Where Are The "Tax Loopholes"?

PoliticalChic

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If you said corporations, you'll be surprised to learn that a mere 8% of special interest tax breaks go to corporations.

So....where?

The Washington Post
By: Lori Montgomery
September 18, 2011

1. As President Obama and congressional Republicans argue over how to rewrite the U.S. tax code, the debate has revolved around "loopholes" for corporate jets and ending "carve-outs" for well-heeled special interests. But if the goal is debt reduction, that's not where the money is.

2. Broad tax breaks granted to millions of families at all income levels dwarf the corporate giveaways. Over the past two years, largely because of these popular benefits in the federal income tax code, the government has reached a rare milestone in tax collection - it has given away nearly as much as it takes in.

3. The number of tax breaks has nearly doubled since the last major tax overhaul 25 years ago, with lawmakers adding new benefits for children, college tuition, retirement savings and investment. At the same time, some long-standing breaks have exploded in value, such as the deduction for mortgage interest and the tax-free treatment of health-insurance premiums paid by employers.

4. All told, federal taxpayers last year received $1.08 trillion in credits, deductions and other perks while paying $1.09 trillion in income taxes, according to government estimates.

5. Only about 8 percent of those benefits went to corporations. (The write-off for corporate jets equals about .03 percent of the total.) The bulk went to private households, primarily upper-middle-class families that Obama has vowed to protect from new taxes.

6. "The big money is in the middle-class subsidies," said Syracuse University economist Leonard Burman, former director of the nonpartisan Tax Policy Center. "You're not going to balance the budget by eliminating ethanol credits. You have to go after things that really matter to a lot of people."

7. These tax breaks weave an invisible web of government benefits that now costs nearly as much as the Pentagon and all other federal agencies combined. But "tax expenditures," as they are known in Washington, get no routine oversight. …The congressional Joint Committee on Taxation lists more than 300 breaks, while Treasury tallies 172.

8. Edward Kleinbard, a University of Southern California law professor who served until recently as chief of staff to the Joint Committee on Taxation, says tax breaks are now the dominant instrument for creating new spending programs….In 1997, after a Republican Congress refused to increase spending for federal student loans, President Bill Clinton turned to the tax code to create a slew of higher-education credits.

9. In 2009, when Obama wanted to boost the flagging economy, he offered a massive new tax break as the centerpiece of his stimulus package. The Making Work Pay credit put about $60 billion a year in people's pockets in 2009 and 2010, including $18 billion in "refundable" payments to low-income families…

10. Georgetown University law professor John Buckley recently estimated that 95 percent of the revenue lost to tax expenditures is concentrated in 10 categories that aid families and advance popular policy goals. The "special-interest stuff," he said, such as write-offs for corporate jets, is minuscule by comparison - "unless we're all special," he said. Tax breaks pile up, grow more costly - CFED News Clips



Another one of this Left-wing bumper stickers shot to hell.
 

william the wie

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PC, I like your stuff but the Dems are in the political wilderness as the latest special election; Greece is slouching towards default which means that even if Obama asked for all of the right stuff and got it it wouldn't work; and new demographic analysis indicates that economy recovery on a per capita basis is no sooner than 23 at the earliest. This is beating a not merely dead but at least a partially embalmed horse.
 
OP
PoliticalChic

PoliticalChic

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PC, I like your stuff but the Dems are in the political wilderness as the latest special election; Greece is slouching towards default which means that even if Obama asked for all of the right stuff and got it it wouldn't work; and new demographic analysis indicates that economy recovery on a per capita basis is no sooner than 23 at the earliest. This is beating a not merely dead but at least a partially embalmed horse.
Scary...but probably correct.

What I found interesting was how the article put to bed the latest bete noire...evil corporations getting those horrid tax breaks and loopholes....
...not true.

I was astounded to learn that 92% of same go to ...us! The individual citizens!


Class warfare takes another fall.
 

Kuros

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First of all, we should all be wary of a post which states that "Another one of this Left-wing bumper stickers shot to hell." Our motive shouldn't be to solely crush left-wing talking points, except insofar as they are actually misleading.

