News / Publications » Publications

It’s Not a Spending Problem. It's a Revenue Problem.

Our tax system benefits the wealthy and corporations at the expense of vital public services.

By Clyde Weiss

Belt-tightening

A tax system skewed towards benefiting the wealthy and corporations is robbing the nation of revenue needed to provide vital public services.

Wall Street CEOs, tea party ideologues and corporate-backed lawmakers contend that taxes on the wealthy should remain at their historic lows in order to grow the nation’s feeble economy.

The reality? Just the opposite. Spending cuts won’t improve the economy, but they will diminish the quality of life in our communities — by hurting those most economically vulnerable.

All the while, the wealthiest, as well as corporations, avoid paying their fair share of those services that remain. General Electric, the nation’s largest company, is a prime example of this tax inequity. The multi-national company made $14.2 billion in profits in 2010, yet paid no U.S. taxes on that amount! Instead, G.E. was able to claim a $3.2 billion credit, because tax breaks and accounting tricks allowed it to keep most of its profits offshore.

The giants of Wall Street and Big Business benefit from lower federal rates on capital gains, lower estate-tax rates and other tax breaks beyond the reach of the middle class. Federal tax revenue is now at its lowest share of the economy since 1950.

For essentially the same reasons, state and local revenues, needed to pay for critical public services, are also on the decline. Solving this very serious situation should be easy, but pro-corporate lawmakers have been willing to shut down their governments, or threaten equally dire measures, rather than raise $1 more in taxes from their wealthiest constituents. In July, the shutdown scenario played out dramatically in Minnesota, where more than 20,000 state public employees there were laid off for 20 days during a budget battle. This longest and largest layoff of public service workers in the state’s history could have been avoided if lawmakers had agreed to create a tax system that deals fairly with corporations and the working middle class.

In an attempt to avoid the Minnesota debacle, Gov. Mark Dayton (D) offered a plan that hiked the tax rate for filers whose net income is more than $1 million per year — just 7,700 Minnesotans in all (0.3 percent of the state’s population). But Republican lawmakers rejected it. The deal that ultimately ended the shutdown failed to solve the state’s long-term problems.

“We don’t have an expenditure problem — we have a revenue problem,” says Mike Lindholt, a state transportation department maintenance worker from St. Paul and a member of Local 221 (Council 5). In Lindholt’s view, tax fairness is “a basic principle of the United States.” But the principle has been abandoned in the interest of “protecting the wealthiest.”

Minnesota’s tax system — and that of other states — places the greatest burden on the backs of those who can least afford to pay. Yet dismaying numbers of lawmakers support the tea party’s small-government philosophy: cut public services rather than ask the wealthiest Americans to pay their fair share of essential government operating costs, like trash collection and public safety.

There are more logical, more equitable, all-around-better solutions: increase revenue to expand the middle class and create jobs; and raise tax rates on the millionaires and billionaires who have gamed the system for their own benefit. This will not cost jobs — our economy was stronger when tax rates were higher.

Even the world’s third-wealthiest person, billionaire Warren Buffett, has called for making the rich pay their fair share. “My friends and I have been coddled long enough by a billionaire-friendly Congress,” he said in a recent column in The New York Times. “It’s time for our government to get serious about shared sacrifice.”

We must demand that the wealthiest Americans pay their fair share. After all, fairness is a cornerstone of democracy. 

Get news & updates from AFSCME

Follow AFSCME