Congress Must Wake Up And Smell The Taxes

Wednesday, April 6, 2011, AM | 2 Comments

Lately, media have been abuzz about some corporation paying very little or no taxes at all. The burden of running the country financially seems to have fallen on ordinary folks in the American landscape of taxpayers. There are two distinct entities in the IRS arsenal of collecting taxes.

Over many decades, especially the last one, both corporate and individual taxpayers have fallen apart from each other and are at the farthest ends of the tax spectrum.

On paper it is said that Federal tax rates on corporate taxable income vary from 15% to 35% and the maximum is among the highest in the world.

However, the government raises less money in corporate taxes than it once did, because of all the loopholes that have been added in recent decades. An overwhelming majority of businesses never pay the maximum 35%.

There are two tax loopholes that businesses take big advantage of:

  1. Tax-loss Carry-forward

    Businesses are allowed to use losses to help reduce its tax bill. It’s a technique that applies the current year’s net operating losses to future years’ profits in order to reduce tax liability.

    It isn’t one bit controversial. G.E. Capital, the financial arm of the company, lost billions of dollars during the financial crisis.

  2. Active financing exception

    This is a whole different fish in the tax pond. This tax break was first enacted in 1997 and has kept appearing since then.

    It allows companies to avoid paying U.S. taxes on overseas profits if those profits were derived by actively financing some activity or deal. The Treasury estimates that it costs the government $5 billion a year.

G.E., being a multi-national corporation, took complete advantage of these two legal and, according to some experts, ethical clauses of the tax code. The second clause can be squarely blamed on the Congress of these United States.

It was supposed to be temporary for a year or two. However, because of the strong lobby of businesses, it was renewed and so has continued since it was first introduced.

David Leonhardt of the New York Times calls it the Paradox of Corporate Taxes. It’s an intelligent and somewhat provocative article, a must read.

Congress must act responsibly…

Congress must eliminate these tax loopholes for corporations that abuse the system. The problem is folks sitting in Congress seldom represent the common man and woman.

They would never get reelected without the continuing help from the lobbyists that represent these businesses.

The result is that policy makers make the rules on behalf of mega corporations, resulting in unfair taxation policies and unfair competition for the rest of us.

On paper, better known as the Constitution, the Congress of the United States represents we the people but in reality they are in the strong grips of the lobbyists representing big businesses.

The Congress must stop catering to special interest groups and start serving the general populace.

In a Nutshell
Congress must close the loopholes. Ultimately it’s the American people that are hurting. We all have to pay taxes, but it should be appropriately apportioned between personal and corporate contribution to the Treasury.

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  1. 2 Responses to “Congress Must Wake Up And Smell The Taxes”

  2. By Rosemary Peavler on Apr 15, 2011, 3:57 pm | Reply

    To add insult to injury, corporations with operations overseas want to bring their profits back to the U.S. to be taxed at a very low tax rate while small businesses continue to be taxed at the 35% tax rate.

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