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Altaf Rahamatulla on April 14, 2011 - 11:04am
At the end of March, the New York Times published an explosive story finding that General Electric (G.E.), the nation's largest company which reported $5.1 billion in profit last year from operations in the U.S., would not pay a dime in federal taxes. Similarly, ExxonMobil posted profits exceeding $45 billion last year, but as a result of aggressive tax avoidance strategies, paid no federal income tax in 2009. Almost as shockingly, in a 2008 report, the Government Accountability Office discovered that two out of every three U.S. corporations paid no federal income taxes from 1998 through 2005.
These stories mirror a general trend at both the state and federal level that will be on the minds of many taxpayers as they send in their returns this week: at the same time that income inequality, joblessness, and the economic insecurity of the middle class has grown, corporations have been contributing less and less of their fair share in taxes.
In 1955, corporate taxes represented over 27 percent of federal revenue; today that figure has dropped to just under 9 percent. Jeff Immelt, the CEO of G.E. and head of the Obama administration's Council on Jobs and Competitiveness, commented on his company's tax liability, "we do like to keep our tax rate low,” and further explained that corporations “hire armies of tax lawyers to understand how [the tax system] works and to take advantage of the various loopholes that exist that are legal in order to reduce their tax burden.”
DEMOS recently provided this comprehensive graphic depicting this decline:
Source: DEMOS, Loophole Land: Time to Reform Corporate Taxes
States have also been losing billions of dollars from declining corporate tax revenue. As a percentage of total state tax revenue, the corporate income tax has dropped significantly. The Center on Budget and Policy Priorities has found that the share of total state tax revenue generated by corporate income taxes dropped from 10.2 percent in 1979 to 6.5 percent in 2005. This decline has been coupled with right-wing proposals to drastically reduce or even eliminate corporate income taxes at the state level.
Just as corporate taxes have fallen, corporate profits have reached record heights. What's more, the richest Americans continually increase their share of the country's wealth. The top 10 percent of earners in the US control almost half of all income. This disparity is heightened by the stark regressivity of state tax structures, which, on average, place a much heavier proportional burden on low and middle-income earners than the rich.
In a recent blog post, Good Jobs First explains how this shift has hit the middle class in a time of heightened economic pressures: “When large corporations pay less, households and small businesses have to pay more, or the quality of schools and other public services declines, or some of both. Something to think about as you prepare your state tax return.”
While Wall Street and the rich are enjoying historic profits, the economic downturn’s impact is still being felt by the average American as the middle class continues to struggle. Despite high unemployment and unprecedented state revenue shortfalls, there has been an alarming lack of any significant job creation or state fiscal relief proposals at the federal level. Since the midterm elections last November, lawmakers in Washington D.C have prioritized cuts to social, educational, and environmental protection programs, tax cuts for the affluent, and fiscal austerity for the rest – policies which undermine recovery in a sluggish economy. Mark Zandi, chief economist at Moody's.com, confirms that steep cuts weaken economic prospects in a recent analysis, stating that "given the economy’s halting recovery, it would be counterproductive for [significant spending] restraint to begin until the U.S. is creating enough jobs to lower the unemployment rate."
The mood at the federal level reaffirms that the terms of the policy debate have been perverted by decades of disingenuous and manipulative anti-government rhetoric on the part of conservatives. By the day, right-wing policy proposals at both the state and federal level become more egregious and injurious. If there was any doubt as to their intent, policy ambition, or lack of concern for any segment of society beyond the rich or large corporations, one need look no further than Wisconsin Congressman Paul Ryan's budget proposal released this month – labeled as "ludicrous and cruel" by Paul Krugman – which calls for Medicare privatization, enormous cuts to low-income safety net programs, slashing public investments, and undermining health care. The right's policy priorities at the state level have proven just as heinous – targeting worker's rights and slashing support for working families, students, and vulnerable populations.
Nevertheless, polling continually indicates voters' preference for progressive solutions to economic and fiscal challenges, including closing corporate tax loopholes, high-end income tax increases, ending inefficient corporate subsidies, and other measures, in order to promote the interest and economic security of the middle class and working families.
As tax day approaches, DEMOS and Our Fiscal Security are effectively highlighting that our taxes matter, providing revenue for schools, infrastructure, communication networks, and investment in long-term economic growth. As the rest of us contribute our fair share, corporations should be paying their fair share as well.
Full Resources from this Article
Center on Budget and Policy Priorities – States Continue to Feel Recession’s Impact
This article is part of PSN's email newsletter, The Stateside Dispatch.
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