Tag Archives: taxes

While Partisans Fiddle…

Congressional Republicans and Democrats continue to do battle over taxes, with most Democrats advocating a moderate hike in the rates paid by those making over 250,000/year, and the GOP insisting that a raise in (historically low) rates amounts to “class warfare.”

It’s a classic conflict between irreconcilable worldviews: rightwing Republicans label taxation for anything other than military spending and corporate welfare as socialism;  the more radical see taxation as theft. Democrats respond that taxes are the dues we pay for civilization.

Meanwhile, we have stalemate.

I wonder if the antagonists might be able to “cut the baby,” Solomon-like, by agreeing to pursue corporations actively evading their civic responsibilities.

The largest American multinational companies parked an additional $206 billion of profits in offshore accounts last year, according to Bloomberg, bringing the total amount of profits stashed where U.S. tax officials can’t touch them up to about two trillion dollars.

 The 307 companies that Bloomberg examined now hold a combined $1.95 trillion offshore, allowing them to avoid paying U.S. taxes on those earnings. The majority of the total is concentrated in just a few corporate hands. The largest 22 of those companies hold more offshore than the other 285 combined.

 Surely, even the purveyors of  “makers and takers” rhetoric can see how wrong this is. After all, the corporations playing these games are shifting the tax burden to those who aren’t able to do so.

Talk about theft.

 

 

 

 

Listen Up, Mr. Me Myself and I….

Okay–it’s cold and snowy and I’m old and cranky and in a bad mood. But this is the sort of attitude that just sends me over the edge!

A commenter responding to yesterday’s post about drug testing TANF recipients said, and I quote: “Government has no business in supplying food stamps, or any other of my earnings to those who did not earn it. Period.”

This is a standard meme employed by self-styled libertarians, the folks who like to equate taxation with theft and scorn recipients of social welfare programs as “takers” and “losers.”

I think the rest of us should make a deal with people like Mr. Clueless. Here’s my proposal:

You don’t want your hard-earned money going to the “takers”? Fine. You can keep every penny you earn. But you can’t drive on the streets that we suckers (er..taxpayers) paved. You can’t attend the public schools or universities we support. When trash collection day comes around, we’re going to skip your house, and if a real thief comes for your possessions, the police we support with our tax dollars aren’t going to respond.

If your house catches fire, tough. Hope you have a hose–and a private water supply. When you go to the grocery, you can’t buy any meats and vegetables that have been inspected by  government agencies that our taxes support. If you get sick, don’t expect to be treated by a doctor we educated in a hospital we built.

Go buy all of those services–and the others that we supply and you take as your due–in the private marketplace. If you can.

And if the unthinkable (at least unthinkable to you) happens, and you fall on hard times, you’d better hope for charity, because we’re going to respond with the same human compassion and understanding of social obligation that you’ve displayed.

You see, the real “takers” are the people who unthinkingly accept all the benefits of a social infrastructure, but who whine when they’re asked to pay their fair share.

What Am I Missing?

I have to admit I frequently listen to a political or policy discussion, and have what might be called a “duh” moment–wondering why I see a rather obvious approach that everyone  else is ignoring.

This week, Governor Pence announced that state revenues have fallen below budget estimates for the past few months, and the only remedy is to cut funds to education and state agencies and sell the state airplane. Leaving aside the airplane gesture (a one-time, largely symbolic “sacrifice”) why is the administration focusing on cutting services rather than delaying or foregoing its beloved tax cuts?

There are two ways to handle revenue shortfalls, after all–cut expenses or raise revenue.

Despite the fervent belief that lower taxes stimulate the economy and foster job growth, there isn’t an iota of evidence supporting that belief. Indiana is already one of the lowest-tax states in the Midwest, our economic indicators still lag those of our higher-tax neighbors, and the case for continued tax cuts is thin, to put it mildly. (Indeed, research indicates that quality of life drives economic development; continued service cuts that diminish quality of life indicators–far from stimulating the economy– are probably counterproductive.)

Then there was the research report presented at a recent meeting of the Advisory Board of the Institute for Working Families. The subject was paid sick leave, which relatively few Indiana employers offer. When researchers talked to those who opposed a law requiring a sick-leave benefit, they found that the major objection wasn’t to paid sick leave, it was to the idea of a government mandate. (Don’t tell me how to run my business!!)

If the objection is to the use of a stick, why not offer a carrot? Why not give a tax deduction or other incentive to employers who voluntarily decide to offer paid sick leave? Avoid the mandate, but reward the desired behavior.  Evidently, such an approach hasn’t been considered.

My grandmother used to say there’s more than one way to skin a cat.

What am I missing?

Revenue Enhancement

A couple of days ago, a former partner of my husband copied me on a message he sent to his City-County Council representative. It began:

Today we were the recipients of an unannounced revenue enhancement effort “inspection” by a member of the Indianapolis Fire Department, acting under authority of General Ordinance #46, supposedly under the guise of State law.

