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June 18, 2014

My followers know from dozens of my posts that there is a great mismatch between rich and poor in the way income is taxed in this country. It was not always thus. When the income tax was initiated following our amendment of the Constitution in 1913, some 100 years ago, it was designated to be a progressive tax. The idea was that the more you made the more you paid, which was a fair and equitable means of interpreting the statute both then and now. That progressive idea is still in evidence, as a cursory glance at the tax tables attests. Each little increase in taxable income means that the taxpayer must cough up additional tax to our treasury – so far, so good. So what’s the problem?
The problem is that we have destroyed the idea of progressive taxation by redefining business income into little niches subjected to varying rates of taxation, adding new and increased deductions and credits to arrive at “taxable” income etc. etc. etc. Examples of how corporate and investment and banking interests have captured and fashioned the internal revenue code to fit their respective profit and loss statements abound. (The internal revenue code, like no other federal statute, is amended on average of once a day!) Globalization of production and financing has afforded American corporations and Wall Street banks opportunities to fine tune the code (via willing congress people) so as to reduce, offset, take a deduction or credit against, or (if a “home office” is established in the Caymans or Ireland or other tax havens), claim no tax is owing at all on income derived from offshore operations. GE with its 2010 return is the best example I have run across (though I’m sure it’s one of many).
GE now admits that the majority of its business is conducted overseas (though of course it wants patent protection and military cover and other such subsidies provided by the rest of us for their activities both here and abroad – it just doesn’t want to pay for them, which leaves us, who have no patents or overseas business, the bill). In 2010 GE reported several hundred million dollars in corporate profits from overall operations but filed a corporate return here which, thanks to imaginative tax lawyers and creative accountants, netted them a REFUND OF 3 BILLION DOLLARS!
We paid it. That’s money out of our pocket because we have to make it up either through paying increased taxes or adding to our long term deficit, which we are also liable to pay. Final result? We of the poor and middle class subsidize and even pay GE for the privilege of assuring that they are a profitable and bonus-paying corporation, even though a majority of their business is conducted overseas. Such a policy of rewarding American corporations for having overseas operations to play off against their domestic tax liabilities also encourages them to do even more business overseas, thus adding to our unemployment here, so it’s a double whammy. We are called upon to pay more taxes because we reward such corporations for moving their operations overseas in many and diverse ways, tax preference being only one of such subsidies for these corporate welfare recipients.
Consider also the quality of the jobs being exported. Typically they are in manufacturing or other relatively high-paying jobs. That means that when we see that there has been an uptick in employment here, we should take it with a grain of salt. When you exchange high-paying jobs (and the increased taxes paid in) for relatively low-paying jobs such as retail clerks, fast-food workers et al. (and the low taxes such workers pay into our treasury), you have a triple whammy. We have less overall ability to subsidize the corporate and banking/investment classes when their demands for subsidies are increasing. This is not an economic model that can be sustained over time; you can only get more out of less for so long, and then you have to raise taxes and/or cut social programs so that we can keep this corporate welfare charade in place. Corporations and the superrich first, people last. That’s our policy.
Are you ready for a quadruple whammy? Here it is. Per an April study of restaurant pay, the Institute for Policy Studies in a report entitled “Restaurant Industry Pay: Taxpayers’ Double Burden,” found that almost 60 percent of food-service workers are classified as low wage, the highest percentage in any industry. They are literally at the bottom of the food chain in our struggle to end wage inequality. The report finds that big corporate restaurant chains pay their workers so meagerly that more than half of the front-line, fast-food workers in the nation rely on at least one public-assistance program, such as Medicaid or the Supplemental Nutritional Assistance Program (food stamps).
The report further finds that as a result of such poor pay taxpayers (the rest of us, but not excluding fast-food workers who may pay at least some taxes into our treasury) contribute 7 billion dollars a year in social welfare subsidies to an industry that recorded 683 billion dollars in profits in 2013. Let’s see, now. The industry, which is so hard up that they only made 683 billion dollars in profits for the taxable year needed a subsidy of 7 billion dollars from you and me? What? Why should we pay their help to keep body and soul together while they are immersed in huge profits? This certainly puts the current issue of wage inequality in focus; these hugely profitable corporations could well afford to pay their workers twice what they are now paying them and still be profit factories.
Since whammy subsidies for corporate welfare are endless, let’s move on to the quintuple whammy, reserved for Part II (as this post is long enough). Hint – it involves a tax break for the executives of the twenty largest corporate restaurant chains which we also subsidize (in addition to the 7 billion dollars we pay their employees – 7 billion dollars the food chains should be paying but for bottom line greed).
Angry yet? If not, tighten your subsidy seat belt for another giveaway trip from you and me to an industry that made 683 billion dollars in profit last year. I hear much complaint from these corporate welfare recipients about welfare for the poor; they urgently need to look in the mirror. How far can greed go? We’ll take a look in Part II. Stay tuned. GERALD E


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