Time to Close Corporate Tax Loopholes to Save Jobs
Yesterday, our Governor released her “Budget Roadmap” for cutting another $2 to $4 billion from the State Budget.http://www.ofm.wa.gov/reductions/alternatives/all_budget_alternatives.pdf
But Hoover proved long ago that we can not cut our way to prosperity. Each billion in cuts equates to the loss of 10,000 public and private sector jobs.Firing public workers in the middle of a recession is how Hoover caused the Great Depression. Do we really want to make the same mistake twice?
The following table describes some of the 160 programs being cut, along with the number of jobs lost.
The total possible budget cuts listed in the Governor’s Proposal is $4.2 billion. Ironically, it is possible that ALL of these cuts will be required during the next couple of years unless something is done to roll back tax breaks for wealthy corporations. This is because even $2 billion in cuts is based on the assumption that State revenue will only drop from $32 billion to $30 billion. But as I have shown in previous articles, State revenue is likely to remain between $28 to $29 billion – meaning even more cuts are coming in the next few months.
As a reminder, all of these billions of dollars in new cuts are on top of $4.6 billion in cuts in the last legislative session which ended just a few months ago – and on top of $10 billion in cuts during the past 3 years. Another $2 to $4 billion in cuts will bring the total cuts to between $12 billion to $14 billion and the total jobs lost to between 120,000 to 140,000.
The Other Option: Closing Tax Loopholes for Wealthy Corporations
According to reports from the Washington State Department of Revenue, tax breaks for wealthy corporations have skyrocketed from $20 billion per year in 2000 to $50 billion per year in 2010.
Tax breaks for major corporations in our State have skyrocketed 250% during the past 10 years: Over 90% of these tax exemptions benefit the richest one percent, with much of this wealth being shipped out of State and even out of the country, creating jobs overseas instead of here in Washington State. None of these billions in tax breaks resulted in any jobs in our State. Instead corporations used these windfall profits to outsource jobs out of Washington State.
These billions in tax breaks for the super rich have shifted the tax burden from the rich to the middle class – giving the State of Washington the most unfair tax structure in America. In shifting the tax burden to our middle class, and causing the firing of thousands of public servants, these massive tax exemptions for billionaires do not create jobs. Instead, they cost jobs.
Wealthy Corporations can afford to pay State taxes!
Some have claimed that wealthy corporations are struggling right now and can not afford to pay taxes. This is simply not true. First, because State business taxes are deductible from federal business taxes, it would not harm wealthy corporations to pay their fair share of State taxes.
Second, wealthy corporations are not struggling right now.
Let’s use Washington State’s most wealthy corporation as an example of their ability to pay their fair share of State taxes. This past year, Microsoft recorded a record profit of $20 billion dollars on record sales of $60 billion dollars. Had they paid a normal 1.5% Gross Receipts Business Tax like any other business in our State, they would have paid about $1 billion in State taxes. This entire amount could have been deducted from their federal taxes – meaning they still would have recorded nearly $20 billion in profits – the greatest profit in the history of our planet.
Microsoft is not alone in experiencing record profits. The following chart confirms that corporate profits are near an all time high. http://www.chartoftheday.com/20110916.htm?A
Since its First Quarter 2009 low, S&P 500 earnings have surged (up over 1000%) and currently come in at a level that is greater than what occurred at the peak of the dot-com bubble and very near what occurred at the peak of the credit bubble.
Given that these wealthy corporations are making record profits by getting billions in tax payer bailouts and shipping our jobs overseas, isn’t it time that they at least start paying their fair share of State and federal taxes?
Washington Education Association President Mary Lindquist
Firing Thousands of Workers only Worsens our Economic Crisis
Public Sector Workers, like teachers and health care providers, who lose their jobs not only lose their homes, their health care, their life savings and their sense of dignity, they also lose the ability to shop at local small businesses – which in turn only leads to further job losses.
This leads to a downward economic death spiral in which everyone loses. Home foreclosures are already at a record high in our State. The value of the average home has already fallen by over $100,000 – wiping out the life savings of nearly all middle class families.
Do we really want to make things much worse just so a few billionaires can buy bigger boats?
Tax Breaks for Wealthy Corporations are not merely economically unwise, they are Unconstitutional
Article 9, Section 1 of our State Constitution requires the State legislature to provide ample funding for our public schools. It is therefore illegal to cut billions of dollars in funding for our schools simply to give these same funds away in billions in tax breaks for wealthy corporations. For more information on the illegality of corporate tax breaks, visit the section on Record Corporate Welfare in the Main Menu.
Some have claimed that the legislature can not close tax loopholes due to the Eyman Initiatives. But this is nonsense. Our Constitution states that the legislature can repeal tax breaks with a simple majority vote. This process can only be changed with a Constitutional Amendment – not by merely passing an Initiative. For more on this, see my article Eyman versus our State Constitution: http://realwashingtonstatebudget.info/index.php?option=com_content&view=article&id=60&Itemid=77
It is time to end the phony excuses and close tax loopholes for wealthy corporations instead of cutting billions in funding for schools and health care. Our State’s one million school children are already suffering under the burden of the lowest school funding and the highest class sizes in the nation. Instead of firing thousands of teachers and nurses, we should be hiring them by the thousands. Putting teachers and nurses back to work would allow them to save their homes, stabilizing home prices for everyone. Putting everyone back to work would also help restore spending – saving thousands of local small business. Restoring spending in turn is the ONLY way to increase State revenue.
Every month we continue with Hoover Economics, we will continue to receive more bad news. Until the insane corporate welfare is stopped, we will not have an economic recovery. Feel free to email me back with your questions and comments.
Regards, David Spring M. Ed.