The American Sustainable Business Council, Main Street Alliance, and Small Business Majority released a new poll yesterday gauging small business owners’ opinions on taxes. On everything from the tax rates of the wealthy to corporations' exploitation of loopholes in the tax code, small business owners from across the nation say big businesses and millionaires aren’t paying their fair share.
Nine out of ten small business owners believe large corporations use loopholes not available to small businesses to avoid paying taxes – taxes those same small businesses have to pay. A similar percentage of small business owners see the use of accounting gimmicks by U.S. multinational corporations to shift profits overseas – and thus avoid paying taxes on those profits – as a serious problem.
A majority of respondents supported policies that require the wealthy to pay more taxes. Fifty-one percent of small business owners want to see the Bush tax cuts for the wealthy expire at the end of the year, while 81 percent disapprove of the carried interest loophole that allows hedge fund managers to pay the capital gains tax rate on their income (currently at a modern low of 15 percent).
The survey polled only businesses with 100 employees or less. Other trade associations who claim to represent small business interests often count businesses with 500 or even 1500 employees. The poll also included a representative sample of political leanings: 50 percent of those polled identified themselves as Republicans or independents leaning Republican, 32 percent identified as Democrats or independents leaning Democratic, and 15 percent were independents without political party leanings.
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(Gary Therkildsen 02/07/12; 3 comments)Earlier this month, the Internal Revenue Service (IRS) released an updated analysis of the tax gap – the difference between the total amount in federal taxes owed by people and businesses, and the total paid. What did the IRS find? In 2006, the most recent year for which information is available, Americans underpaid their taxes by $450 billion. Extended over a decade, this could represent a shortfall of trillions, robbing the country of needed funds for infrastructure and other investments.
The last time the IRS put together an analysis of the tax gap – issued in 2006 and based on 2001 data – the agency estimated a gap of $345 billion. Despite a $105 billion increase in the gap between 2001 and 2006, the rate at which individuals and businesses voluntarily comply with the tax code has "remained essentially unchanged," says the IRS, due to an increasing population.
For those that do not voluntarily comply, the IRS attempts to recover unpaid taxes through enforcement efforts. The IRS estimates that Uncle Sam eventually recovered $65 billion in unpaid taxes from 2006, bringing the net tax gap down to $385 billion. Similarly, according to the IRS, the government recovered $55 billion worth of unpaid taxes from 2001.
With deficit reduction being all the rage on Capitol Hill, one would think that Congress might invest in IRS enforcement activities to help shrink the tax gap further, especially seeing as the government gets a four to five dollar return on investment. One would be wrong in this assumption, however, as congressional Republicans, and even a few misguided Blue Dog Democrats, have recently stepped up their attacks on the IRS and its budget.
Last fiscal year (FY), House Republicans inserted a policy rider in the continuing resolution that funded the federal government through FY 2011 that specifically prevented the IRS from hiring additional tax enforcement agents. The rider exacerbated an already serious staffing situation at the agency, which, as Bruce Bartlett notes, has lost almost 32,000 employees since 1992 "despite an increase in the population of the United States of 53 million over that period." Think about that for a moment.
Moreover, as conservatives' efforts translate into a weaker IRS that can't fully enforce the tax code, it gives a green light to would-be tax cheats who might otherwise fully comply with their tax-paying responsibilities if they knew they would get caught evading their taxes. This vicious cycle ends up increasing the tax gap even further.
While you can never fully close the tax gap, Congress must increase funding for the IRS, especially for enforcement activities. Even if we could only eventually recover a quarter of the tax gap from 2006, that's $113 billion that could go to better roads, better schools, lower taxes, or even lower deficits.
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(Gary Therkildsen 01/18/12; 2 comments)Earlier this month, the city council of Topeka, KS, voted to decriminalize domestic violence in what has become a national-headline-grabbing budget dispute between the city and its county seat, Shawnee. Some are arguing that it's a sad spectacle when a couple of local governments within our nation play jurisdictional games with such a serious issue, but it's important to point out that the standoff didn't have to occur.
