Tax loopholes unjustifiable by results
Needed -- a controlled burn in the tax code
The tax code is riddled with provisions that favor one industry or investment over another without any oversight or accounting of the costs. Incentives to lure companies to various locales fail to bring prosperity. We trim, blend, and append two 2011 articles on taxes from (1) Weekly Wastebasket, Apr 29 (Vol. XVI No. 17) by Taxpayers for Common Sense and (2) Jersey City Independent, Apr 27, by Jon Whiten.
by Taxpayers for Common Sense and by Jon Whiten
Taxes a la mode
BP was able to save $13 billion on their taxes by writing off their losses associated with last summer's Gulf of Mexico oil spill. Not only were we left with an environmental disaster in the gulf, diminished economies in the neighboring states, and the use of federal resources, but the federal budget sank deeper into the red because BP could write off its losses.
So it goes with the tax code, as it increases in complexity with more loopholes. The tax code is riddled with provisions that favor one industry or investment over another without any oversight or accounting of the costs.
For example, the home mortgage interest deduction has increased the cost of homes and contributed to the housing bubble while countries without similar tax policies -- Canada, England -- have roughly the same or higher rates of home ownership.
The deduction for employer provided health care plans, which has subsidized so-called Cadillac health care plans, helped render invisible to workers the true cost of health insurance and tied people to their jobs because of health insurance.
Like a forest never allowed to burn, the underbrush and debris pile up, choking out life and making it impossible to navigate. What we need is a controlled burn in the tax code.
This week, ExxonMobil announced that it made more than $10.7 billion in profits, roughly $5 million an hour for the last three months. We should rip all of the energy tax breaks. Oil and gas spent more than $30 million in campaign contributions during the last election and $150 million on lobbying in 2010. A pretty sound investment for their billions in tax breaks.
House Budget Chairman Ryan just the other day said, "subsidies for all energy companies need to be reduced or eliminated so that we can get government out of the business of picking winners and losers in the market." Hear, hear.
JJS: Time for Congress to quit yappin' and get cuttin'. Same goes for the states, too.
Incentives Used to Lure Companies to Jersey City
“A Surge in Subsidies,” released by New Jersey Policy Perspective (NJPP), says that despite the state’s “unprecedented spending spree” of $822 million on business subsidies over the past 15 months, few jobs have appeared. The report targets the entire alphabet-soup of the state’s subsidy programs: the Business Employment Incentive Program (BEIP), the Business Retention and Relocation Assistance Grant (BRRAG), the Economic Redevelopment and Growth (ERG) program, and the Urban Transit Hub Tax Credit (UTHTC).
Several of these programs have been used to lure companies to Jersey City recently; the NJPP report notes the $14.6 million ERG grant to New York-based Depository Trust and Clearing Corporation (DTCC), which was part of a nearly $90 million incentive package used to lure the company to Jersey City. As a result of the incentives, DTCC plans to move 1,600 jobs to a Newport office building in 2013.
The report also cites the $3.7 million BEIP grant given to Jersey City-based Atlantic Coast Media Group; that company’s CEO said in September that its “hiring of 153 New Jersey employees is a direct result of the state’s assistance,” and that it planned to hire at least 140 more employees as a result of the BEIP grant.
Proponents of the subsidies and local officials have long touted the trickle-down effect that the tax breaks and grants have on the local economy, in service-sector employment, and the real estate market. But the report argues that the logic of these business subsidies is not only faulty at its “trickle-down foundations,” but that it “misinterprets the job situation in the current economy”:
“With big productivity gains and stagnant wages, many big businesses are sitting on huge cash hordes. What’s keeping these newly flush businesses from hiring, according to a number of prominent economists, is skepticism about the economy’s ability to sustain even minimal growth now taking root.”
NJPP argues that benefits have to be weighed against costs to the state. “In the case of these tax four programs alone, the state is conceding $822 million in revenue over the next 10 to 20 years,” the report reads. “That’s more money than the state collects in a year from the gasoline tax. It’s the same amount the governor cut in school funding for the current fiscal year.”
To see the whole article, click here
JJS: That one break above -- BEIP -- means a company gets to deduct taxes from the wages of new employees but does not have to pass the revenue on to the state. So why even have a state? Business pretty much runs the show, why bother paying taxes to governments that favor a few over the entire society?
We’ve had the separation of church and state; perhaps it’s time to have the separation of state and business. Have government just recover the commonwealth by charging dues for titles to land -- without using taxes -- and instead of subsidizing insiders, pay everyone an equitable dividend.
It’s called geonomics and it has worked wherever tried.
Editor Jeffery J. Smith runs the Forum on Geonomics.
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