Sunday, July 14, 2013

Bernie's Proposal On Tax Fairness

Republicans like to whine about how corporations in the United States are taxed too heavily -- and they like to point to the top tax rate (about 35%) as proof. But what they don't tell you is that very few, if any, corporations pay that rate. In 2011, the average tax paid on corporate profits was only about 12.1% -- far less than most middle class Americans pay on their earned income. And some don't pay any taxes at all (in spite of earning huge profits). They have been able to do this because of tax subsidies and loopholes provided for them by the GOP, and because they hid huge amounts of profits overseas to avoid paying taxes on them.

Note also (in the top chart above) that the taxes paid by American corporations as a percentage of Gross Domestic Product (GDP) has dropped sharply in the last 60 years -- from about 6.1% in 1952 to about 1.6% in 2012. That's a much smaller tax burden for corporations in the U.S. than that paid by corporations in other countries (see bottom chart above).

The truth is that American corporations are not overtaxed -- they are under-taxed. American corporations are currently making record-breaking profits, and their tax burden is lower than it has been in decades. The Republican argument that these corporations need to pay even lower taxes is simply ludicrous. And it is at odds with their stated desire to cut the federal budget -- since the federal budget has already been cut to the bone (except for the military budget) and the bottom 90% of Americans are still hurting from the Bush recession (and can't afford higher taxes).

Senator Bernie Sanders (I-Vermont) has a solution -- a solution that would both promote tax fairness in this country and sharply reduce the federal budget deficit. Here are some of the things Senator Sanders has proposed in his new tax plan:

“Stop large corporations from stashing their profits in the Cayman Islands and other offshore tax havens to avoid paying U.S. taxes.  Legislation already introduced by Sanders would raise more than $590 billion over the next decade.”

“Establish a Wall Street speculation fee to ensure that large financial institutions pay their fair share in taxes.  A speculation fee of 0.03 percent on the sale of credit default swaps, derivatives, options, futures, and large amounts of stock would reduce gambling on Wall Street, encourage the financial sector to invest in the productive economy, and reduce the deficit by $352 billion over 10 years.”

“End tax breaks and subsidies for big oil, gas and coal companies to reduce the deficit by more than $113 billion over the next 10 years.  The five largest oil companies in the United States have made more than $1 trillion in profits over the past decade.  Exxon Mobil is now the most profitable corporation in the world.  Large, profitable fossil fuel companies do not need a tax break.”

“Tax capital gains and dividends the same as work.  Taxing capital gains and dividends the same way that we tax work would raise more than $500 billion over the next decade.  The top marginal income tax for working is 39.6 percent, but the top tax rate on corporate dividends and capital gains is only 20.”

I am not opposed to lowering the tax rate for corporations, and neither is Bernie -- as long as enough subsidies and loopholes are eliminated to insure that corporations actually pay their fair share of taxes. Bernie's plan makes a lot of sense -- which is exactly why it will be killed by the congressional Republicans. The GOP is far more interested in protecting their corporate buddies from paying taxes than they are in reducing the federal budget deficit or putting our economy back on the road to recovery.

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