Loopholes commonly refer to the deductions placed within the tax code. Loopholes usually mean the difference between the marginal rate of taxation and the actual rate of taxation. Thus, the article is correct: loopholes for both individual and corporate taxes are rampant.

The US has the highest marginal corporate tax rate in the developed world: its top rate is 35%. (That is Federal only; most states tax corporations somewhere between 5-10%).

But its effective rate is much lower for many companies.

Of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate — both federal and otherwise — of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent.

. . .

Over the last five years, on the other hand, Boeing paid a total tax rate of just 4.5 percent, according to Capital IQ. Southwest Airlines paid 6.3 percent. And the list goes on: Yahoo paid 7 percent; Prudential Financial, 7.6 percent; General Electric, 14.3 percent.
(Its not true that GE payed no taxes; that infamous analysis turned out to be a mistake)

Now, corporate taxation is inherently different from personal taxation. Corporations are taxed on their profits, whereas individuals are taxed on their ENTIRE income. So, already corporations have a lot more latitude to manipulate their taxes; after all, corporations control their own expenses and while they cannot always determine their gross income, they can determine many of their expenses.

Secondly, most economists agree that the US needs to close loopholes in the corporate tax code AND lower marginal rates. This would have a neutral effect on corporate tax liabilities, and is anything but class warfare. Thirdly, everyone pays corporate taxes. Corporate taxes are passed on to consumers: they are figured into profit margins, and thus everyone pays them. When Obama says he wants to close corporate loopholes, he's passing on the taxation to everyone.

I did enjoy the article. The thrust of it is very true:

"The big money is in the middle-class subsidies," said Syracuse University economist Leonard Burman, former director of the nonpartisan Tax Policy Center. "You're not going to balance the budget by eliminating ethanol credits. You have to go after things that really matter to a lot of people."
The mortgage-interest deduction and state-tax deductions cost us (off the top of my head) about $600 billion each year. Eliminate these popular deductions, and you've already almost double the total Federal tax receipts from corporate taxation before the crash (corporate taxes plummeted in 2009).
 
OP
PoliticalChic

PoliticalChic

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First of all, we should all be wary of a post which states that "Another one of this Left-wing bumper stickers shot to hell." Our motive shouldn't be to solely crush left-wing talking points, except insofar as they are actually misleading.

Loopholes commonly refer to the deductions placed within the tax code. Loopholes usually mean the difference between the marginal rate of taxation and the actual rate of taxation. Thus, the article is correct: loopholes for both individual and corporate taxes are rampant.

The US has the highest marginal corporate tax rate in the developed world: its top rate is 35%. (That is Federal only; most states tax corporations somewhere between 5-10%).

But its effective rate is much lower for many companies.

Of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate — both federal and otherwise — of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent.

. . .

Over the last five years, on the other hand, Boeing paid a total tax rate of just 4.5 percent, according to Capital IQ. Southwest Airlines paid 6.3 percent. And the list goes on: Yahoo paid 7 percent; Prudential Financial, 7.6 percent; General Electric, 14.3 percent.
(Its not true that GE payed no taxes; that infamous analysis turned out to be a mistake)

Now, corporate taxation is inherently different from personal taxation. Corporations are taxed on their profits, whereas individuals are taxed on their ENTIRE income. So, already corporations have a lot more latitude to manipulate their taxes; after all, corporations control their own expenses and while they cannot always determine their gross income, they can determine many of their expenses.

Secondly, most economists agree that the US needs to close loopholes in the corporate tax code AND lower marginal rates. This would have a neutral effect on corporate tax liabilities, and is anything but class warfare. Thirdly, everyone pays corporate taxes. Corporate taxes are passed on to consumers: they are figured into profit margins, and thus everyone pays them. When Obama says he wants to close corporate loopholes, he's passing on the taxation to everyone.