Over the past month or so, the Shawnee County district attorney’s office has stopped pursuing domestic violence charges – a misdemeanor offense – due to state budget cuts and an overwhelming caseload of felonies. To prevent the costs shifting onto the similarly budget-strapped city, local elected officials chose to repeal the city ordinance outlawing domestic violence, directing the cases back to the county.
State governments are dealing with the worst revenue shortfalls in modern history – with average state revenues still nine percent below pre-recession levels – and most have adopted severe budget cuts to deal with these shortfalls, affecting important social services like education, health care, and economic assistance. These cuts can have a devastating impact as they travel down the line to local governments, as exemplified by the Topeka case. But when budget cuts can go no further, local officials could push responsibility back up the chain and make the case for taxes.
Unlike local jurisdictions with high unemployment and a limited tax base, the federal government has numerous options for raising the revenue local communities so desperately need to pay for vital services. Many of these revenue options enjoy majority support among the public. Whether it’s financial taxes, a surtax on the wealthy, or repeal of the top two Bush tax cuts, additional federal revenue are popular and critical to providing help to states and localities still grappling with the Great Recession.
Alternatively, state officials could pair a small revenue raiser with spending cuts. According to the Center on Budget and Policy Priorities (CBPP), only five states “balanced deep spending cuts with significant revenue-raising measures” to close fiscal year (FY) 2012 budget shortfalls. Kansas was not one even though residents pay only 9.7 percent in state and local taxes (a little below the national average).
Politicians are too docile about speaking to the public about taxes. Taxes help pay for important things like the ability of a county prosecutor to protect domestic violence victims. Elected officials need to have the moral courage and leadership to raise their voices and discuss these issues. Budgets – whether federal, state, or local – are about choices; we fund those services we believe the government should pursue, and the prosecution of domestic abusers should be one of those services.
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(Gary Therkildsen 10/31/11; 0 comments)Reporting last week in a piece titled, "Bipartisanship lives! And it will likely cost taxpayers money," Suzy Khimm of the Washington Post notes that although Democrats and Republicans are battling over the fiscal year (FY) 2012 budget, "there's one big thing that both parties already agree on: cutting funding for the [Internal Revenue Service (IRS)]." This shortsighted move is likely to end up costing the government money (at a time when every penny is needed) because roughly half of the cuts are coming out of the agency's enforcement budget.
The IRS enforcement budget ensures that people and businesses pay their taxes. It funds tax examiners and agents who investigate and collect from those who do not pay on a timely basis. For every dollar spent on enforcement, the government gets back $4 to $5 in revenue. However, the federal government is perennially unable to collect all the tax it is owed; the difference between the two makes up the "tax gap", which is estimated to run $350 billion annually.
Overall, the GOP-led House's appropriations bill calls for more than $600 million in cuts to the IRS, while the Democratic-controlled Senate is looking at roughly $450 million worth of cuts. Of these cuts, both chambers call for more than $266 million to come out of IRS enforcement, which, if enacted, would be $700 million less than the agency requested for the program for FY 2012.
These cuts would reverse two years of increased funding for the unit, and would begin returning IRS funding to the anemic levels seen under President George W. Bush. A GOP amendment limiting the hiring of more IRS agents weakened the FY 2011 IRS budget, and these FY 2012 cuts will ensure even fewer examiners are able to collect taxes: the National Treasury Employees Union (NTEU) estimates the cuts will force the IRS to lay off 3,000 to 4,000 personnel.
House Appropriations Ranking Member Rep. Norm Dicks (D-WA) summed up the shortsighted cuts thusly: “The IRS estimates that this cut will end up costing $4 billion per year due to the lack of enforcement on tax cheats. This cut literally increases the deficit.” The Post writer concludes, "Ultimately, the lost potential revenue could end up outstripping the upfront savings from IRS budget cuts."
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(Gary Therkildsen 10/14/11; 6 comments)Warren Buffett's op-ed last week calling on Congress to raise taxes on the wealthy has struck a nerve with conservatives, stirring charges of class warfare and zingers about how the billionaire investor should write a check to help Uncle Sam. Exemplifying the right's opprobrium, the reactionary Tax Foundation has been lambasting Buffett in a series of recent posts and has actually gone so far as to call on low- and middle-income Americans to pay more before the rich do.
