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THERE’S NO FREE LUNCH – SOMEBODY MUST PAY

April 24, 2013

THERE’S NO FREE LUNCH – SOMEBODY MUST PAY

When politicians are in charge of the peoples’ money (I write “people’s” advisedly since we the people provide the lion’s share of taxes collected with the fall of corporate tax from 22% to 10% of total tax collected during the past few years), one would assume that these politicians would pay attention to the wants and needs of the people first and the corporate world second. After all, we the people are paying almost all the bill for the politicians to run the government and its programs, so it’s only fair. But not so – the corporations get what can only be called a free lunch – and guess who gets that bill, too?

It’s the same people who are providing by far the biggest share of taxes collected. Ordinary non-corporate people (we have to distinguish since Citizens United held that corporations are people) are called upon to endure a double whammy. We pay our own bills and much if not most of those of corporations as well, whether through internal revenue code giveaways, free power grids, employees educated on taxes we pay, local taxes that are forgiven in return for their locating in the community, advantageous zoning amendments etc. The list is endless, but probably the biggest subsidy we taxpayers give these corporate welfare recipients is via the internal revenue code.

There is not enough time and space to enumerate all such subsidies. Corporate loopholes in the internal revenue code come in festoons – that code is amended on an average of once a day! I will give as the first example one that is particularly galling to me – carried interest.

Our first mistake is to allow corporations (via their K Street lobbyists and imaginative accountants) to dream up such fantasies as “carried interest” and insert it in the code via their captive tax writers in the House. Carried interest is nothing more than ordinary income gussied up to be treated as “capital gains” for hedge and equity fund vulture capitalists, among others.  Such income is taxed at a much lesser rate than it would be taxed if treated as ordinary income. “Commissions” earned by such vulture capitalists in the course of dismembering other corporations (which are clearly ordinary income) are nevertheless given a name of “carried interest” and taxed at capital gains rates. Shoe and refrigerator salespeople who are paid “commissions” enjoy no such tax favoritism – their income is taxed at ordinary income rates. Ordinary income is ordinary income, whether by salary or commission.

Treatment of income from international sources is claimed by corporate accounting wizards as having been earned in other countries (even when not) and credited to subsidiaries there or to tax havens here and there, wherever the tax load is lowest (some such havens have no taxes at all).

Loopholes abound in the internal revenue code in the form of credits and deductions and other accounting devices to reduce exposure to taxation in the first instance. There are tax and trade treaties to be observed with foreign countries, some of which override our own laws (since treaties are on a par with the Constitution itself). Multinational corporations can stack up profits from overseas in tax havens while negotiating rate of tax with the IRS on such profits as they may choose to repatriate.

I could go on and on, but the reader will, I hope, get the idea from the short examples I have cited above. You and I used to pay 78% of the total tax load; now we pay roughly 90%. Corporations used to pay 22% of the total tax load; now they pay 10%. We are going on welfare to pay for theirs. GERALD  E

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