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Ralph Nader > In the Public Interest > Loopholes for the Rich

Corporate income tax payments, as a percentage of federal revenue receipts, have been withering away over the last three decades to a level that would shock millions of individual tax­payers who, quite predict­ably, are holding up an in­creasing share of the federal tax burden.

In what must be among the least publicized figures in Washington, corporate tax payments declined from 33.6 percent of total federal receipts in fiscal 1944, to 30.3 percent in 1954, to 20.9 percent in 1964, to an esti­mated 14.6 percent in 1974.

In contrast, according to Treasury Department fig­ures, individual income tax payments (including the full social security tax which is really borne by the employee) rose from 48.5 percent in 1944, to 52.7 per­cent in 1954, to 62.7 percent in 1964, to an estimated 73.9 percent in 1974. The remain­ing tax payments have come from excise, estate, gift and other miscellane­ous taxes,

THIS DECLINE in the corporate tax burden has occurred against an in­crease in the formal corpo­rate income tax rate from 31 percent in 1944, to 52 per­cent in 1954, which was fol­lowed by a slight decrease try 50 percent in 1964 and 48 percent in 1974.

To further place the de­clining corporate income tax burden in its federal context, corporate profits as a percent of gross corpo­rate product went from 22.6 percent in 1944, to 18.4 per­cent in 1954, to 17.6 percent in 1964 and an estimated 18.1 percent in 1974.

If the level of the statuto­ry tax rates and actual corporate profits cannot ex­plain why the effective tax rate payment has declined so sharply, what can? Here is where layer after layer of tax privileges, or “loop­holes” in common parlance, have had their effect year after year.

They are not exactly household names, but the “depletion allowances,” “intangible drilling ex­penses,” “investment tax credits,” “asset deprecia­tion range,” and a diction­ary’s list of other tax preferences have built up this corporate welfare sys­tem out of Washington to the annual level of billions of dollars.

WHAT IT AMOUNTS to in the first place is an inequitous tax system that makes middle- and lower-income taxpayers pay more than they should so that corporations and wealthy investors (who benefit from corporate tax loopholes) pay less than they could. So the many who have little subsidize the few who have much.

“Many oil companies, for example, pay at an effec­tive federal income tax rate of under 6 percent per year while multimillionaires pay an even lower percentage of their net income or escape the federal tax altogether, That is not all.

Former IRS Commission­er Former IRS Commission­er Johnnie Walters, on more than one occasion, ex­pressed deep concern over sophisticated corporate tax evasion. The wide-open opportunities for multi-na­tional companies to take advantage of numerous dubious or illegal means of playing one country off against another in the inter­national tax game have been exposed but still await reform.

Add to this the many imaginative ‘accounting strategies employed by hun­dreds of corporations in complex ways and it is not difficult to understand why the understaffed teams of corporate tax auditors, as­signed by the Treasury to these corporate giants, live in a world of subdued de­spair.

IN RECENT DAYS, corporate executives are once again telling the White House that they need even more ”tax incentives,” as they call them, or “welfare payments,” as they should be described. Such incen­tives are needed, these industrial leaders say, to in­crease investment in plants and equipment.

This corporate cry is becoming a routine Wash­ington refrain — more tax subsidies for companies who vaguely promise more investment. But when they get their special tax reduc­tions, the public is not shown what they receive in return.

Back in 1971, corporations received a massive tax bonanza from Congress and the Nixon administration. These included special ex­port promotion tax relief, faster depreciation write-offs, and a 7 percent invest­ment tax credit. From what information is available, these windfalls are produc­ing neither the additional investment nor the robust economic expansion and productivity which the law­makers were told to expect.

GIVEN THIS unrequited subsidy, which directly bur­dens the small taxpayer, why is there not an annual evaluation by the Congress or the Treasury of such spe­cial corporate tax privi­leges? The small taxpayers should he informed about what they are not receiving in return for their subsidiz­ing of these companies through the tax system.

Readers interested in more information on who bears the tax burden in America can-send a stamp­ed, self-addressed envelope to “People and Taxes,” P. 0. Box 19404, Washington, D. C. 20036.