The rationale trotted out most often by the organization to defend its position is currently one of the more popular conservative conceits: the super rich already "pay nearly 40 percent of the income taxes" and "50 percent of American households pay no income tax at all." At first blush, these statistics might give one pause when confronted with a call for higher taxes on the rich, but let's unpack the argument a bit.
The Tax Foundation is trying to claim that a group's share of the total income taxes paid in any given year should help determine that group's tax rate. Yet it's not the share that a group as a whole puts into the income tax pie that matters so much as the tax rates that each of that group's members pay. Indeed, the super rich's share of total income taxes paid in a certain year serves little useful purpose for policy discussions and is simply a rhetorical device employed by anti-tax zealots to halt revenue discussions in their tracks.
Similarly, the fact that roughly 46 percent of households will pay no income tax in 2011 doesn't provide a ringing endorsement for raising their taxes before those of the rich. As Ezra Klein recently noted, "For about half of [the households], the standard provisions of the income tax wiped out their liability." So, why did standard provisions wipe out their liability? It's because those households make so little money.
Ninety-nine percent of those earning less than $10,000 a year pay no income tax, just as nearly 81 percent of those bringing home between 10K and 20K yearly. A good number of those who pay no income tax are also elderly folks who "get an extra standard deduction" and "an exemption for some Social Security benefits." Moreover, members of this group – nonironically referred to by the Wall Street Journal as "lucky duckies" – already pay a much greater share of their income on payroll, sales, and state and local taxes compared to the wealthy.
The fact is, over the last 40 years the federal tax system has become increasingly less progressive. There has been a dramatic decline in top marginal income tax rates – which affects the most affluent among us – while payroll taxes – which disproportionately affects low- and middle-income folks – have substantially increased. If any group can spare some additional income, it's the super rich.
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(Gary Therkildsen 08/24/11; 0 comments)An Agence France-Presse (AFP) piece making its way around the interwebs states, “US [sic] borrowing tops 100% of GDP: Treasury,” and goes on to explain, "US debt shot up $238 billion to reach 100 percent of gross domestic [product] [GDP] after the government's debt ceiling was lifted" earlier this week. The problem with this story is that our debt is nowhere near 100 percent of GDP, at least not the debt that matters.
The AFP story makes the elementary mistake of conflating public debt – the money the federal government owes individuals and institutions, both at home and abroad – with gross debt, which is the public debt combined with the money the federal government owes itself. As Chad Stone of the Center on Budget and Policy Priorities (CBPP) explains, this includes the common example of "money the Social Security trust fund has lent to the Treasury in years when Social Security’s earmarked revenues exceeded expenditures."
A separate CBPP analysis makes clear that no credible economic study looking at "the effect of rising deficits and debt on the budget and the economy" would use gross debt figures. The analysis points to a recent Congressional Budget Office (CBO) report that states, "Gross debt is not a good indicator of the government’s fiscal condition" or its "future obligations," as the Treasury securities held by trust funds "represent internal transactions of the government and thus have no direct effect on credit markets."
Not surprisingly, several conservative and libertarian blogs have picked up the AFP story and reported it verbatim, handing down rectitudinous judgment on the fiscal imprudence of Democrats in general and the Obama administration in particular. It's a shame these bloggers couldn't take a moment to research AFP's claim before racing off to reduce a complex fiscal issue into black-and-white conservative palaver.
I'm sure it would be news to AFP and the above mentioned bloggers that our public debt-to-GDP ratio is actually somewhere in the mid 60s, and that the ratio isn't expected to approach 80 percent for another couple of decades, which is unfortunate for these publications' misinformed readers.
Image by Flickr user Images_of_Money, used under a Creative Commons license. TaxBrackets.org is the original creator of this image.
