Blog: The Reality of Tax Breaks for Wealthy Businesses and Individuals
Sep 29, 2011
Yesterday afternoon, I attended a lunch meeting in the Russell Senate Office Building entitled “Are Investment Incentives Necessary in Corporate Tax Reform?” with Donald Marron, the director of the Urban-Brookings Tax Policy Center, Rob Atkinson, from the Technology and Innovation Foundation, and Michelle Hanlon, from the Massachusetts Institute of Technology. Each of the members on the panel spoke on the topic of tax incentives, or temporary tax breaks for businesses if they make efforts in innovation or if they participate in a specified activity such as investment in a certain capital good.
Having studied history in college, and not economics, the speeches were a little over my head. No wonder the average American citizen is confused and often frustrated with the federal tax system! There is so much jargon. I suspect, and maybe it is just the young cynic in me, that the tax system is meant to be confusing and that the baffling mess and that the endless stacks of system manuals are a perfect way for ultra-wealthy corporations to slip in complicated income tax loopholes. Corporations could claim that the American tax rate is the second highest in the world. What is important to know about here is the “effective tax rate.” The effective tax rate is what corporations are actually paying in taxes after various loopholes and tax avoidance schemes. The effective American tax rate is not the second highest in the world, and is actually ranked near the middle of other countries’ effective tax rates. Is it not about time that the wealthiest pay their fair share?
“But don’t tax hikes on the wealthy prevent business leaders from having the ability to create jobs?” This is a question that often comes up when taxes are addressed in a critical light. The majority of the panel claimed that tax breaks ultimately harm the common worker for a company or organization. In reality, tax breaks do not create more jobs.
According to a May 2010 Forbes.com article, huge corporations like General Electric do not use the saved money to increase the number of jobs, but instead to create incredibly low-wage jobs in different countries. Why are American corporations allowed to make more and more money while refusing to create more jobs on our own soil? It is time for this unfair system to be shaken up and flipped upside down. If this article interests you, I highly recommend the Facebook website for the organization Citizens for Tax Justice. It has the great, but challenging mission of creating a just tax system in our country.