The Corporate Tax Holiday is Ending
Judging by the growing convergence of influential conservative and liberal forces, the bottom has about fallen out of the corporate tax loophole industry. From the Treasury Department to Cong. Jack Kemp (R-NY) to right wing columnist James J. Kilpatrick, the calls are mounting for making corporations pay their fair share of taxes. There is more than fairness involved in these demands; conservatives and liberals alike know that Reagan’s massive annual deficits, heavily created by Reagan’s massive tax give-away to companies in the 1981 tax law, cannot be substantially reduced without more revenues from America’s pampered, large corporations.
The Treasury Department knows the revenue is needed and also knows that the largest of these tax incentives — the so-called Accelerated Cost Recovery System and the investment tax credit — did not really work to bring more investment into the economy during the years 1981-1983. The 1984 investment rise was driven by consumer demand, not tax loopholes.
Rep. Kemp, addressing ultra-conservatives in Washington recently, got cheers when he told them: “There is no reason conservatives should support tax breaks and subsidies for corporations. There’s no reason for corporations to be subsidized by government.”
James Kilpatrick headlined his syndicated column “corporate welfare” and started his condemnation off with the now notorious example of General Electric’s $6.5 billion in profits between 1981 and 1983. That company not only paid no federal income tax hut received $283 million in tax refunds from the Treasury due to the exploitation of the since repealed ‘safe harbor leasing’ provision that allowed companies to buy unused tax credits from one another.
Kilpatrick also went after the tax shelters for the affluent. After listing some of these shelters — including treasure hunts for sunken ships, horses, kiwi fruit and the breeding of llamas — he left out billboards —Kilpatrick concluded: “The investments make a mockery of our capitalist system, for the whole object is not to earn money but to lose money — to provide tax losses for the rich.”
Welcome to common sense, James, after all those years of your badgering critics of corporate welfare, monopoly, fraud and abuse of power. When people like Kilpatrick and Kemp get upset, and when savvy tax lobbyists like Charles Walker say that the political winds are blowing toward reinstating corporate taxes, an opportunity to really reduce the economy—crushing, $200 billion a year Reagan deficits may be at hand.
Robert McIntyre, director of Citizens for Tax Justice, has made the best argument for ending corporate tax dodges. He recommends bringing back the level of taxation of corporations to “something like the levels of taxation that prevailed during the last great American boom, in the 1960s.” In an article given prominent placement by the Washington Post, McIntyre showed that if corporations paid taxes at the level paid in the ’60s, the Reagan deficit would “instantly be cut in half. We could expect interest rates to fall, the dollar to return to a more sensible value, and the economy to prosper without ‘the dangerous imbalances that now threaten our future.”
In the Sixties, tax revenues from companies accounted for about 25 percent of all government spending (other than Social Security which is self-financed). By 1984 corporate taxes paid for 8.8 percent of government spending. In addition, a Public Citizen study in January showed that tax shelters are keeping $24 billion in the hands of the rich, while diverting capital from more productive outlets.
As for the old saw that corporations don’t pay taxes, only people do, McIntyre wonders why companies fight taxes if they can so easily pass them on to consumers. He also points out that while General Electric paid no taxes, Whirlpool paid almost 46 percent of its profits to the federal government. “But Whirlpool washing machines”, wryly observes McIntyre, “are higher rated than GE’s by consumer testing organizations and are cheaper than GE’s.” He adds that Exxon paid a much higher percent of its 1983 profits in federal taxes than Mobil without any noticeable difference in gasoline prices between the two companies.
So what was considered impossible a short six months ago may indeed be possible, but not without much more citizen support. For a copy of McIntyre’s article, send a large self-addressed, stamped envelope to Citizens for Tax Justice, 1313 L Street, NW, Washington, DC 20005.