We Don't Need to Shut Down the Government: Tax the Wealthy and Deadbeat Corporations to Close Budget Gaps
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Before any government shutdown–or drastic state and federal budget cuts –we should reverse huge tax cuts for the wealthy and deadbeat corporations.
When you hear politicians lament that “we’re broke,” consider this fact: If corporations and households with $1 million income paid at the same levels they did in 1961, the Treasury would collect an additional $716 billion a year – or $7 trillion over a decade.
Our communities are facing mammoth state and federal budget cuts because Congress has, in large part, failed to sufficiently tax America's millionaires and billionaires or prevent aggressive tax avoidance by multinational companies. The rest of us are paying to pick up the slack in budget cuts and future taxes.
There are two primary explanations behind our current budget “squeeze.” First, income and wealth have become extremely concentrated in the hands of the super-rich. The richest 1 percent of households own over 35.6 percent of all private wealth, approximately $20 trillion. The number of households with incomes exceeding $1 million has grown from 15,753 in 1961 to 361,000 today, adjusted for inflation. Meanwhile the middle-class standard of living is collapsing and poverty rates are at a 15-year high.
Second, we’ve dramatically reduced taxes on the super-rich and global corporations. A new report by the Institute for Policy Studies, “ Unnecessary Austerity, Unnecessary Shutdown” (which I coauthored), chronicles 50 years of tax shifts off of the wealthy and multinational corporations onto middle-class taxpayers and small businesses. The report’s finding include:
- Households with incomes over $1 million in 1961 paid an average 43.1 percent of their incomes in federal income taxes. Today, households with $1 million income pay 23.1 percent, almost half as much, adjusting for inflation.
- If households with income over $1 million today paid their federal income taxes at the same rate that comparable households paid taxes in 1961, we would this year raise an additional $231 billion.
- If U.S. corporations paid at the same effective tax rate that they paid in 1961, the additional tax revenue would total $485 billion.
- In 1961, small business owners and individuals paid twice as much in federal income taxes as large corporations. By 2011, small business owners and individuals will be paying nearly five times in taxes what corporations pay.
Congress and special interest lobbyists have made mincemeat of our tax code, losing hundreds of billions in revenue. Worse, lawmakers have averted their eyes as corporate lobbyists drill new tax loopholes and extract new corporate welfare subsidies.
That’s how a profitable company like General Electric aggressively avoids taxes. Since 2006, General Electric has reported over $26 billion in profits, yet paid not one penny in U.S. taxes.
Other huge global companies such as Verizon, Boeing, ExxonMobil, and Federal Express also pay no or very low taxes. These artful tax dodgers use accounting gymnastics to move money to overseas tax havens like the Cayman Islands or Ireland. They pretend to earn their profits offshore and then report their paper losses here in the United States—reducing their responsibility to Uncle Sam.
The “Unnecessary Austerity” report identifies over $4 trillion in potential revenue over the next decade. Closing offshore tax havens could generate an estimated $100 billion a year. Adding new top tax brackets for millionaires could generate another $60-80 billion. Instituting a financial transaction tax could generate $150 billion a year.
This month is the first salvo in a multi-year battle over the role of government and the quality of our lives. At each step, we’ll need to remind lawmakers to reverse irresponsible tax breaks before budget cuts and shutdown theatrics.
Before we lay off another worker, we should heed the message from US Uncut, the feisty direct action movement emerging in different communities around the country: “Before you cut, make the tax dodgers pay up.”
Chuck Collins is a senior scholar at the Institute for Policy Studies and chair of the Working Group on Extreme Inequality , an emerging coalition of religious, business, labor and civic groups concerned about the wealth gap. He is coauthor with Bill Gates Sr. of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes .