Red Ink: Inside the High-Stakes Politics of the Federal Budget by Wessel David

Author:Wessel, David [Wessel, David]
Language: eng
Format: epub
Tags: Business
ISBN: 9780770436155
Goodreads: 13531685
Publisher: Crown Business
Published: 2012-07-30T00:00:00+00:00

Why such a declining share? In part, because Congress has offered corporations all sorts of tax breaks. And, in part, because businesses have exploited loopholes or shifted profits overseas or legally organized themselves into entities that aren’t subject to the corporate tax. (That last factor is a big one: in 1980, 22 percent of all U.S. business profits were booked by outfits organized so they didn’t pay corporate taxes, though their owners—like partners in a law firm—paid individual income taxes on the profits. In 2008, 73 percent of all business profits were in entities that didn’t pay corporate taxes.)

With competition from abroad to attract businesses increasingly stiff, most economists and many politicians challenge the wisdom of relying more heavily on corporate taxes. Both the White House and congressional Republicans were flirting with corporate tax reform in early 2012, but both were talking about rearranging the burden among businesses, not raising more money from corporations.

The federal government’s only explicit tax on wealth—the estate tax levied on the money that the wealthy leave when they die—was an important source of revenue in the 1930s but has been on the wane ever since. Last year, it accounted for much less than 1 percent of revenues. Unlike most other developed countries, the United States at the federal level doesn’t rely on broad sales taxes on consumer spending, such as the value-added tax common abroad.

This book focuses on the federal government, but Americans pay state and local taxes, too. For every $1 the federal government raised in 2011, state and local governments collected another 58 cents from sales, property, income, and other taxes. That measure recently has been distorted by the federal government’s ability to cut taxes and run deficits during a recession; most states can’t do that. But even before the recession, the weight of state and local taxes rose from 44 cents for every $1 of federal taxes in 2001 to 49 cents in 2007. Of course, the burden varies widely by state. State and local governments in New York take about 15 percent of personal income, while in Missouri they take about 9 percent.

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