FAIRNESS HAS BEEN FORGOTTEN
When Mitt Romney ran for president in 2012, he famously stated “corporations are people too.” If that were the case, then they would be paying their fair share of taxes to the federal government. In 1950, corporate tax revenue accounted for 26% of federal tax receipts and individuals for 45%. By 2013, corporate contributions had dropped to 10% while individual contributions had risen to 63%. Reducing the Corporate tax rate from 35% to 21% (a 40% reduction) will reduce their contribution to just 6% of the federal governments revenue.
So despite my hope that a few Republicans would show some backbone, it obviously must have been the year of the squid as none of them showed any spine. Trump, with Walden’s full support, was successful in this smash and grab robbery from the poor to the rich. The Sherriff of Nottingham must be laughing over this one. Why should corporations contribute fairly to the federal coffers? Corporations would have a difficult time existing and generating a profit if not for the public infrastructure, which today is largely funded by individual taxpayers. Individual tax payers pay for the roads, sewers, water, electrical grids, airports, police, fire, defense, security, public schools, and universities. Why should corporations not pay for the privilege of using tax payer funded infrastructure? Evidently Republicans don’t think they should.
Another issue, why are corporations playing the poverty card? U.S. Corporations in 2016 were sitting on $2.5 TRILLION in overseas cash accounts. These funds would be subject to the Corporate Tax of 35% if they were returned to the U.S. So they continued to accumulate overseas. Some familiar names include Microsoft and General Electric with $100+ billion and Apple in a league of its own with $200+ billion. Tim Cook, CEO of Apple explains this is not unamerican tax avoidance but, rather “good old fashioned ingenuity”. Obama proposed a one-time amnesty for repatriation of funds at 14%. Corporations balked, hoping for a future Republican president more in line with their thinking, which is zero. The political rhetoric, of course, is about the JOBS these funds will create if the funds are brought back into the country at a minimum or zero tax rate. What is the truth? The truth is Corporate America is awash in cash domestically. According to Federal Reserve data, U.S. Corporations are sitting on $1.9 TRILLION cash here at home. Bringing back their $2.5 TRILLION overseas cash would simply add to the pile.
In the 12 month period ending March 2016, the S&P 500 companies spent a record $590 BILLION on stock share buy-backs according to S&P Dow Jones Indices. When a company buys back its own stock, it reduces the number of shares outstanding, increases earnings per share, and generally causes the stock price to rise. This action benefits the remaining shareowners, and more importantly for the Corporate Officers, the value of their stock options. Total shareholder return for the period ending March 2016 was a record $975 BILLION. In other words, their strategy to increase their personal wealth worked very well. And what did the stock market do after the tax bill was passed? It soared. Then Trump was caught on tape telling the rich at Mar-a-Largo “I just made you rich guys richer”. And the sad truth is, he did.
To convince “public corporations” to serve the public as they are intended to do so in return for the legal doctrine that they have the same rights as a person, I would propose as an incentive to invest their funds rather than sit on them, a 1% excise tax on cash balances in excess of a to-be-determined percentage of net corporate assets. And what about the average American? Wages continue to stagnate and layoffs continue to occur. In other words, as Elizabeth Warren writes, the middle class continues to get screwed while the rich get richer. I want to add many of these same people continue to vote for the Republicans who are complicit in all of this. If you believe, as Trump has tweeted, that a reduction in corporate tax rate will result in $4000 to $9000 in wage increases, I have some Arizona beach front property I would like to sell you.
Unfortunately, there are a lot of ordinary people, with ordinary incomes, that believed this pile of horse manure. Here is a simple tax example to share with them as I know these folks won’t read any of the “fake news” I publish.
Old Tax Basis: Median Average US Income of $59,000 less standard deduction of $12,700, less personal exemption (wife, self, 2 kids) $16,200 = Taxable Income of $30,100 = a tax of $3582.
New Tax Basis: Median Average US Income of $59,000 less standard deduction of $24,000, less personal exemption (zero because they eliminated it) = Taxable Income of $35,000 = a tax of $3,815.
Yes believe it or not, your taxes JUST WENT UP but you will not find out about it until you file and discover your personal exemption deductions have been eliminated. In the meantime, your take home has gone up by $148 a month and you are so happy. Call me next April when the smoke clears and you find out just how badly you have been screwed.
Let’s be real, nobody likes to pay taxes. But there is a cost to be paid for living in an advanced society with many benefits. When you drive down the interstate to a pristinely maintained coastal beach park, does it not occur to you that it was your shared investment in your government that made it all possible? Without our shared government we are nothing more than disconnected tribes foraging for survival. I propose that “ALL INCOME IS CREATED EQUAL”. That means whether it is W2 earnings, capital gains, dividends, or interest, it is ALL taxed at the same rate. As Warren Buffet states, my secretary should not pay a higher percentage than a multi-billionaire. All incomes of $50,000 or less would be taxed at a federal income tax rate of ZERO. Individual deductions would be allowed only for state and local taxes, and government certified 501C3 charity groups. Furthermore, ALL 501C3 certified organizations would be explicitly and immediately denied tax exempt status for engaging in political speech. If you want your right to free speech then you get to exercise your right to pay taxes.