Let’s take a look today at two recent stories that help explain a lot about what’s been happening in our country. The first, which came from the US Department of Commerce in early April, reported that corporate profits are at their highest level in at least 85 years. That was the good news, at least for those who have money to invest. The bad news was that employee compensation relative to executive compensation in America is at the lowest level in 65 years. Most of those folks don’t have money to invest.
The profits earned by the country’s corporations, the Commerce report added, amounted to about 12.5% of the total economy, the first time it has been that high since 1942, when World War II helped the bottom lines of many of the nation’s largest companies. Back then, though, the effective corporate tax rate was nearly 55%. Today, it’s about 20%. Floyd Norris, who writes a regular column on finance and the economy for the New York Times, noted that while the statutory top corporate tax rate is 35% — one of the world’s highest — a myriad of credits, deductions and other preferences all help bring it down to about 20%, the bracket that married couples with about $75,000 of income are in. Which brings us to the second story, which is still unfolding in Washington.
Last week the GOP-controlled US House of Representatives passed the first of six bills aimed at “extending” the tax breaks that provide those loopholes that corporations use to lower their tax rate. Two of the bills are loopholes that enable companies to shift their profits to subsidiaries in other countries to avoid paying federal income taxes.
Not only is the House considering extending those tax breaks, there’s a move among Republican members of Congress to make them permanent. Whether the Senate will eventually agree is still up in the air, although the Senate Finance Committee has already OK’ed the six tax breaks.
Several organizations have strongly opposed the extensions — including Americans for Tax Fairness, which points out that the bill passed last week would cost the treasury $156 billion over 10 years. Passing all six bills would put a $310 billion hole in federal revenue. Yet there have been no demands that cuts be made elsewhere to offset this loss of revenue like there have always been whenever there’s a move to extend unemployment benefits or maintain food stamp benefits.
“Fiscal conservatives who have blocked an extension of emergency unemployment benefits because of expressed concern for the deficit are aggressively pushing these corporate tax breaks that are not paid for and will blast a hole in the federal budget,” ATF said in a statement. Added USA Today in an editorial, “(Budget) discipline only goes so far. House Republicans have declared that when it comes to offsets, tax cuts don’t count — budget be damned.”
It’s actions like this — rather than programs to help the poor or the unemployed — that wreak havoc with the budget and cause the problems that members of Congress claim to hate, but don’t have the courage to do anything about. It’s easier to demand “reforms” in programs for the poor than take on the largess that the politicians’ big contributors enjoy. And they wonder why the American people have such little regard for them.
Dave Zweifel is editor emeritus of The Capital Times (www.captimes.com), Madison, Wis., in which this originally appeared. Contact him c/o The Capital Times, PO Box 8060, Madison, WI 53708, email email@example.com
From The Progressive Populist, June 15, 2014
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