Debunking the family budget analogy
Jack Rothman is a professor emeritus at the Luskin School of Public Affairs. His op-ed appeared originally in the Huffinton Post on July 11, 2011.
Republican pundits are aghast over the staggering deficit and scold us to deal with the budget like a sensible ordinary family: cut household expenses. But what if the well-heeled son in the household opts out of contributing to the family income? America's flush son is the corporate structure and its network of affluent allies.
Maybe we should cajole that errant son to come up with his fair share rather than relegating the family to starvation living. At the community level that means emaciated schools, impaired Medicare, blighted libraries, run-down roads and bridges, and other third world-like amenities we are rapidly acquiring. Children, the elderly and the poor suffer disproportionately when these basic services disintegrate.
Let's spotlight the extent of shirking going on. Corporations are paying less in taxes than they used to and at the same time prospering enormously. According to the Tax Policy Center
, corporations now contribute only 7% to federal tax revenues, whereas in 1960 they contributed 30%. A just released Northeastern University study
revealed that since the recovery started in June of 2009, profits by corporations captured 88% of the growth in real income, while wages and salaries advanced only 1%. Senator Bernie Sanders illustrates
how corporations have enriched themselves by evading responsibility for carrying the tax load.
Exxon paid no federal income taxes in 2009. It made profits of $19 billion that year and kindly received a tax rebate of $156 million from the IRS.
Goldman Sachs paid a microscopic 1.1% in taxes in 2008, even though it raked in a profit of $2.3 billion, on top of a federal bailout of almost $800 billion.
Citigroup paid no federal income taxes at all last year while piling up $4 billion in profits. It also was the happy recipient of $2.5 trillion in bailout funds.
The ConocoPhillips corporation in 2007 through 2009 racked up $451 million in tax breaks through the oil and gas manufacturing deduction, neatly offsetting its $16 billion in profit taking.
Overall, wealth in the country has shifted dramatically upward, from the middle class and the poor to the top. Studies by the Economic Policy Institute demonstrate
this. The top 5% of wealth holders possess 63.5% of the country's riches, while the bottom 80% hold only 12.8%. In the 15-year interval between 1992 and 2007, income for the average household grew 13%, while income for the top one percent rose 123% — and the 400 households at the pinnacle advanced an astonishingly 399%.
That's pretty good grasping if you can get away with it. Warren Buffett spilled the beans when he owned up to paying taxes at a lower rate than his secretary. But when you round out this picture, it gets worse. There are an array of tax shelters, overseas tax havens and extensive under-reporting of income. We all know that corporations have funded a multi-million-dollar science dedicated to finding tax loopholes to avoid meeting tax requirements.
Conservative spokesmen never tire of saying that a bigger take for the well-fixed son in the family will result in economic miracles for all the members — the famous trickle-down theory. There's no convincing evidence for that. It's either a convenient fantasy or a clever scam. Experience shows that those so favored use their pile-up of income to play the market, invest in mansions and build factories overseas. The Bush tax cuts of 2001 and 2003 were a perfect experiment on this question and demonstrated that promised prosperity from indulging the rich resulted instead in a severe recession.
The national deficit won't be cured through a deficit of corporate responsibility. When freeloading members of our national fiscal family aren't paying their fair share, we're in deep trouble — we have a dysfunctional family. A balanced budget starts with a balanced pay-in.