Ever wonder why big corporations and the super-rich invest large sums of money in high-priced lobbyists and an army of accountants? And yes the correct term is “invest” because they see a great rate of return.
In the abstract, their lobbyists persuade elected officials to change the tax code and shift the tax burden to you.
The real-world impact of this insiders’ game is highlighted in a new report from Wisconsin Public Interest Research Group (WISPIRG), which found that corporations and wealthy individuals dodge $184 billion of state and federal taxes in 2013—a shortfall that has to be made up by the average individual taxpayer, small business owners and cuts to public services, like funding for education, public safety and infrastructure upgrades.
WISPIRG found that the cost of these tax loopholes equals $1,054 for an average Wisconsin taxpayer and $3,966 for the average small business.
That’s because ordinary individuals and small businesses cannot move their profits off shore to tax havens or set up subsidiaries to make them seem less profitable—accounting tricks used by multinational corporations and super-wealthy Americans.
For example, WISPIRG found that General Electric paid an effective tax rate of negative 11.1% between 2008 and 2012, which means that even though the company was profitable during those years, it received tax payments from the federal government. It also has 18 subsidiaries in tax havens and moved $110 billion offshore. Similarly, Microsoft used accounting tricks to avoid paying $4.5 billion in federal income taxes and Pfizer’s tax bills between 2010 and 2012 showed the pharmaceutical giant owed no federal income taxes because it claimed it operated at a loss in the U.S.
That lost $184 billion could run the Milwaukee Public Schools (MPS) for more than 150 years. It could pay for the Milwaukee Police Department’s $244 million budget for 757 years. It would cover the cost of Pell Grants for needy college students nationwide for more than five years. Or it could cover the $76.4 billion allocated annually for food stamps used by 47.6 million low-income Americans for almost two and a half years.
Contrary to what conservative politicians will tell you, the majority of the nation’s budget problems aren’t caused by wasteful spending like money to educate your children in 21st-century schools with teachers who are paid fair salaries or out-of-control entitlement programs that provide health care for your grandmother. Rather, much of the problem is caused by wealthy insiders who are gaming the system to their own advantage, and shifting the tax burden and blame onto you. If you want evidence of this, take a look at U.S. Rep. Paul Ryan’s Republican budget and its reverse Robin Hood effect, where it takes from the poor and middle class and gives to the rich.
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