We can all breathe a little easier now that the fiscal cliff has been averted, but we can’t rest on those laurels for much work still remains. In classic Washington style, our political leaders compromised on a few key issues but then punted the harder decisions further down the road.
This week’s fiscal cliff bill involved a deal to raise the top income tax rate on families earning over $450,000 a year -- about 1 percent of households -- and includes about $12 billion in spending cuts.
On the positive side, this scaled down agreement was better than none at all, and Wall Street’s reaction was almost euphoric. The Dow Jones industrial average rose more than 300 points higher on the first trading day of the new year. That certainly bodes well for 2013.
However, the $620 billion in higher taxes over the coming decade barely touches the deficits still expected to be in the $650 billion range by the end of President Obama’s second term.
Nobody is completely happy with the fiscal cliff deal. Democrats say it doesn’t do enough to raise revenue (Obama wanted taxes to go up for families making over $250,000) and Republicans want more cuts to entitlement programs that they say are driving the country deeper into debt.
We can expect to see more heated debate in the coming months over these polar opposite approaches to balancing the budget. In an e-mail to constituents this week, Vermont’s own U.S. Sen. Bernie Sanders vowed to continue to protect Social Security and resist efforts to change how the program’s cost-of-living adjustments are calculated.
Not surprisingly, his approach to balancing the budget centers on the revenue side. He says it’s high time for corporations to start paying their fair share of taxes. After seeing the fact sheet Sanders distributed, we couldn’t agree more. Here are some of the highlights noted by the senator:
-- Today corporate profits are at an all-time high, while corporate income tax revenue as a percentage of GDP is near a record low.
-- At 1.6 percent, corporate revenue as a percentage of GDP is lower than any other major country in the Organization for Economic Cooperation and Development (including Britain, Germany, France, Japan, Canada, Norway, Australia, South Korea, Switzerland, Norway, Italy, Ireland, Poland and Iceland).
-- In 2011, corporations paid just 12 percent of their profits in taxes, the lowest since 1972.
-- In 2005, one of out four large corporations paid no income taxes at all even though they collected $1.1 trillion in revenue over that one year period.
-- Large corporations and the wealthy are avoiding more than $100 billion in taxes every year by setting up offshore tax shelters in places like the Cayman Islands, Bermuda and the Bahamas.
-- In 2009, Exxon Mobil made $19 billion in profits. Not only did the company not pay any federal income taxes, but it actually received a $157 million rebate from the IRS.
-- In 2010, Bank of America received a $1.9 billion tax refund from the IRS, even though it made $4.4 billion in profits. Bank of America operated 371 subsidiaries in offshore tax havens in 2010 -- 204 of them in the Cayman Islands.
Republicans like to talk about cuts to entitlement programs. Before targeting those that help our most vulnerable citizens, they first need to take a long, hard look at corporate welfare and at the tax loopholes that allow these big businesses to avoid paying their fair share of taxes.