GOLIATH DOES NOT PAY TAXES
Comparing the tax rates of those on Main Street and those in the halls of power.
Can’t you feel it? Surely you must! It’s the most wonderful time of the year. Well, maybe it is for H&R Block or your friendly accountant around the block. However, for most of us, a feeling of dread covers the skies and our souls as April 15 nears. Who among us stares down at their tax return with anything else inside them but utter anxiety and repressed anger? We pay our taxes, but that doesn’t mean we like it. If you raise your head and look around the tax laws a bit more, you might find other things objectionable.
Recent reports suggest that the largest companies in the world pay the smallest amount of taxes relative to their income. In fact, almost one hundred of the biggest corporations in America paid absolutely no federal income tax at all. If this shocks you, consider these companies made north of $100 billion in pretax revenues. Nice tax rate if you can get it! Some of the most well-known corporations to evade federal tax collection entirely last year include the following: United Airlines, Tesla, Live Nation Entertainment (yes, the one who just got sued for price fixing), and PayPal. If only they had to pay the minimum statutory taxation rate of 21%, America could have recovered over $20 billion in tax revenue. If these companies had to pay a rate similar to many individuals across the nation, close to 30%, then that figure would rise well beyond $20 billion.
Adding insult to injury, these statistics do not even consider private companies. Many of these businesses get away with substantial tax reductions because of arbitrary distinctions in their profits. Specifically, individuals earning income through carried interest (long-term capital gains) are taxed at rates hovering around 20%, which is nearly half the amount they would pay if their earnings were considered ordinary income (money from traditional employment). Critics complain that this is loophole exploitation because most people taking advantage of this rule work in the financial industry and make their money almost exclusively through investments. In other words, their ordinary income is long-term capital gains.
Maybe this paradox was unforeseen when the tax rules were adopted. Although, any review of political lobbying practices over the last ten years casts doubt on the notion that this outcome was unintended. On the contrary, this is just yet another example of Wall Street pillaging Main Street. Is it not enough that they socialize their losses (remember 2008?) onto hardworking taxpayers? Must they also socialize their tax responsibilities onto them as well?
These facts are even more disturbing when you consider the burden that our tax laws—and by extension our federal government—ask ordinary Americans from Main Street USA to shoulder. For an average middle-class family in this country, with income around $60,000, they pay approximately $17,000 in taxes (federal, state, and local). Of that figure, nearly $10,000 goes to Washington. Think about how much more $10,000 is worth to an American family making only $60,000 versus a large corporation with billions and billions left over after paying comparable rates. The circumstances are even more deflating when you consider the meager savings of a typical family compared to such companies who have large reserves.
How did we get to a point where Goliaths are treated as Davids and Davids are treated as Goliaths on Tax Day? A number of provisions in the tax code allow this iniquity to exist and let these giant corporations off the hook (accelerated depreciation, R&D tax credits, foreign income deductions, and investment gains deductions, among others). This does not even consider conniving tax lawyers that spend hours upon hours looking for loopholes for their well-off clients to jump through in order to reduce their taxable income base when they’re not outright trying to stash the money in a more hospitable country so it cannot be taxed at all.
Where did these suspicious rules come from? The answer can be summarized in just three words: special interest lobbying. There are thousands and thousands of registered lobbyists (roughly 6,000) wining and dining members of Congress, and many of them took the revolving door from Congress itself to arrive at such an esteemed job. Of that number, about half lobby federal politicians on tax laws exclusively, almost ten lobbyists for every federally-elected official.
To be sure, it was not middle-class Americans making $60,000 a year sending these lobbyists up the Hill. As you might expect, many of those seeking to influence tax policy in America represent not the Americans that already pay a large share of the income they make (through whatever means) to the government but the corporations that profit off these Americans and then turn around and send little at all to D.C., thanks in part to the lobbyists they pay to lower their bills.
Where are the guardians of Main Street? Who is roaming the halls of Congress advocating for their interests and not the wealthy and connected? What could a regular American family do with an extra $10,000, especially in today’s market of extraordinary inflation? Putting this money back in the wallets of these individuals might even stimulate the economy to a greater degree rather than giving it to corporations so they can store it abroad. We will never know until someone stands up for Main Street.