Teachers, firefighters and cops are being laid off. Social services slashed. Subsidies to help the unemployed buy health insurance were deep-sixed in the latest tepid jobs bill passed by the House.
At a moment when new revenues are desperately needed for a serious public investment agenda, job creation, and continued economic recovery, Congress is sounding alarms about the need to shrink the deficit and find cuts, cuts, and more cuts. It’s insane, inane, and exactly what we don’t need right now.
Instead, what we do need is a national discussion–front and center–about reforming a tax code that has been rigged via high-priced lobbyists to favor the wealthy at the expense of a struggling middle-class.
Despite the major shortcomings in its jobs bill last week, the House did take one significant step in the right direction on taxes. It voted to close one of the most obscene and inequitable loopholes benefiting the richest of the rich–the so-called “carried interest” loophole that taxes hedge fund and private equity managers at a 15 percent capital gains rate rather than an ordinary income tax rate of 35 percent.
That’s right, these mega-billionaires pay a lower rate on the bulk of their income than their administrative assistants–not to mention those same cops, firefighters, and teachers now facing layoffs. This is morally and economically reprehensible–especially since the corporate tax base has already been severely eroded due to offshoring, tax havens and other quasi-legal tax plans devised by high-end legal and accounting firms. A 2008 GAO report found that two-thirds of US corporations paid zero federal income taxes from 1998-2005. Twenty five percent of the largest US corporations had $1.1 trillion in gross sales in 2005 but paid no federal income taxes. Where is the debate on corporate tax rates and loopholes?
While Wall Street lobbyists were successful in delaying the start date of the House-approved tax reform to January 1, 2011, and only 75 percent of carried interest will be taxed as ordinary income while 25 percent will still be treated as capital gains, the House deserves credit for showing some moxie. Industry lobbyists and their benefactors used all of their usual tricks of the trade–including fear-mongering, warning that closing this loophole would kill jobs, hurt minorities, and slow any recovery in the real estate market.