During our brief medical leave, Daily Austerity Watch come to the not-so-original conclusion that Americans have a nutty attitude about taxes. We are not talking Charlie Sheen crazy, but it’s awfully close.
Take the New York Times/CBS News poll in which “given a choice between raising taxes on corporations and raising taxes on households that make more than $250,000 a year, almost two-thirds of respondents opt for taxing businesses. ” People favor giving breaks to small businesses, green businesses and the health care sector though the poll is not clear on what that means. Plenty of large companies, for instance, consider themselves to be green.
The New York Times/CBS News poll underscores the schizophrenic attitude Americans have toward taxes. Most people agree that the United States has a serious debt problem but have no clue how to solve it. Thirty seven percent of respondents said they believed that corporate taxes should be raised to help lower the deficit. Many, though, buy the arguments pushed by Republicans and some Democrats that spending in Washington need to be reigned-in. Since the dawn of time, Republicans have favored cutting government spending as do Independents. Democrats tend to back raising taxes on both the wealthy and corporations.
Unfortunately, the correlation between reduced taxes and job creation is not so clear cut. Wealthy individuals often derive much of their income — particularly if they are older — from tax-free investments such as municipal bonds. Large multinational corporations are able to evade the grasp of Uncle Sam through perfectly techniques that sound like names of crime novels such as “Double Irish.” An analysis by the conservative Tax Foundation disputes the notion that American corporations are evading taxes on foreign profits. In fact, US companies paid $ 100 billion in corporate income taxes to foreign governments in 2007, the most recent year for which IRS data is available.
“The truth is U.S. companies pay plenty of income taxes on international profits—they pay them to the host countries where that income is earned and where the benefits of those taxes are received,” said Tax Foundation President Scott A. Hodge, in a press release. “Washington simply wants another bite at the apple with our worldwide tax system.”
Even if taxes were cut, whose is to say that the rich person won’t use their windfall to pay down debt or just put it in the bank? Many corporations would probably use it to pay down debt, buy back stock or boost dividends. Neither scenario would lead to a dramatic improvement in unemployment. Many deals that governments strike with businesses that locate in their communities in exchange for lower taxes.
Rich people and businesses are not as worried about higher taxes as stepped-up IRS enforcement. The IRS is cracking down on wealthy tax evaders by increasing the number of audits it conducts of them, though some critics argue that the agency should be much tougher. Meanwhile, corporations may be under further pressure after the New York Times reported in March that GE had a tax bill of zero in 2010, a claim which the company and its defenders vigorously dispute.
Americans are worried about the economy as much as ever. A USA Today/Gallup Poll found that 67% of Americans believe that “Social Security and Medicare costs are already creating a crisis for the federal government (34%) or will do so within 10 years (33%),” according to Gallup. However, that same poll found that Americans are opposed to a complete overhaul or drastic changes in Medicare.
Elected officials must be pulling their hair out trying to figure a way to address a problem that most everyone agrees exists but which the American people are showing scant understanding of the issue. It makes little sense to worry about the rich and corporations who are more than able to help themselves. That was a point recently made by of all people GE CEO Jeffrey Immelt.
“Rarely does business speak with one voice, but they do on taxes,” Immelt is quoted by Bloomberg News as saying. “Our system is old, it’s outdated, it’s complicated — and all of us are for closing the loopholes.”
That would be a good start.
–Jonathan Berr
Top Gaining Stocks
Top Losing Stocks