Why Pay the Privileged our Public Money?
|July 9, 2010||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
Why Pay the Privileged our Public Money?
End Dependence Day
You often hear the corporate tax rate is 35%, higher than most of the Western world, but you hardly ever hear about all the credits, deductions, subsidies, and loopholes. Or about a replacement policy. This 2010 article is from the Weekly Wastebasket, Volume XV No. 26: July 1.
by Taxpayers for Common Sense
- With apologies to Thomas Jefferson:
When in the course of fiscal events, it becomes necessary for the people to dissolve the political bands which have connected corporations with the treasury We hold these truths to be self-evident, that all entities are created equal, and they are endowed by their creator with certain unalienable rights, which does not include a right to subsidies That whenever any form of government becomes destructive of these ends, it is the right of the people to alter it
Now, more than 230 years after the Declaration of Independence was signed, we have created a culture of corporate subsidy dependence. Sure, the corporate tax rate is 35%, higher than most of the Western world, but after all the credits, deductions, subsidies, and loopholes, the effective corporate tax rate is actually much lower. Some lawmakers have proposed lowering the rate and eliminating much of the special interest breaks that litter the tax code.
In light of the President’s debt and deficit commission meeting, we thought we would light off a few subsidy fireworks of our own, corporate and otherwise:
Fannie Mae and Freddie Mac: Congressional leadership left these two mortgage behemoths alone when they finalized the financial reform legislation. Taxpayers essentially own the pair and are looking at nearly $400 billion in losses over the coming decade. Using the Treasury as a backstop, these entities subsidize lenders, financial markets, and home buyers and need to be reformed.
Bailout Bucks: Although the bailout is winding down for most of the large banks, taxpayers are still on the hook for our investments in smaller ones, AIG, and the auto companies. More than 90 banks missed May’s bailout dividend payment; taxpayers have $182 billion invested in AIG; and while GM made a much ballyhooed repayment of their government loan, taxpayers still own 60% of the company.
Big Energy: For nearly a century, oil and gas companies have been at the government trough, gobbling up hundreds of billions in subsidies. A little late to arrive but already making up for it, the nuclear power industry is now trying to add more subsidy slop to the feed. And despite providing virtually no economic or energy benefit, ethanol is trying to renew its $5 billion per year excise tax credit.
General Corporate Welfare: There are tax breaks littering the code, propping up NASCAR track owners, film production companies, municipal bonds, rum distillers, the inland waterway industry; you name it, they’ve got a lobbyist and a subsidy.
Military/Industrial Complex: One of the most lucrative markets for the nation’s big defense contractors is not the Pentagon, but foreign nations. Federal taxpayers subsidize all the research and development of weapon systems, which eventually get sold to allies overseas at a tidy profit for the contractor. Even better, the proliferation and relative parity of weapons worldwide prompts Uncle Sam to order up some new toys, which starts the process all over again.
States: Right now, states are looking to Uncle Sam to help them bridge their own enormous budget gaps. Balanced budget requirements send most states to Washington with their hands out for cash to cover the promises they made in the boom years. At some point the states have to stand on their own. But perhaps most galling of all is Florida’s attempt to get the government to bailout the state-run home insurance pyramid scheme. This could cost taxpayers tens of billions not if but when a hurricane hits the state.
Unfortunately these are just a few examples of the subsidies and corporate welfare that litter our tax code and spending bills. Our nation faces years of yawning budget deficits and crushing debt, but we have to start somewhere. Kicking some of the country’s delinquent dependents out of the budgetary house is as good as any.
P.S. Taxpayers for Common Sense declared its commitment to independence from government and corporate subsidies at our birth 15 years ago.
JJS: Radically reducing the discretionary spending by politicians is one of the four main planks of geonomics. The other three are to also greatly reduce their discretionary taxing, instead recover the socially-generated values of land and resources, including EM spectrum, ecosystem services, fields of knowledge, etc, and to share out the surplus revenue as a dividend to the citizenry. Tom Jefferson would be pleased; as did many major thinkers of his era, he advocated the same policy a couple centuries ago.
Editor Jeffery J. Smith runs the Forum on Geonomics.
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