by Karl Stark | February 22, 2013
Next Friday, federal budget cuts known as “sequestration” are scheduled to take effect, forcing nearly $85 billion in drastic, immediate budget cuts to government programs. Of course, these cuts could easily have been avoided. In fact, they were designed to be so unfathomable that Congress would take balanced action on deficit reduction.
But like a good Hitchcock movie, Congress is full of surprises. Budget hawks who have spent the last two years clamoring about the need for deficit reduction are finally seeing the real effect of those cuts: massive job losses, more than a million of them. Instead of working to prevent these deep cuts by passing deficit reduction measures that share the burden equally, some in Congress are more dedicated to protecting outrageous tax loopholes for the wealthy and corporations than they are to protect jobs.
With an economy that is still staggering along, what could be more important than preventing job losses? Let’s take a look at the right’s favorite loopholes:
Deferring Overseas Income
Multinational corporations don’t have to pay U.S. income taxes on profits they earn overseas until they transfer those earnings back to the United States. In effect, these companies just keep their profits outside America in overseas tax havens, allowing them to avoid paying taxes indefinitely. These companies can even transfer domestic profits to these havens and avoid paying taxes even on income that’s earned here in America.
A staggering 83 percent of top 100 publicly traded companies had tax-haven units in 2009, according to the GAO, including General Electric, Google, and Pfizer, costing the federal government an estimated (PDF) $100 billion each year.
Deducting Punitive Damages
When corporations have to pay punitive damages due to litigation from destructive or sometimes illegal activity, they can write these damages off as an “ordinary and necessary” business expense (PDF). When Exxon was hit with $1.1 billion in punitive damages resulting from the Alaska oil spill settlement, the actual cost to the oil company was $524 million after taxes.
Deducting Corporate Jets and Yachts
Corporations can deduct some of the costs for their private jets, and at a better rate than even commercial airline companies are able to. Yacht owners get similar perks.
Lower Tax Rates for Wall St. Bankers
For decades the federal government has taxed income earned through investments much lower than the income working families earn through regular wages. This allows Wall Street bankers, who earn all of their income through investments, to pay tax rates that are often 20% lower than the average middle class family. Mitt Romney, for example paid a tax rate of 14% on more than $13.7 million of income in 2011.
Take action on this issue today, by signing a petition that tells lawmakers it’s time to stop the giveaways and protect the programs that working people rely on.