Today is “Tax Day,” the normal filing date for federal income tax returns for millions of Americans who do their patriotic duty and ensure that, to paraphrase Oliver Wendell Holmes, Jr., we live “in a civilized society.”
Yet while ordinary, Main Street Americans sacrifice for their country by paying taxes, a whole host of big corporations are getting away with paying little to nothing in federal corporate income taxes — exploiting loopholes in the tax code to avoid their tax responsibilities. From Bank of America to ExxonMobil to General Electric, these big businesses have gone quarters or entire years without paying their income taxes — at a time when the effective tax rate on a median family is 13.6 percent.
This isn’t the first time Americans have had to deal with a tax code that lets the nation’s richest firms get away with shirking their tax responsibilities. In the middle of his presidency, then-president Ronald Reagan learned that a number of big corporations, including his former employer, General Electric, were completely escaping paying federal corporate income taxes. “I didn’t realize things had gotten that far out of line,” Reagan told his Treasury secretary, Donald T. Regan, according to his 1988 memoir.
So Reagan undertook a comprehensive tax reform effort that actually raised the corporate taxes and closed numerous loopholes that allowed big firms to dodge their tax responsibilities. As part of these reforms, Reagan passed the 1986 Tax Reform Act. This law “raised corporate taxes by $120 billion over five years and closed corporate tax loopholes worth about $300 billion over that same period.”
During the signing ceremony for the speech, Reagan explained that his goal in pursuing these reforms was to make sure “that everybody and every corporation pay their fair share”:
REAGAN: We’re going to make it economical to raise children again. Flatter rates will mean more reward for that extra effort, and vanishing loopholes and a minimum tax will mean that everybody and every corporation pay their fair share.
Unfortunately, the modern tax code is still riddled with loopholes and exemptions that allow big corporations to get away with paying little to nothing in federal corporate income taxes. When asked about this tax dodging, leading members of Reagan’s party have shown nowhere near the Gipper’s motivations to crack down on corporate America. Potential GOP presidential candidate Newt Gingrich said we should “celebrate” corporate tax dodgers, and Tim Pawlenty responded to a question about Bank of America paying nothing in federal income taxes by saying “taxes are too high.”