Taxes dodged in corporate boardrooms hurt education in neighborhood classrooms.
Keep that in mind the next time you hear about so-called “corporate tax reform” that doesn’t result in our nation’s most profitable corporations chipping in to help resolve our budget crisis.
In Washington, as part of the deficit-reduction negotiations, lawmakers are debating whether to require big corporations to increase the amount they pay in taxes. Many are pushing instead for what they call “revenue neutral” corporate tax reform. We need to make sure that reform is “revenue positive” by demanding a fairer share of taxes from our largest firms to pay down debt and strengthen public investments like education.
Most Americans agree multinational corporations don’t pull their weight when it comes to funding our common priorities. In recent years, very familiar and very profitable corporations like Boeing, General Electric, and Wells Fargo have used accounting sleight-of-hand to reduce their federal tax liability to zero.
Even among those corporations that owe taxes, loopholes can quickly chop the official rate of 35 percent down to an average effective rate of just 12 percent, according to the Congressional Budget Office.
Three things happen when corporations evade their financial responsibilities to society: middle-class families pay more, important services suffer, and deficits widen. As a member of the middle class, I don’t relish higher taxes; as a citizen, I worry about growing debt.
But the most immediate effect I experience is as a school board member trying to patch holes in our budget that can be traced, in part, to paltry corporate-tax collections. Our school district is the second largest in the state, with some 25,000 students and an annual budget of more than $200 million. As with most school districts in Missouri, the bulk of our funding comes from local property taxes, but we look to the federal government for about 10 percent of our funding. And that money goes directly to help kids who are most at-risk in our district — the poor and the disabled.
This federal aid allows us to hire teachers and aides and establish programs to assist low-income and disabled students to learn and thrive, part of a national commitment to universal quality education for all children.
Corporate tax loopholes endanger this funding. And now, believe it or not, some politicians in Washington want to make it even easier for huge corporations to avoid the taxman.
First, they would declare a “repatriation holiday,” which despite its festive name would be anything but a party for the middle class. Instead, we’d get stuck with the bill as overseas profits of multinational corporations are brought home practically tax-free. That one-time money-losing event would then be capped by a “territorial” tax system making all future overseas corporate profits entirely free of U.S. taxes.
It’s not only schools and other public investments that pay the price when corporate giants get special tax breaks. Local businesses that can’t hide their profits in foreign bank accounts suffer a competitive disadvantage. And local workers will be even more vulnerable to the loss of jobs as corporate operations are moved to tax-free havens overseas under a territorial tax system.
What would real, “revenue positive” corporate tax reform look like? It would end accounting shell games so all profits are taxed fairly regardless of where they’re made or recorded. It would set a minimum corporate tax, so profit-laden companies can’t skate tax-free. In general, it would once again make corporate taxes a significant source of federal revenue. According to the Office of Management and Budget, in 1960 corporate taxes accounted for 23 percent of all federal receipts. Today, only 8 percent of federal receipts come from corporations. Real, revenue positive corporate tax reform could raise hundreds of billions of dollars over the next decade.
American corporations should be grateful for our national treasures, ranging from a fair legal system to honest government to the quality of workers produced by good public school systems like ours. When their country needs help, big companies should display their patriotism by contributing more to the common good. I call on our congressional delegation to reject “revenue neutral” corporate tax reform in favor of actual reform that serves our schools, our economy and our national interest.
Andy Hosmer is an attorney and a member of the Springfield (Mo.) R-XII Board of Education.