Nothing patriotic about raiding Treasury
The Senate faces a historic challenge. It must decide how to respond to a House bill touted as a patriotic response to the economic recession. The bill was triggered by the barbaric destruction of life and property in New York and Washington on Sept. 11.
The House bill (NCR, editorial, Nov. 9) is a boondoggle. It is a shameless attempt to take advantage of the universal mood of sorrow, outrage and readiness to sacrifice. To quote Robert McIntyre, director of Citizens for Tax Justice, Who would have thought that a national emergency would set off a feeding frenzy by corporations and the wealthy?
Now we see that the Republicans in the Senate are determined not only to push the bill into law, but also to sweeten it further. They would increase the $212 billion tax cuts over three years to $220 billion. Forty percent of that $220 billion would go to the wealthiest 1 percent of Americans. Seventy percent of the benefit of cutting the capital gains tax from 20 to 18 percent would go to the wealthiest 1 percent, almost all of it to the wealthiest 10 percent.
Particularly outrageous is the provision that eliminates the Alternative Minimum Tax. The history of that tax is important. A loophole sneaked into President Reagans Tax Reform Act of 1986 had allowed half of the largest and most profitable corporations in the country to pay no tax at all. Public outrage led quickly to a Senate Finance Committee hearing and a report that read: The committee finds it unjustifiable for some corporations to report large earnings and pay significant dividends to shareholders, yet pay little or no taxes on that income.
Congress responded with an act providing for an Alternative Minimum Tax, ensuring that companies making a profit pay some reasonable amount of federal income tax. The House bill repeals this legislation -- retroactively. Incredibly the Treasury would have to return to the corporations all Alternative Minimum Tax paid since 1986.
Although the standard corporate rate tax is 35 percent, other loopholes over the years have cut the tax the biggest corporations actually pay far below that level. IBM last year paid 10.8 percent on profits of $5.7 billion. Eliminating the Alternative Minimum Tax will cut that to 7.6 percent. General Electric, with $9.7 billion, paid 8 percent. It gets two-thirds of that back. Ford, with $9.4 billion, paid 7 percent. It will apparently get all of it back, although the statements it publishes do not allow a precise calculation. General Motors, with $2.9 billion, paid 1.5 percent, and gets all of it back.
The accelerated depreciation for corporations will cost the Treasury $109 billion over three years. The major automakers get a permanent extension of the expiring tax shelter that allows them through manipulation of interest payments to avoid tax by shifting profits offshore.
Although the media report that the nation is in a recession, with layoffs piling up and companies reluctant to hire, they generally downplay the reluctance of Congress to help those who will most feel the cold and hunger of approaching winter. Perhaps to avoid offending their owners and advertisers, commentators seem reluctant to protest the obscenity of giving money back to wealthy and prosperous corporations while so many live in need.
There are exceptions. Is grabbing for all you can now so imbued in corporate culture that executives dont remember what it is to act with honor? writes Gretchen Morgenson in The New York Times.
White House Budget Director Mitchell Daniels, meanwhile, says that he needs new spending cuts to prevent a deficit and is preparing lists to sharply reduce nonmilitary programs. Fr. Brian Hehir, president of Catholic Charities, recently said, Programs for the poor, especially the most vulnerable, should be exempt from another round of budget cuts.
This is an important time to speak up. Our senators first need to hear that government programs that redistribute wealth once again toward the superrich are wrongheaded and immoral. Coming when they do, taking advantage of a national crisis, is both outrageous and contemptible. Second, they need to hear that the vulnerable need protection, not another round of cuts and diminished welfare support programs.
National Catholic Reporter, November 16, 2001