I did enjoy the article. The thrust of it is very true:

"The big money is in the middle-class subsidies," said Syracuse University economist Leonard Burman, former director of the nonpartisan Tax Policy Center. "You're not going to balance the budget by eliminating ethanol credits. You have to go after things that really matter to a lot of people."
The mortgage-interest deduction and state-tax deductions cost us (off the top of my head) about $600 billion each year. Eliminate these popular deductions, and you've already almost double the total Federal tax receipts from corporate taxation before the crash (corporate taxes plummeted in 2009).
Welcome to the board.

An interesting and well-written post.

Wonder, what would elimination of the mortgage-interest deduction do to the foundering housing market...Opinion?
 

Kuros

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First of all, we should all be wary of a post which states that "Another one of this Left-wing bumper stickers shot to hell." Our motive shouldn't be to solely crush left-wing talking points, except insofar as they are actually misleading.

Loopholes commonly refer to the deductions placed within the tax code. Loopholes usually mean the difference between the marginal rate of taxation and the actual rate of taxation. Thus, the article is correct: loopholes for both individual and corporate taxes are rampant.

The US has the highest marginal corporate tax rate in the developed world: its top rate is 35%. (That is Federal only; most states tax corporations somewhere between 5-10%).

But its effective rate is much lower for many companies.

Of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate — both federal and otherwise — of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent.

. . .

Over the last five years, on the other hand, Boeing paid a total tax rate of just 4.5 percent, according to Capital IQ. Southwest Airlines paid 6.3 percent. And the list goes on: Yahoo paid 7 percent; Prudential Financial, 7.6 percent; General Electric, 14.3 percent.
(Its not true that GE payed no taxes; that infamous analysis turned out to be a mistake)

Now, corporate taxation is inherently different from personal taxation. Corporations are taxed on their profits, whereas individuals are taxed on their ENTIRE income. So, already corporations have a lot more latitude to manipulate their taxes; after all, corporations control their own expenses and while they cannot always determine their gross income, they can determine many of their expenses.

Secondly, most economists agree that the US needs to close loopholes in the corporate tax code AND lower marginal rates. This would have a neutral effect on corporate tax liabilities, and is anything but class warfare. Thirdly, everyone pays corporate taxes. Corporate taxes are passed on to consumers: they are figured into profit margins, and thus everyone pays them. When Obama says he wants to close corporate loopholes, he's passing on the taxation to everyone.

I did enjoy the article. The thrust of it is very true:

"The big money is in the middle-class subsidies," said Syracuse University economist Leonard Burman, former director of the nonpartisan Tax Policy Center. "You're not going to balance the budget by eliminating ethanol credits. You have to go after things that really matter to a lot of people."
The mortgage-interest deduction and state-tax deductions cost us (off the top of my head) about $600 billion each year. Eliminate these popular deductions, and you've already almost double the total Federal tax receipts from corporate taxation before the crash (corporate taxes plummeted in 2009).
Welcome to the board.

An interesting and well-written post.

Wonder, what would elimination of the mortgage-interest deduction do to the foundering housing market...Opinion?
The mortgage-interest deduction needs to wound down gradually, just like Fannie and Freddie are being wound down gradually. Unfortunately, you can't pull away any massive subsidy suddenly, even if the effect is deleterious in the long-run.
 

william the wie

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Most of the loopholes are at the individual level.

And the corporate jet tax is stupid.
You expected something different from a White House that is this inept at basic political skills?
 

Supposn

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PoliticalChic, the lesser tax rate favoring long term capital gains but denied other income sources do not increase investment as defined by economists and factored into the calculation of gross domestic product.

It's politically unfeasible to eliminate the discounted tax rates granted to home sellers but I prefer that rather than tax cuts for sellers, we grant greater tax consideration for capped amounts of real-estate and school taxes paid by those who are trying to remain in their homes. The amounts of those caps should be annually cost of living adjusted.

I am not opposed to financial speculation but incomes of those who continue nurture their enterprises are no less economically worthy than those who realize capital gain profits. The lesser tax rates granted to commercial capital gains serve only to reduce federal revenues and increase our budget’s deficits.

Refer to the topic of “Capital gains income’s tax discount is unjustified”
last posted to on 4-16-2011 11:02 PM.

Respectfully, Supposn
 

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