(Gary Therkildsen 08/05/11; 3 comments)Bob Greenstein, president of the well-respected Center on Budget and Policy Priorities (CBPP), lays out the broader consequence of the self-inflicted debt ceiling crisis and, in short, it's a "terrifying" new framework of federal budget politics that enshrines minority rule and threatens to "undermine democracy."
Leaving aside the awful details of the deal itself, which include punitive discretionary caps, a special joint committee that likely won’t raise any revenues, and potential arbitrary across-the-board cuts, Greenstein says, "[I]t's the precedent that Republican congressional leaders say the crisis has established" that is the true threat to our democracy.
Several Republican leaders have already spoken out about either replaying the last crisis by withholding votes on a future debt limit increase and risking financial collapse unless specific policy goals, i.e. spending cuts, are met (Sen. Mitch McConnell (R-KY)), or that all future debt limit raises should entail dollar-for-dollar spending cuts (Sen. Rob Portman (R-OH) and Rep. Paul Ryan (R-WI)).
Neither of these approaches is acceptable, as the first will continually threaten the full faith and credit of our nation and both risk sowing long-term turmoil into our economy. As Greenstein points out, if Congress were to adopt a dollar-for-dollar debt ceiling policy, even under Rep. Ryan’s unnecessarily miserly budget that entails over $4 trillion in cuts, future congresses would have to raise the debt ceiling another $6 trillion to incorporate the budget’s debt, necessitating that same amount in what would be even further draconian cuts.
Of course, future increases of the debt ceiling do not have to play out like the most recent debacle, though it will take a concerted effort from the public to demand that future congresses stop playing games with the debt ceiling. Polling conducted since the resolution of the debt ceiling crisis has shown that people were disgusted and angry over the way Congress handled the issue, with congressional Republicans fairing the worst.
The public must convert that frustration into an actionable demand of their elected officials – especially those lawmakers that have swaddled themselves in the garb of constitutional fealty but have displayed an utter disdain for the processes of our representative democracy, particularly during this latest crisis – and insist that they renounce debt ceiling brinksmanship.
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(Gary Therkildsen 08/04/11; 0 comments)Last week, a group of more than 60 House lawmakers sent a letter to President Obama offering their "full support" for final release of a proposed executive order (EO) that would require disclosure of contractors' political spending. After more than three months of baseless attacks on the prospective EO from a relentless special interest smear machine, it's time for the president to establish this basic measure of accountability within the federal contracting system.
When last we checked in on the EO, reactionary congressional members were attempting to preempt the order through amendments to defense authorization bills and several appropriations measures. The amendments would prevent federal agencies from using appropriated funds to implement “any rule, regulation or executive order” regarding contractor disclosure of political contributions.
This is amazing for several reasons, foremost among them, as Lisa Rosenberg at the Sunlight Foundation points out, being that members are legislating against a boogeyman. "Opponents of disclosure are responding to a draft EO," showing 1) how fearful big business is of this potential piece of transparency – providing further justification for the order in my book – and 2) how beholden many members of Congress are to the Chamber of Commerce and other corporate special interests.
Sunlight recently released an analysis of a small group of Democratic House lawmakers who voted in favor of one of the anti-disclosure amendments, showing just how beholden some are. Not surprisingly, "On average, the 18 ... members received about 63 percent of their campaign contributions from corporate sources for the 2010 election," with several of them taking in more than 80 percent.
Notwithstanding this minority contingent, the 62 Democratic House members supporting the president have this right. As Rosenberg mentions, the government has always stipulated conditions, including reporting requirements, for receipt of taxpayer dollars through a federal contract, and, "Disclosure of contributions is no more burdensome than any other check imposed on potential contractors." In other words, disclosure of political spending is a reasonable requirement for doing business with the federal government.
Importantly, though Congress has added amendments to both House and Senate defense authorization bills and several House appropriations bills, no final piece of legislation has come across the president's desk with an anti-disclosure amendment attached to it. Before Congress forces him to choose between rejecting an unjust amendment and funding important government programs, President Obama should implement his disclosure EO.
Image by Flickr user Gamma-Ray Productions used under a Creative Commons license.
