a new report detailing the income groups that benefit most from the various tax expenditures in the internal revenue code. No surprise that it finds that those in the highest income brackets receive an enormous amount of (not-needed) money from these tax subsidies.
As one blog put it: “a whopping $2 trillion of that goes to folks who make more than $450,000 a year. In other words, 17 percent of all tax breaks goes to the top 1 percent. $2 trillion is about double the 10-year cost of the sequester.” Bill Scher, $2 Trillion Wasted in Tax Breaks for Wealthy, Campaign for America’s Future.org (May 30, 2013).
The wealthy enjoy tax breaks that have no relation to anything they produce but do relate to the fact that they are the primary owners of financial assets, such as the preferential rate for capital gains and the preferential rate for corporate dividends. They also benefit much much more from any tax break they get than others do, especially when it comes to the mortgage interest deduction, the charitable contribution deduction or the exclusion for interest on tax-exempt bonds. That’s because they have more expensive homes, get bigger mortgages, have more financial assets that they can contribute to their pet projects for a FULL deduction of value (not just, as with most other property contributions, for their actual investment), and are about the only purchasers of tax-exempt bonds (the rates for which are generally set to attract the wealthiest buyers) and always itemize, whereas 70% of Americans just take the standard deduction.
This $2 trillion is an economic waste–for some, its just more money to “invest” in offshore bank accounts and tax scams; for others, it just feeds Wall Street’s private equity funds and “private banks” with more cash for casino capitalism bets and takeover gambles. As John Kominitsky, a commenter on the blog, notes “This is the “capital” Wall Street sucks up to fuel their Speculation Casino of derivatives (CDO’s) high-speed computer trading, outsized “executive bonuses”, and tax dodging off-shore accounts.” So the tax breaks for the wealthy (costly to ordinary Americans who have to make up the tax money needed) feeds the Wall Street casino capitalism monster (costly to ordinary Americans who lose their homes and livelihoods as Wall Street banks require bailouts and private equity firms make megaprofits off firing people).
(2) The New York Times is on a roll on tax issues, seemingly reading more deeply than it had been doing for a while. Today’s editorial makes the valid point that there is no justification in today’s economy for abolishing corporate taxes even if they were replaced with something else. See editorial, No replacement for corporate taxes: the system needs to be reformed, not abolished, New York Times (May 31, 2013).
The editorial calls the “tax cut crowd” out on one of the arguments I’ve lambasted here for years–the idea pushed by corporate lobbyists (and people like Tim Cook in his recent congressional testimony) that since there is a good deal of corporate tax avoidance, we should just cut corporate taxes way back or even eliminate the corporate tax altogether, since we’ll “obviously” never get sophisticated companies to pay more.This is wacky. Rewarding tax avoidance by eliminating the broken corporate tax system altogether gets it backwards, as the Times notes. The editorial makes six important points.
- the corporate share of taxes has steadily declined, while corporations’ use of the good things that the nation provides–the “social and economic foundation on which corporate success is built”–continues apace.
- Ending the corporate tax just rewards the wealthy even more (who own most of corporate stock) and results in heavier burdens on everybody else
And, I would add, everybody else will carry that burden either by paying a larger share of taxes paid or by suffering from reduction in government services of particular importance to them, such as lower funding for education, for aid to the poor, for research, etc. The wealthy can buy themsevles whatever they want, so are now more willing to let government shrivel.
3. cutting out corporate taxes means increasing the deficit
4. There’s no justification for cutting out corporate taxes in order to replace that system with another one, like a value added tax. That implies that it is reasonable to favor publicly traded corporations with all the benefits of US government without any of the obligations to pay for that benefit.
This is particularly unreasonable given the Supremes’ decision that corporations have a right to spend their money to influence election campaigns for real people, and the right-wing’s attempt to make a scandal out of the IRS scrutiny of groups that use 501(c)(4) status to conduct politicking in order not to have to reveal their donors, frequently major corporate owners like the Koch brothers and MNEs like Exxon Mobil. The idea of eliminating corporate taxes and passing the burden to less able to pay individuals is just another piece of the corporatist, class warfare agenda.
5. It also doesn’t make sense to scrap corporate taxes if we decide to get rid of the preferential rate for dividends. There is ample reason for raising the tax rate on capital investment income–it mostly goes to the wealthy, so the preferential rates for the wealthy exacerbates the growing inequality in this country, though, as the article notes, there is little political will even among Democrats to set the system aright. But even so, eliminating the capital gains preference doesn’t support eliminating the corporate tax–corporations don’t have to pay dividends and shareholders get to choose when to realize taxable gains. Getting rid of the corporate tax would exacerbate the problem of corporations and shareholders controlling tax revenues through personal decisions.
6. We do need to reform corporate taxes–to prevent the ability of MNEs like Apple, Google and GE to pay ridiculously low or no US corporate taxes. And that needs global cooperation. So in the meantime we should require country by country reporting of profits and taxes.
(3) This last item isn’t a tax item, but it is something that is just about as pervasive as tax issues in our lives–the question of whether corporate giants should be allowed to “own” patents on living organisms, especially on self-replicating living organisms like seeds.
I think the Supreme Court’s recent decision in the Monsanto case is wrong. The current policy represents corporatism gone viral: it leaves farmers dependent on the few chemical giants that own the original genetically modified seed and all seeds that plants that sprout from it make. It rips profits from farmers’ hands and puts them in the hands of managers and shareholders of Monsanto and companies like it–a kind of class warfare by proxy. It leaves our agriculture, and our environment, at the mercy of a big corporation that has been steadily pushing us to overuse poisonous pesticides and herbicides that ruin our air, our water, and our land. Congress needs to act to undo this patent determination. See Kristina Hubbard, Monsanto’s Growing Monopoly: what the Supreme Court got wrong: patents on self-replicating seed are unethical, dangerous and anti-competitive, Salon.com (May 30, 2013).
Wow, it is good Linda did not have time to really write some commentary.