Sunday, September 25, 2011

Unnecessary Tax Cuts, Unnecessary Austerity

"We're broke!" Or so claim Tea Party governors and lawmakers all over the country. Our states and our nation can no longer afford, their plaint goes, the programs and services that Americans expect government to provide. We must do with less. We need "austerity."

But we're not broke. Not even close. The United States of America is awash in wealth. The richest 1% of Americans and our largest multinational corporations are hording a record treasure of several trillions of dollars in cash. The Federal Reserve reports corporate cash balances alone grew to $2.05 trillion in September 2011 on a quarter over quarter cash reserve growth rate of nearly 5 percent.

Doling out yet more tax cuts to the richest 1% of Americans and our largest multinational corporations will not induce them to use their already huge treasure trove of cash to create new jobs or move the jobs they have already off shored back to the U.S.

Twelve major corporations made $171 billion in profits from 2008 to 2010, yet had a negative income tax rate of 1.5 percent according to a Citizens for Tax Justice report. And, in 2010 alone, the tax bill of General Electric, the nation’s largest corporation with reported worldwide profits of $14.2 billion, $5.1 billion of which came from its operations in the United States, according to David Kocieniewski's New York Times article, “G.E.’s Strategies Let It Avoid Taxes Altogether.”

The truth is, the three decades after World War II were the nation’s most prosperous, in spite of the astounding debt level that resulted from the war and higher tax rates on the richest Americans. In the 1940s, co paid 43 percent of all the federal income taxes collected in the U.S, but in 2010, that percentage was only 8.9 percent says Joshua Holland in his Alternet article, “Paul Krugman Is Right About Our ‘Low, Low Taxes,’ but There's More to the Story.”

Reversing the Bush tax cuts for the super-rich and giveaways to the nation's largest multinational corporations could raise $4 trillion within a decade and avert the need to further "cut" the nation's Social Security, Medicare, Medicaid, public K-12 school, college student aid, law enforcement, and road and bridge maintenance funding.

Why do "deficits" dominate our political discourse? What explains the red-ink hurricane now pounding government budgets at every level? There are two prime drivers behind our current budget "squeeze."

  1. We have indeed become wealthier than ever. But our wealth has become incredibly more concentrated at our economic summit. U.S. income is cascading disproportionately to the top.
  2. We are taxing the dollars that go to our ever-richer rich — and the corporations they own — at levels far below the tax rates that America levied just a few decades ago. We have, in effect, shifted our tax burden off the shoulders of those most able to bear it and away from those who disproportionately benefit from government investments the most.

These two factors — more dollars at the top, significantly lower taxes on these dollars — have unleashed a fiscal nightmare:

  • 15,753: The number of households in 1961 with $1 million in taxable income (adjusted for inflation).
  • 361,000: The number of households in 2011 estimated to have $1 million in taxable income.
  • 43.1: Percent of total reported income that Americans earning $1 million paid in taxes in 1961 (adjusted for 2011 dollars)
  • 23.1: Percent of total reported income that Americans earning $1 million are likely to pay in taxes in 2011, estimated from latest IRS data.
  • 47.4: Percent of profits corporations paid in taxes in 1961.
  • 11.1: Percent of profits corporations paid in taxes in 2011.
Research by Beverly Bandler

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