The message went on to describe a Fire Department program in which individual tenants of commercial buildings were notified of an obligation to “self-inspect” their leased premises –and charged $25 each for that dubious privilege. Those failing to respond were assessed a $60 fine.

The owners of the building were not notified, despite the fact that they would seem to be the parties responsible for maintaining fire safety standards. And as the writer noted, tenant “self-inspections” are unlikely to generate confidence-producing results.

What particularly irked my correspondent–a registered architect who has to comply daily with fire safety regulations–was the fact that the building in which he has his offices is fully sprinklered, has a supervised alarm system, and is regularly inspected by the State Fire Marshall.

The purpose of these laughable “self-inspections” is rather obvious, and it isn’t fire safety. It is, as he asserted, “revenue enhancement.”

The City’s taxing authority has been constrained (unwisely, in my view, but that is a separate conversation), so it is trying to compensate by raising “fees.” The difference between a tax and a fee is that the former is levied on the population at large in order to provide services that benefit the entire citizenry; fees–at least in theory–are levied on the people benefitting from the service.

Fire safety is a good example of the elasticity of this theory. Many years ago–in colonial times, actually–fire protection was a consumer good. Fire departments (privately owned) would respond to fires at the homes of those who could afford the “insurance” they sold. That didn’t work very well, as you might imagine, and lawmakers recognized the benefits of providing “socialized” fire protection.

Thanks to America’s current hysteria over taxation, we seem to be moving back to the bad old days. Affluent neighborhoods are hiring their own “security” in the absence of adequate police protection. And now, we’re evidently going to use a “safety program” to charge commercial occupants for a portion of their fire protection.

This isn’t progress, folks.

Maybe its time for a community-wide discussion of what government is for.

 

 

 

Perverse Incentives

I know this chart has probably been floating around the Internet for a while, but I recently came across it, and it really made me think.

The chart lists 30 major corporations, their profits for 2011, the amount of taxes each paid that year, and the amounts they paid lobbyists. A majority of those listed  paid zero taxes on massive profits, thanks to various provisions of the tax code. Many of them actually got money back, again, courtesy of those same arcane provisions. Virtually all of them spent millions of dollars lobbying the federal government; in every case, the amounts spent to influence policy far exceeded the amounts paid in taxes.

What’s wrong with this picture?

There are often sound reasons for using the tax code to encourage behaviors that benefit the greater society. If we want more energy, for example, and we recognize that the costs of exploration and the risk of coming up dry are high, it makes sense to provide a tax incentive to ameliorate that risk. If we want businesses to modernize, to invest in equipment that will make them more productive, offering them the ability to write off those investments over the useful life of the equipment is reasonable. There are many other examples.

The problem comes when the incentives bear no reasonable relationship to the behaviors they are intended to encourage–when those well-compensated lobbyists manage to persuade lawmakers to favor their clients by inserting special provisions in the law or special treatment in the tax code. In the case of oil and gas, for example, companies have not only benefitted from obscenely favorable tax provisions, but have negotiated leases of public lands on terms that have been widely criticized as giveaways.  Here in Indiana, Leucadia–a politically well-connected energy company–will benefit from a 30-year agreement with the state that effectively shields the company’s new coal gasification plant from unfavorable market conditions. 

Leucadia is hardly an isolated example. There’s a reason someone coined the term “crony capitalism.”

The well-connected and powerful have always been able to influence policy. To a certain extent, it’s an unavoidable aspect of human society. But in 21st Century America, we are dangerously close to corrupting the system, eviscerating checks and balances, and institutionalizing a caste system. Recent studies have documented America’s depressing loss of social mobility. Headlines routinely report the self-dealing of Wall Street bankers and financiers, along with the outrageous salaries and bonuses that bear no relationship to their performance. Jack Abramov, the disgraced lobbyist whose name has become synonymous with K-Street and Washington deal-making, is trying to rehabilitate his reputation in interviews sharing “chapter and verse” of influence-peddling in the nation’s capital, and the picture he paints is not pretty.

Local business-people, shop-owners, mom-and-pop enterprises and other middle-class Americans go to work every day, follow the rules, and pay their taxes when due. They don’t have agents working the halls of the legislature to get them special deals. They don’t have hundreds of thousands of dollars to contribute to Super-Pacs, and Citizens United didn’t free them to donate megabucks to buy a Congressman or two.

Shouldn’t the major corporations that are profiting so handsomely also be paying taxes to the country that makes those profits possible? Those companies depend upon workers educated in our public schools. They rely on our courts to enforce their contracts. Their trucks drive on roads paved by American taxpayers. Tax-supported police and fire-fighters protect their warehouses. Why do they prefer to pay millions to lobby for special advantage rather than simply using that money to pay their fair share of the costs to maintain our physical and social infrastructure?

What are the incentives that lead those who are already rich and privileged to seek even more by gaming the system?