If You’re Using Loopholes, What’s Your Real Tax Rate?
|May 6, 2014||Posted by Staff under Good Press|
This 2014 excerpt of the Weekly Wastebasket, Apr 11, is by Taxpayers for Common Sense.
Taxpayers that don’t need subsidies — through direct spending or via tax loopholes — include the oil and gas industry. Extraction of fossil fuel has been subsidized for a hundred years (literally) and it is one of the most profitable businesses in the world (literally). We found that the three largest U.S.-based oil and gas companies had an average U.S. tax rate of 26.2 percent for 2008-2012. If you subtract the billions the companies are allowed to defer each year (thanks to these special tax provisions), it drops to around 20 percent. And, to be sure, oil and gas companies are not the only ones picking from the menu of various tax breaks to lower their rate below the statutory rate of 35 percent.
The same holds true for individual taxpayers. Special tax deductions that have been in effect for decades benefit a small slice of taxpayers, but cost everyone. Even popular ones like the mortgage interest deduction, which costs roughly $75 billion a year, have no effect on homeownership rates in this country and are basically offset by the increase in home prices it causes. Like the oil and gas industry, some of the wealthiest individual taxpayers can avoid paying higher rates by also utilizing special tax provisions that aren’t available to everyone.
Congress could lower overall tax rates – something everyone wants to do – by cutting out the whole thicket of special credits and deductions that distort both the tax system and business decisions. So why don’t they just do it already?
Ed. Notes: It would not surprise me if the author over-estimated how much tax the oil corporations actually pay, especially when you subtract the payments they get from the US Government for storing oil underground (pump it out, pump it back in), for doing “research”, and for the “services” performed by their subsidiaries, such as uranium miners and processors. You could also subtract the fines not levied for pollution emitted by their trains and ships and gas stations and the fines not collected for their failure to pay over even the tiny royalties that they are charged (Norway charges nearly 80%, not 10% or 12%). This list could probably go on.
Most ironic, most of the value of oil is “rent”, or, its value in the ground, before it’s even extracted. Since oil in the ground is not the product of anyone’s labor or capital, and since its value is created by the demand for it by all of us, oil “rent” is actually our common wealth. It is one of the few things that really should be taxed or levied in some other way (auction or deed fee, etc), with the raised revenue going to the citizenry, a la Alaska’s oil dividend.
If you’re going to have a federal income tax, you should make it as simple as possible, since complexity is the enemy of equity. Have one same rate for everybody. Have absolutely zero loopholes. And spend it all on war. If you want to pay less tax, then shrink the so-called “defense” budget. Make everybody pay, even the poor. They’ll be able to afford paying 10% of an $8,000 income — $800 — since their Citizen’s Dividend would be more like $12,000. After paying $800, they’d still have $19,200 per year to live on. Not bad. And $12k to replace mortgage interest deduction; not bad for the middle class. And $12k to replace billion-dollar oil subsides … well, too bad, “oiligarchy”, but fair is fair.