G.E. and Corporate Tax Fairness

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         Three days ago, I posted a comment on G.E.’s lack of any tax liability this year.  People are chagrined.  Some are noting wryly that this effectively means every American owes G.E. more than $10 for its tax credit.     

          Actually, G.E’s free ride highlights a crucial fact:  The relatively low tax revenues provided by the very rich and by corporations is a major factor in their continuing accumulation of massive wealth at the expense of Americans in the declining middle class and below – the bottom 99%. 

         As carefully documented and explained by Barry C. Lynn, [1] in 1981 the Reagan Administration rather abruptly discontinued the enforcement of the anti-trust laws, permitting vast networks of monopolies to form.  This has resulted in a tightly compartmentalized, globalized economy run by financial interests who are driven primarily by potential gains from mergers and acquisitions, and ultimately monopoly prices, fewer choices and lower quality products for consumers. 

          This new economy, which is nothing like the economy that existed before 1980, poses some extraordinary risks for America, as Lynn explains.  Among other things, it also appears to have accelerated the accumulation of wealth at the top. It may also have affected the share of federal tax revenues received from corporations.  As the following table shows, the percentage of federal revenue contributed by corporations has 

 steadily fallen from over 30% in 1952 to down around 10% or below since 1980.  There has been fluctuation, and a steep decline in the last few years, with the percentage falling to around 6% in 2010.  We will endeavor to shed more light on the topic of corporate taxes.

         Here is what Michael Keegan, President of People for the American Way said today (3/28/11) about the declining levels of corporate tax responsibility:

          “Do you pay taxes? Guess who doesn’t: America’s largest corporation, General Electric. 

          “G.E. did not pay any taxes on their $15 billion in profits last year and instead got a $3 billion tax refund.  But it doesn’t end at G.E.   Senator Bernie Sanders of Vermont put out a Top 10 list of corporations with high profits and no taxes in recent years including Exxon-Mobil, Chevron, Bank of America, Goldman Sachs, Boeing and Carnival Cruise Lines. Over the last two years, Wells Fargo earned $37 billion in profits but got a $4 billion tax refund. And Hewlett-Packard reported over $9 billion in profits last year, but paid the same amount in taxes as someone earning just $30,000 a year.

          “This is not about business incentives, which are fine and can be valuable in helping to kick-start the economy. This is about a system gone completely off the rails in which corporations are getting an unnecessary free ride at the expense of everyone else.

          “Congress is on the verge of shutting down over Republicans’ demands for deep, draconian cuts to everything from public broadcasting and reproductive health to college loans and programs that feed poor children. So why aren’t increases in revenue, beginning with basic Tax Fairness for corporations, on the table too? Conservatives seem hell-bent on slashing funding for every program under the sun that helps ordinary Americans, including Social Security and Medicaid, just so they can protect corporations’ free ride.

           “The New York Times reported that corporate taxes made up 30 percent of all federal revenue in the mid-1950s, but as of 2009 were only 6.6 percent of total revenues. It’s not hard to see that closing loopholes and ending billions of dollars of giveaways in corporate welfare could solve most if not all of our budget problems. Don’t let this Tea Party Congress pay for corporate welfare on the backs of poor and middle-class families. Demand Tax Fairness Now! 

          “We need to change the conversation and now is the time. While Republicans, the media and too many conservative Democrats continue to play to the false narrative that deep cuts are necessary, including cuts to essential retirement and health care programs, everyone is ignoring the real elephant in the room: that profit-swollen corporations are shorting America and its taxpayers billions of dollars every year.  Congress can show they are really serious about budgets and deficits by making corporations pay their fair share, and making it the top priority over cuts.”  (Original emphasis.) 

          In this note, Keegan focuses on a crucial question everyone concerned with America’s future and survival should be asking themselves right now:  Why should large corporations with earnings in the billions of dollars (some of which no doubt greatly exceed the cost of capital needed to invest in their enterprises), be excused from paying taxes when we, their captive customers, are left to shoulder disproportionate tax burdens out of our meager earnings?

          As I explain elsewhere, this isn’t just about fairness.  It’s a matter of survival.  This game has played on for too long, and now the United States has become a feudal society, exactly what Americans have struggled since its creation, for over two centuries, to avoid.  Unless steps are taken soon to reverse the existing drastic income and wealth inequalities, an economic and social collapse that no right-thinking person could want will become inevitable.  

          The question now is whether Americans will stop listening to the false, self-serving propaganda about “free” markets and corporate benevolence and start standing up for themselves.  

JMH – 3/29/11

[1] Barry C. Lynn, Cornered: The New Monopoly Capitalism and the Economics of Destruction, John Wiley & Sons, 2010.

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