WHEREAS:

The Congress is now considering a major restructuring of the federal tax system; and

WHEREAS:

There is a pressing need for tax reform in the country. As a result of both long-existing tax loopholes and new ones enacted during President Reagan's first term, many profitable corporations and wealthy Americans are not contributing their fair share of federal taxes. In contrast, the tax burden on middle-income and poor Americans has risen sharply in recent years.

• The corporate share of federal revenues fell by one-third in just four years, from 12.5 percent in 1980 to 8.5 percent in 1984. The Accelerated Cost Recovery System and other loopholes enacted in 1981 have fostered legalized corporate tax avoidance. Fifty major US. corporations with aggregate profits of $57 billion paid no federal income taxes during President Reagan's first term. According to Citizens for Tax Justice, these companies received net tax refunds totaling $2.4 billion.
• The top 10 percent of individual taxpayers enjoyed a 10.4 percent cut in their effective federal income tax rate between 1980 and 1985. At the same time, the 20 percent of tax-payers in the middle suffered an 11.5 percent increase in the share of their incomes devoted to paying federal taxes.
• Federal taxes paid by poor families increased especially sharply during President Reagan's first term. Between 1980 and 1982 alone, the number of persons in poverty paying federal income taxes more than doubled. A poverty-level family's federal tax burden more than quintupled between 1979 and 1984.

WHEREAS:

The Reagan Administration and other right-wing forces have seized on the real need for tax reform as an excuse to further elements of their own conservative agenda. Their insistence on the elimination of the deductibility of state and local taxes, the taxation of employer-provided workplace benefits and greater tax incentives for business are all examples.

• Eliminating the deductibility of state and local taxes would promote tax revolt, make state and local taxes more regressive, and force state and local governments to drastically cut back on the services they provide.
• Taxation of employer-paid health insurance and other work-related benefits is a poorly veiled attempt to shift the tax burden onto working people and weaken the power of the collective bargaining process.
• The assertion that corporations must keep their current loopholes or need even more tax incentives in order to encourage investment has little basis in fact. A Citizens for Tax Justice study found that investment was inversely related to the use of tax breaks. Corporate tax breaks simply reward supporters of conservative causes and keep the tax burden off the rich; and

WHEREAS:

The House of Representatives in December 1985 passed the Tax Reform bill (HR 3838) that redressed many major problems with the tax system and avoided the new inequities advocated by the Administration. That bill —

• Eliminates the tax liability of 6.3 million poor persons,
• Closes most corporate loopholes and includes a stiff minimum tax on corporations and individuals at a 25% level,
• Retains the deductibility of state and local taxes and the
• Lowers the tax rates for all individuals and corporations, and
• Is revenue neutral, that is, would raise the same amount of revenues as the current tax system; and

WHEREAS:

The subsequent passage of the Gramm-Rudman deficit cutting mechanism has made the need for new revenues to maintain vital federal programs and services even more urgent. The major source of those new revenues must be from closing corporate loopholes and enacting a minimum tax.

THEREFORE BE IT RESOLVED:

That AFSCME urge Congress to make the federal income tax system fairer and more progressive, as well as raise additional, adequate revenues to meet domestic spending needs, by actions to:

1. Repeal corporate loopholes such as the Accelerated Cost Recovery System, the investment tax credit, the treatment of foreign income and operations, and the special treatment for defense contractors and the oil industry.
2. Enact a stiff, comprehensive minimum tax on corporations and high income individuals,
3. Make the individual income tax fairer and more progressive by removing persons below the poverty level from the tax rolls, enacting moderate income tax relief, curbing loopholes such as capital gains and estate and gift taxation that benefit only the wealthy, and otherwise limiting rate reduction to those income groups that were adversely affected by the 1981 tax changes; and
4. Use the additional revenues generated from the corporations and the wealthy paying a fair share to meet domestic spending needs and reduce the federal deficit.

SUBMITTED BY:

International Executive Board