Think of the government as a restaurant and the Congress as a waiter. The restaurant is losing money and it turns out that the waiter has been giving discounts to some customers - the waiters friends who give the waiter big tips. "No problem" says the waiter, "when I don't charge them for caviar, champagne, and prime rib, I'm not stealing, I'm just letting them keep their own money". A waiter would get fired and risk jail, but the US Congress has been handing out free caviar at public expense to the rich and well connected using exactly this excuse. The bipartisan deficit commission estimated that "tax expenditures" cost the public over one trillion dollars a year ($1,000,000,000,000/year) and that most of that goes to rich people and big well-connected corporations. The deficit commission said that we could balance the budget, increase critical spending (for education and new green manufacturing for example) and still reduce tax rates if we stopped special tax reductions and tax credits for favored groups of well off taxpayers. There are some tax expenditures for low income people who need help, but tax expenditures are a sneaky way of giving away tax money and, of course, those who can employ the most lobbyists and give the most in "contributions" (tips) get the most. The thieving waiter might
want us to think that giving $1000 "discounts" to his buddies (just 2 bottles of Cristal champagne) is completely different from lifting $1000 from the till - he's not giving money to his buddies, he's just letting them "keep their own money". If he was as baldfaced a crook as some congressmen, he might argue that the restaurant is in trouble, not because of the "discounts" he handed out, but because the restaurant spends too much buying groceries and paying cooks! But people go to jail routinely for under-ringing the cash register and special tax breaks are pretty much the same thing.
In 2007, the 400 top tax filers earned an average of $340,000,000 each - $340 million dollars of income in that year. And they averaged an effective tax rate of 16% - less than the tax rate of people making $40,000 that year. Congress gave them "discounts" on their champagne t
ab. And that's just the beginning of the tax scam - some corporations actually get negative taxes
as seen in this 2003 study:
In 2003 alone, 46 companies paid zero or less in federal income taxes. These 46 companies told their shareholders they earned U.S. pretax profits in 2003 of $42.6 billion, yet they received tax rebates totaling $5.4 billion.
So they tell shareholders they made billions of profits, they pay huge bonuses to their executives, yet they are able to get so many "deductions" that the government collects taxes from other companies and people and then gives them "rebates"!
Here's a tax discount Speaker of the House Republican Congressman John Boehner really likes that allows companies to make extra profits moving jobs out of the USA. Companies do not have to pay taxes on foreign profits until they "repatriate" the money - bring it back into the US. The trick is that they can keep profits overseas and still count the taxes they paid to foreign governments as a deduction against US income. So a company could make $1 billion in Singapore, pay the government of Singapore $100 million in taxes, keep the profits in Singapore without paying any additional US taxes, but then reduce their taxable income in America by $100 million. If they made $100 million in profits in the US and would have owed the government 30% they can avoid all US taxes by claiming the Singapore tax as a deduction. Basically, the US government is paying them to move jobs to Singapore! See this article
for a more complete explanation.
When these wealthy people and companies get out of paying taxes
, the full weight of paying for the government and the debt falls on everyone who is not getting special treatment and the government has to cut benefits: like Pell grants for going to college and Social Security benefits that were promised. Small business has to take up the slack for the companies that can shield profits overseas. When Republican Senator Kyl says “you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans
” he does not mean "all Americans". The general rates are not going down. He means that Congress should be able to give away "tax breaks" to well connected people and not have to figure out how to pay for them. And, by the way, Kyl has earned $24 million in tips, um, contributions, in his 30 years as a professional politician.
The deficit commission proposed something revolutionary: that people and small businesses that fill out the tax form themselves or who go to HR-block or their local CPA to get their taxes done, should pay taxes on the same rate schedule as those who can afford international tax consultancies and fancy shelters. So those of us who are ordering a burger and fries or rice and beans are not being forced to pay for discounts on the champagne and caviar menu.