Last week, Forbes reported that many big corporations, including General Electric and Exxon Mobil, will pay no income taxes to the U.S. Treasury for 2009. (Exxon disputes this report, but refused to tell Forbes how much it will owe, and Forbes did not retract the statement.) At the same time, oil companies like Exxon are fighting to preserve billions of dollars in senseless corporate subsidies that they receive from the federal government, which the Obama administration has proposed abolishing.
These subsidies are part of a much wider problem with tax expenditures, or government spending that is administered through the tax code. Over the decades, a number of expenditures have cropped up in the tax code that senselessly subsidize corporations, huge farms, and the vacation homes for the wealthy. And anytime anyone tries to remove them, the interest involved throws a hissy fit and goes all out to protect the subsidy. Just look at the reaction of big corporations that, thanks to the recently passed health care reform bill, no longer get to both receive subsidies and write the subsidies off on their taxes.
Today, I spoke with Rep. Lloyd Doggett (D-TX), a leading proponent of cracking down on tax havens and cleaning up the tax code. He called wasteful tax expenditures “barnacles on the code” and criticized tax dodging multinationals for paying less in taxes than a local pharmacist:
I’m trying to provide some balance, by having a thorough analysis, an objective report coming out of the Joint Tax Committee and the Government Accountability Office, so that we have data to review the claims of those lobbyists. Not all of these provisions are bad, but many of are like barnacles on the code, and just as hard to scrape off as they are on the bottom of a ship…Whether it’s Exxon Mobil or many of the Wall Street institutions we were asked to bail out, I think [tax havens are] a real problem. I think we’ve had a proliferation of offshore tax havens, of corporate tax dodging. I always find it impossible to explain why a pharmacist in Bastrop, Texas, or a small retail store in San Marcos is having to pay higher rates on the income that their hard-working small business owners are earning than some multinational that can duck and dodge taxes in Bermuda or the Cayman Islands.
Last year, spending on tax expenditures totaled more than $1 trillion. This year, they amount to 25 percent of all government spending. But cutting them, even when they go to subsidize companies in well established industries like oil, is derided by lobbyists as raising “new” taxes. And the same goes for cracking down on tax havens: an effort to simply have corporations pay what they rightfully owe, under the statutory tax rate, is condemned as an end to American competitiveness.