April 28, 2017
With the president boasting that his one page tax reform plan (i.e., massive tax cuts for both Big Business and the wealthy elite) is the biggest in history, one thing for certain is that this proposed legislation will add to the soaring national debt, as experts are already opining that it will add an additional seven trillion dollars of debt over the next decade. The administration is saying this tax plan will pay for itself via economic growth. However, that was not the case when George W. Bush cut taxes twice during his terms in office.
Politicians, corporate leaders and business pundits all whine how the present corporate tax rate of 35% is the highest in the world, yet they fail to mention the average, effective rate paid by all corporations is only 12.8%, hardly unfair. Many of this nation’s largest corporations pay little, if any federal tax, including Boeing, General Electric, Priceline.com, Verizon, American Electric Power, First Energy, Duke Energy, Con-Ed and FedEx, among many others. These same people say reducing the corporate rate to 15% will create jobs, however, it is demand that creates jobs. U.S. corporations have been sitting on record piles of cash the past few years, which has done nothing to stimulate the economy. The problem is the working man and woman have little, if any discretionary income, as they are barely getting by on minimum wage jobs. Now days, it takes both the husband and wife working full-time jobs to raise a family, whereas a few decades ago all it took was for the husband to be the breadwinner.
Why is it that nearly seventy percent of U.S. corporations are regarded as non-profits? According to the latest available Internal Revenue Service statistics that I could find, the percentage of non-profits has grown from twenty-four percent in 1986 to sixty-nine percent by 2008. Why the sudden surge in the number of corporations that consider themselves not-for-profit? This percentage is far higher when you add in sole proprietors and partnerships.
Congress needs to investigate why, in 1959 the IRS changed the wording of the actual law regarding the qualifications for tax-exemption status, when they had no legal authority to do so. I am not an attorney, nor a tax expert (who is?); however, the law as written by Congress in Section 501(C) of the tax code requires any entity not organized for profit, applying for tax-exempt status as a social welfare organization to be operated “exclusively” for the promotion of social welfare. Some non-profit corporations that do not seemingly meet the requirement of exclusively promoting social welfare are the NCAA, PGA, LPGA and the NHL. The NFL just this month announced they are giving up their tax-free status, as Major League Baseball did in 2007.
Or, how about Wall Street bankers, earning millions of dollars a year, pay a federal rate of only 15% because their income is counted as capital gains. I guess that “golden rule” is true, isn’t it? Our tax code desperately needs overhauled, but once again slashing taxes paid by Big Business, millionaires and billionaires is not the answer. Nor will it simulate the economy. President Clinton raised taxes and the economy roared. George W. Bush cut taxes twice and he left office with the worst economy since the Great Depression.
Do I feel sorry for U.S. corporations or the wealthy elite who earn billions of dollars, yet pay little or no federal tax? Hardly.
Steven H. Spring