(Gary Therkildsen 08/02/11; 0 comments)Give yourself credit if you guessed "ArmorGroup North America Inc." (AGNA) and the "Lord of the Flies" environment they oversaw in the housing camp for U.S embassy guards in Kabul, Afghanistan, which our friends over at the Project On Government Oversight (POGO) exposed back in 2009.
Earlier this month, AGNA, the private security company and subsidiary of the British security services conglomerate G4S, settled a whistleblower's lawsuit associated with the scandal, agreeing to pay a $7.5 million fine. Importantly, though, the contractor settled the suit without an admission of fault or liability, effectively sweeping the incident under the rug with regard to future considerations of government contracts.
Any future contracting officials seeking to determine ArmorGroup's integrity and trustworthiness will not see the incident listed in the government's top contracting performance database, the Federal Awardee Performance and Integrity Information System (FAPIIS).
Currently, FAPIIS only displays lawsuits or administrative actions taken by federal, state, or local governments where there is an admission of fault or liability by the contractor. And guess what contractors always demand whenever they settle something out of court; yup, immunity from any finding of fault, keeping many of the worst contracting abuses out of the government's databases and away from the eyes of contracting officials.
In AGNA's case, that includes allegations of the company blatantly disregarding "its obligations to ensure the safety and security of the U.S. Embassy in Kabul" – according to the whistleblower who sued – and other assorted nefarious activities – according to the Department of Justice (DOJ). Wrongdoings include:
Those seem like some important pieces of information that a contracting official might want to take into consideration if choosing between ArmorGroup and one of its modestly more responsible competitors when determining the award of a future federal contract.
Of course, contracting officials – and the public for that matter – could see this information if Congress simply passed some common sense contracting transparency reforms. Last spring, then-Sen. Russ Feingold (D-WI) introduced a bi-partisan bill including just such reforms.
Included in the legislation was language to pull into FAPIIS "records of any administrative proceeding entered into by a contractor at any level of government" no matter the finding of fault or liability. There was also a provision "increasing the length of time from five years to 10 that a contractor's past performance record on a government contract" would stay in the database.
The legislation ingloriously died in committee, however, and with Sen. Feingold now out of the Senate, the transparency community needs a new champion to step up in Congress and push for these basic contracting reforms.
Image by Flickr user johnsolid used under a Creative Commons license.
(Gary Therkildsen 07/19/11; 5 comments)
Mother Jones reports that Jamie Leigh Jones – the woman who in 2005 made explosive allegations of gang rape and intimidation while employed in Iraq by former Halliburton subsidiary KBR – stands a “good chance” of losing her civil suit against the contractor due to “significant holes and discrepancies in her story.” These revelations, however, should not call into question the meaningful legislation drafted and passed into law in response to her alleged ordeal.
In the fall of 2009, then-recently sworn-in Sen. Al Franken (D-MN) introduced and won passage of an amendment to the fiscal year (FY) 2010 Defense Appropriations bill requiring contractors to allow employees to bring sexual assault cases to court.
Sen. Franken introduced the amendment on behalf of Jones, who at that point had been battling for several years a clause in her employment contract with KBR requiring her to settle her claims with a private arbitrator hired by the contractor.
Although rumors began to surface that legislators would kill the amendment in conference, Sen. Franken emerged with a "remarkably strong” law requiring contractors to grant employees their day in court over charges of “assault, false imprisonment, intentional infliction of emotional distress or negligent hiring practice[s].”
No matter what “holes” have appeared in Jones’ story – and let’s be clear: she still alleges she was raped and there seems to be enough evidence corroborating that charge – it is unconscionable for a contractor to prevent an individual from accessing the civil justice system over something as personal as sexual assault.
It would be unfortunate if Jones lost her civil case against KBR – especially because it would send a discouraging message to other victims of sexual assault in general and victims in a war zone in particular – but neither the outcome of her case nor the fact that Jones isn't the perfect accuser should impugn the credibility of the legislation taken up in her name to address a serious contracting issue.
Image by Flickr user Public Citizen used under a Creative Commons license.
(Gary Therkildsen 07/08/11; 5 comments)