The deadline for the bipartisan congressional supercommittee to produce a deficit reduction plan of at least $1.2 trillion is just 18 days away. Yet the committee, formed under the law that raised the debt ceiling this summer, is apparently no closer to an agreement than it was when it began work. This isn't the Democrats' fault. The blame for lack of progress on deficit reduction lies solely with Republicans.
The six Democrats on the 12-member panel have proposed a hard-to-swallow $3.2 trillion compromise plan that would whack $2 trillion off the deficit through deeply hurtful cuts in social spending and entitlements over the next decade, while securing just $1.2 trillion in new tax revenue in that period.
But Republicans refuse to compromise. Their plan calls only for spending cuts. To make that point more strongly, 33 Republican senators signed a letter sent Thursday to the panel demanding "no net tax increases" in any deficit reduction agreement, never mind that it was the needless George W. Bush tax cuts (and two wars on borrowed money) that began turning the federal budget from surpluses to deep deficits a decade ago. And a few GOP senators have began crafting legislation that would exempt the Pentagon from the across-the-board cuts that are supposed to occur if the supercommittee fails to produce a bipartisan deficit reduction plan.
The cuts Republicans propose are mainly in hard-earned entitlements like Social Security and Medicare. But they would slash funding for most federal agencies and a broad array of other vital social programs. Their refusal to consider tax increases is grossly unfair to the huge majority of taxpayers and families who pay much more in taxes, as a proportion of their disposal income and often as a matter of higher effective tax rates, than do the super-wealthy individuals and corporations that fail to pay a fair share.
The hardened GOP position against letting the Bush tax cuts for the ultra-wealthy expire, as they were designed to do in the legislation that Republicans passed in 2001 and 2003, makes a mockery of tax equity for the 99 percent of Americans that earn less than $1 million a year. It is that point alone that is driving the Occupy Wall Street movement to promote economic justice for the other 99 percent of Americans.
In his national campaign for higher taxes on for the super-wealthy, megabillionaire Warren Buffet has already made clear how the low 15 percent rate on dividends lets the ultra-wealthy pay much lower effective rates on their incomes than most working Americans. Buffet figures his cumulative tax rate on income at 17 percent, vs. 30 percent for his secretary.
Rich corporations also typically pay much lower rates than the listed 35 percent corporate tax rate. A comprehensive study released this week by Citizens for Tax Justice, for example, found that 280 of America's largest publicly traded companies had federal income tax bills of around 18.5 percent. A fourth of them had tax bills of less than 10 percent, and 30 companies had paid no taxes at all for three years.
Companies that aggressively sought tax breaks, shelters and loopholes in the system paid far less in taxes on their profits than companies that were less aggressive in exploiting loopholes. Wells Fargo Bank, for example, reported profits of $49 billion between 2008 and 2010, the report said, but received a tax benefit of $651 million. Similarly, an earlier New York Times report found General Electric reported profits in the United States of $5.1 billion in 2010, but claimed a federal tax benefit of $3.2 billion.
America's lobbyist-driven, loophole-infested corporate tax rate clearly needs an overhaul and a higher minimum rate. American companies like to claim that the standard 35 percent tax rate on corporate profits puts them at a disadvantage in global competition, and they're lobbying hard now for a lower rate. Yet the Citizens for Tax Justice study found that two thirds of American companies that have substantial overseas earnings pay more to foreign governments in taxes relative to earnings than they do in the United States.
Given such huge and obvious tax giveaways by Republicans to the vast sources of America's wealth, it is only fair that Republicans reverse some of their tax giveaways to rich corporations and individuals to help drive down the deficits those pernicious tax cuts have helped produce. Indeed, if these prior cuts were supposed to have produced jobs in recent years, where are the jobs? And if they're not creating jobs, why are big corporations and banks currently sitting on record profits and not hiring?
In fact, hiring remains depressed because ordinary Americans can't afford to keep up consumer spending on unfairly low wages and higher relative taxes. The Republican insistence on no net tax increases will only worsen that trend, and the tax inequity that drives it.