THE IMMORALITY OF THE TAX-CUT EXTENSION

For the most part, today’s business deals in a “global economy”. The larger companies of “Corporate America”, strategize for their position in this “global economy”. Not only are they looking to find new markets for their products and services, they are also looking for ways to save money in their production, marketing, and service offering. This is business! This is how business works, it’s how it’s always worked and how it will probably always work. I get this. I’ve managed good-sized companies and I’ve owned and operated my own smaller business.

Addressing the immorality of the tax-cut extension for the top 2% of income earners is wrong for many reasons. Today’s headlines in the business section prove point number one. Many American-based businesses are adding to their work forces in other countries while at the same time cutting their work forces at their domestic installations. Is it moral that these companies are benefiting from a 3.5% break on their taxes while expanding their companies over-seas? Where is the benefit to the economy of the United States? The companies are based here, and the profits do come back to these companies, but they not only get the tax break, they don’t even pay their fair share of taxes anyway, and of course, they reduce their domestic work forces. Most of these companies hide their profits via using smart tax attorneys and accountants, the less profit they show, the less money they owe in taxes. Many of these firms hide their money in off-shore banking institutions. The IRS can’t touch them outside the country. Two years ago, General Electric had a profit of tens of millions of dollars. They not only paid no federal tax, they got a refund from the IRS of some $375,000! Is that fair?

In breaking this down a little bit more, if a company shows a profit of one million dollars, the tax savings from the regular rate to the reduced rate is about $35,000. Now, if a company is saving $35K in taxes, is that enough to make a difference in maybe hiring additional workers or expanding the business or adding capitalized equipment? It certainly isn’t enough to add a single full-time employee, it probably won’t play into a possible business expansion, and I’m not sure the purchase of new equipment at 35K will make much of a difference either. Looking at this business model, keep in mind, less than .5% of businesses make more than $250,000 profit a year. That means, the other 1.5% of income earners over $250K are regular “working” people, like attorneys, doctors, hedge fund managers, etc. These people do not have businesses, they do not hire people and they don’t make capital outlays to boost the business chain.

After trying the supply side, trickle-down crap with Reagan in the ’80’s, that left a huge deficit that took almost ten years to fix. After two years of a budget surplus from the robust economy of the Clinton years, George Bush walked into office with a surplus of 200 billion dollars. He promptly initiated two unfunded tax-cuts as well as some other bone-headed programs designed to benefit the wealthy, the end result being him leaving office with a 1.43 trillion dollar deficit. In the eight years he was in charge, the U.S. lost over 800,000 jobs, the unemployment rate sky-rocketed, and the economy almost completely collapsed. I’m still scratching my head about the conservative’s insistence on tax-cuts to spur business growth, when it has been proven time and again that it just does not work. Even David Stockman, Reagan’s economic guru says extending the tax-cut for the top 2% is wrong! The bottom line is, tax-cuts not only don’t get used to expand business and grow companies, they add to the ever-growing deficit that is what will eventually crush this country.

To add to the immoral nature of this continuing track of gifting the top 2%, is the growth of the bottom of the economic scale. The United States now has over 14% of its population living beneath the poverty line. The poverty line being defined as a family of four living on less $22,000 annually! This is alarming! This is morally criminal! At the same time, the wealthiest 2% of the population has now gained control of 90% of the nation’s private wealth. So, given this picture, what has happened to the “middle class”? It’s shrinking and it’s broke. A thriving “middle class” is needed to start climbing out of the economic hole the country is in. This is the group of people who spend money. They buy food, clothing, housing, transportation, and education. If you squeeze them out, the largest consuming block of the population stops spending. When you diminish the demand, business must downsize to stay afloat. That’s how countries get into trouble, they coddle the minute minority and over-look the population that keep the economy on the move.

A “middle-class” tax-cut makes sense. It helps lower-income families to keep food on the table and roof over their heads. At the same time it helps try to stave off the total collapse and disappearance of the “middle class”. At the same time, the country needs to take away the “free” tax-cut gift for the top 2% of income earners. It also needs to put into place a graduated scale of tax rates beyond the $250K level. Like at “bump up” at $500K and another at $750K, and another at one million. For business, put into place a series of aggressive tax credits based on growth and employment expansion. This makes the business accountable for the tax breaks they receive from the government. In other words, perform and get rewarded. Now, they simply sit back and collect the 3.5% rate cut and bank that money as they simply add it to the bottom line of the company. Obviously, a whole new tax code needs to be written. It needs to be simple, transparent, and without loopholes that allow it for cheating. The IRS and government need to be able to go after money gained in America by persons and business that is being hidden off-shore. Pretty simple solutions, right? It would seem so but, with K Street, the U.S. Chamber of Commerce, and the activist Citizens United ruling by the SCOTUS, it makes things very difficult because there are entities controlling this government that are not elected by the people. Until K Street is shut down, until the Chamber is held accountable for its’ actions, and the Citizens United ruling is legislated into being moot, it will be a massive battle, and unfortunately, it’s the “regular” Americans that will suffer. That’s my view of this issue, your comments are welcome. I hope all are having a great holiday season with your families and I wish you a safe, peaceful and healthy new year!
Cam Obert