Clearing Up a Confusion
How to Tax Corporations Fairly
Income taxes are not the best way to get public revenue. Innovation and effort should go into productive activities, not finding loopholes in tax laws. Here is a confused editorial that appeared this week, followed by a razor-sharp response from Progress Report reader Wyn Achenbaum.
Companies should pay their fair shareOur position is: Any company that earns a profit should be fairly taxed.
When it comes to statistics as to whether corporations are paying their rightful share of taxes, it's difficult to get at the truth.
According to a recent study, some of America's biggest, most profitable companies paid little or no corporate income taxes in the past three years. Among the 275 Fortune 500 companies reviewed by Citizens for Tax Justice, taxes paid were down, even as profits were higher.
Although an earlier congressional study also found that 61 percent of U.S. corporations paid no federal income taxes from 1996 to 2000, many critics say the studies are inaccurate or misleading. Eli Lilly and Co., for example, disputed criticism that it cut its maximum tax rate from 35 percent to 12.2 percent. Company officials argue that its actual tax rate was around 21 percent during the period, and any savings went into research or job creation. A Cinergy spokesperson said its tax rate was 25 to 36 percent during the period, not the 9.4 percent that the "politically motivated" report claimed.
Nevertheless, overall corporate taxes as a share of the nation's economy have fallen to their lowest level since World War II. Perhaps most disturbing, however, is that the reports suggest companies are not treated alike. Because of a growing number of loopholes, highly profitable companies in some sectors are largely avoiding taxation while others pay heavily.
Stripping away all of the tax dodges and substantially lowering corporate tax rates would be more equitable and make U.S. companies more competitive internationally.
It is ironic that as the alternative minimum tax ensnares more middle-class taxpayers, highly profitable companies avoid taxes entirely.
Pending tax reform, that situation needs to be reversed. Any company earning a profit should be fairly taxed.
Copyright 2004 IndyStar.com.
A reply by Wyn Achenbaum:
To the Editor: You wrote, "Any company that earns a profit should be fairly taxed." I'd like to propose a radical -- and just -- alternative to your position.
Instead of penalizing the successful corporation for its success -- something they have been very able to evade, as witnessed by the reporting of David Cay Johnston, author of Perfectly Legal, let's charge them for what they claim for themselves from the commons.
First, let's charge them for the use of the prime downtown land that most of them favor. They favor it because it gives them the best chance of pulling employees from 360 degrees of commuting. They favor it because it is served well by transit systems paid for by others. They favor it because it is near the appealing places their top officers want to live. They favor it because supplier and clients can reach them. They favor it because it has services appealing to their employees.
Next, let's charge them for what they discharge into the environment, and for some portion of what their products cause their customers to discharge into the environment.
Then, let's charge them for the portion of the broadcast spectrum they claim as their own private property.
And let's charge them for scarce resources like airport landing rights. For example, LaGuardia airport at 8 am and 6pm are valuable landing and takeoff slots -- and they aren't creating more of them.
Similarly, our mineral and other natural resources belong rightly to all of us, and corporations which claim them owe the rest of us.
None of these assets can be hidden or taken offshore. None of the positives are created by the corporation. Let's ask our corporations and their officers and shareholders to be good community members, and pay the rest of us for what they use to generate their profits. Once they've paid us, they may keep those profits. They are legitimately private property.
We don't deserve a share of their profits. We do deserve compensation for the natural and community-created assets whose exclusive use they want.
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