CLOSING TAX LOOPHOLES TO CORPORATTONS COULD EARN TRILLIONS of TAX DOLLARS IN AMERICA immediately
By Kevin A. Stoda
According to many media experts and Democracy Now [DN] ,"In their coverage of Wisconsin Gov. Scott Walker's attempt to undermine public workers' unions, many journalists have [often] parroted Walker's claim that unionized state workers get their pensions "subsidized" by the state." DN spoke last week "with investigative reporter and Pulitzer Prize-winner David Cay Johnston, who counters the assertion that pensions are costing taxpayers by pointing out that the workers themselves contribute 100 percent in deferred compensation. Johnson's latest article is called, "Really Bad Reporting in Wisconsin: Who 'Contributes' to Public Workers' Pensions?'"
Here are some of the main points from that interview with D.C. Johnson which ALL AMERICAN TAX-PAYERS need to understand:
(1) [T]he Governor really wants to cut their wages. And instead of saying, "I want to cut the wages of these people," he has used this false argument [that the so-called benefits should not be considered earnings for labor contributed]." This BIG LIE had led to "an enormous amount of vitriol against teachers and police officers and how they're all parasites. And it's astonishing to me how successful he's been in demagoguing this."
(2) click here
DAVID CAY JOHNSTON: Well, corporate income taxes in this country [the USA] are one-third lower than they were in 2000--that's in my column this morning at Tax.com--even though corporate profits are up 60 percent and corporations have almost $2 trillion in cash. They're approaching $7,000 of cash for every man, woman and child in the United States. They're not investing this money. They're not creating jobs. They are hoarding this money that they have pulled out of the economy. It's one of the reasons we're in so much trouble.
Now, as to the argument that our tax rate is too high, it is because of all these special favors. The reason the tax code has grown and grown and grown and grown and grown isn't because of people like you and me and the audience; it's because of all these favors being bought from politicians. At Tax.com, we have something called the Shelf Project, and eminent authorities in tax have shown how we could raise a trillion dollars a year--that would double the revenue we get, it's equal to the revenue we get from the individual income tax--by shutting down loopholes and favors for businesses, particularly the oil and gas and pharmaceutical industries. The fact is, the very largest corporations, the ones who are the vast majority of wealth in America, they pay an effective tax rate of about 15 percent of their profits.
And one fundamental truth people need to know, Amy, you can't have an individual income tax if you don't have a corporate income tax, because otherwise, wealthy individuals who own businesses will simply live off their business, and the businesses will become storehouses of untaxed wealth. That's one of the big problems in our tax system. You know, the hedge fund manager John Paulson made $9 billion in the last two years. Unless he chose to take money out of his plan, he pays no taxes on that money. You can make a billion dollars or $5 billion a year in a single year and pay no taxes for years or decades into the future, while working people have their taxes taken out every week.
DAVID CAY JOHNSTON: Revenue.
DAVID CAY JOHNSTON: Well, there's another column of mine at Tax.com--I'm sorry to sound like an advertising machine--that shows that in--since from 1961 to 2006, the very highest income taxpayers have had their tax burden reduced 60 percent, while everybody else has had a reduction of 20 percent. And it's the incomes at the top that have exploded. The corporate tax rate used to be 50 percent, now it's 35 percent.
And let me make what I think is a very important counterintuitive argument. When tax rates are low, I believe there is a sound argument that it destroys jobs. The reason is, you--imagine for a moment you're a plutocrat, that you're very, very, very wealthy and you own a business and your spouse wants to buy a Modigliani painting to hang in your living room that costs $85 million. If the tax rate is 50 percent, it's going to cost $170 million to get that painting. If the tax rate is 15 percent, it only costs $100 million. You're far more likely to withdraw the $100 million than the $170 [million]. We used to have a high corporate tax rate as a way to coerce and encourage owners of businesses to reinvest in the business, which creates more jobs. We've now replaced it with a system that encourages them to withdraw money and not reinvest it. And that's what the cash you're seeing is about. It's about the proliferation of corporate personal jets, not owned by the company, but by individuals, of people who own six and seven and eight and nine mansions. Remember, John McCain couldn't remember how many homes his family had. And so, low tax rates destroy jobs. They encourage withdrawals from business instead of encouraging owners to keep reinvesting in the business.