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Don't close tax loopholes for just Big Oil
The US tax code -- a 70,000-page monstrosity -- includes huge loopholes for the richest businesses, shifting the burden to workers and everyone else. Congress should end the favors for all companies then start on the individual tax code, says one major paper. When major media makes sense, letís give them credit.
by the Editors of USA TodayPresident Obama and fellow Democrats believe they have a winning issue in going after $20 billion of tax breaks Big Oil is set to enjoy over the next decade. Ending the giveaways, they say, will strike a blow against corporate welfare and help trim the deficit, too.
Not surprisingly, the oil industry is grumbling. "A vindictive money grab," is how the head of the American Petroleum Institute sums up the effort.
In truth, it is all of those things, but mostly it is an example of the sort of political gamesmanship that substitutes for serious deficit reduction.
The $20 billion is real money worth saving, but it is just 1/200th of the $4 trillion that is widely seen as the minimum that needs to be found over the next 10 years.
Earlier this spring, Republicans indulged in their own game of Trivial Pursuit, cutting some minor agencies, such as public broadcasting, that weren't contributing much to the deficit but which they didn't much like. Now Democrats are saying, in effect, two can play at that game. They are trying to force Republicans to take the side of an industry about as popular as the flu. With gasoline at $4 a gallon, it's an easy target.
But the initiative is also government at its arbitrary worst, further complicating the tax code by singling out five companies -- ExxonMobil, Chevron, ConocoPhillips, Shell, and BP -- for special taxes not paid by smaller energy concerns, or by similar companies in other industries.
To raise revenue, Congress should rescind two big tax breaks that account for most of the $20 billion -- a credit for domestic manufacturers and a credit for taxes paid to foreign countries. But it should do so for all companies, not just five that make good political punching bags.
In fact, Congress should cut out numerous tax loopholes throughout the corporate code. The manufacturers' tax credit would be a great place to start. It was passed in 2004 in a law best described as an orgy of tax breaks handed out to favored industries that happen to contribute to lawmakers' political campaigns.
The only way to deter that practice is by an extreme simplification of the tax code -- a 70,000-page monstrosity that is a monument to wasteful, inefficient political manipulation.
If and when Congress overhauls the corporate code, it could also tackle the maddeningly complex individual code. In both cases, the additional revenue gained from eliminating tax breaks could be used to lower tax rates, raise revenue, and reduce time and dollars spent on tax preparation.
Supporters of singling out Big Oil point to the enormous profits the industry routinely reaps, particularly at times when consumers are suffering from high gasoline and home heating prices.
These companies certainly do make a lot of money. That is largely a function of their bigness, however, not of excessive profit margins. Reducing the oil companies' earnings will do nothing to lower prices at the pump.
Take away tax breaks for five enormously profitable companies? Sure. But do it as part of a deficit-slashing package of tax reform and spending cuts, not as a one-act piece of political theater.
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JJS: Along with loopholes, what about taxes themselves? Should we still have them? This long after the days of kings and conquerors? Government has the power, but does it have the right to take whatever it wants, from whomever it wants, as much as it wants? Could we do without taxes? They depend on coercion, and force is only rarely justified, as when defending rights. Could government operate like a business and raise revenue by offering goods and services that people would willingly pay for? This notion that government somehow has the right to toss people in jail if people donít give them money -- is there anything wrong with this picture? Could we at least make oneís refusal to pay taxes a civil matter, not a criminal one? Thatíd be a start.
One big problem with taxes is that they hide the commonwealth. We resort to taxing individual wealth because most of us do not see common wealth. Yet itís there. And itís immense. Itís all the money that people spend for things that were never created by anyoneís labor or capital, itís the trillions of dollars that change hands when items like land, resources, and licenses change hands. That immense spending now ends up in very few pockets but it should go to us all. Nobody made things like land and all of us make land valuable.
Meanwhile, blind to whatís already ours, we attack with taxes peopleís work and property because we think each person should pay. While that is true, in a sense, each person has already paid. That is, each person contributes to population density, and population density pushes up land value. Itís one way society generates the value of locations and resources, etc. Let us recognize this social surplus, let us recover it via leases, fees, and dues, and letís get over the knee-jerk response to the challenge of raising public revenue. Forget taking what does not belong to us; instead, let us pay land dues and divvy up what belongs to all.
Editor Jeffery J. Smith runs the Forum on Geonomics.
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