Posts Tagged ‘taxes’

TOON_cjones05192016 clinton-foundation-scandal1

Donald Trump won’t reveal his income-tax returns. However, even as he claims he’s worth $10 billion, Fortune estimates his wealth at $4.5 billion and last year’s financial-disclosure report to the SEC reveals his assets more in the neighborhood of $1.5 billion. So, the scandal in this case may be that Trump is worth a great deal but he pays few taxes and may actually be worth much less than he claims.

Hillary Clinton, on the other hand, has made her income-tax returns public (so we know that she and her husband, former President Bill Clinton, made almost $28 million in 2014). But we have little information about the donations to and the activities of the key family enterprise, the Clinton Foundation.

However, that may soon change. Charles Ortel [ht: ra] has apparently set his sights on the “largest unprosecuted charity fraud ever attempted.”

According to Ortel, in his “Third Follow-up Letter to Donors, Charity Regulators, Investigative Journalists and Citizens Worldwide,”

The Clinton Foundation, directed by certain individuals and together with numerous affiliates, has been part of an international charity fraud network whose entire cumulative scale (counting inflows and outflows) approaches and may even exceed $100 billion, measured from 1997 forward.

Yet, state, federal, and foreign government authorities, that should be keenly aware of this massive set of criminal frauds, so far, move at a snail’s pace, perhaps waiting for the Federal Bureau of Investigation to reveal the scope of its work and the nature of any findings.

This presidential election campaign promises to have financial scandals burning on both ends.

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The folks at the Center on Budget and Policy Priorities have analyzed the distributional effects of the tax-cut plans proposed by Republican candidates Donald Trump and Ted Cruz.

Here’s what they found (for 2025, when their plans would be fully implemented):

  • Just 0.8 percent of the population would live in households with incomes exceeding $1 million, but such households would receive 38 percent of the Trump tax cuts. This would be greater than the share of the tax cuts (32 percent) that the bottom 80 percent of the population would receive.
  • Millionaires would receive 47 percent of the Cruz tax cuts, or more than double the share of the tax cuts (19 percent) the bottom 80 percent of the population would receive. In fact, under the Cruz plan, millionaires would receive a larger share of the tax cuts than the bottom 95 percent of the population.

Even more:

  • The richest 0.1 percent of the population (those with annual incomes exceeding $5.2 million in 2016 dollars) would receive tax cuts averaging $1.4 million under Trump and $1.8 million under Cruz. Under both plans, this segment of the population would receive significantly larger percentage increases in after-tax income (18 percent and 23 percent, respectively) than any other group.
  • These households would receive 18 percent of the tax cuts under the Trump plan—more than the plan’s combined tax cuts for the bottom 60 percent of the population. Under the Cruz plan, these multi-millionaires would receive 23 percent of the tax cuts, a larger share of the tax cuts than the bottom 80 percent of the population would receive.

 

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Yesterday, I argued that the U.S. tax system is broken. That’s because many corporations pay no federal taxes and, even when they do, the effective rate is much lower than the statutory rate.

And that’s just on the tax-revenue side. On top of that, as Oxfam (pdf) shows, U.S. corporations received a wide variety of subsidies. For example, from 2008 to 2014, the top 50 U.S. corporations collectively earned $4 trillion in profits, paid $412 billion in federal taxes, and received $11.2 trillion in support in the form of loans, loan guarantees, and bailout assistance from the federal government.

There is no doubt that data from this time frame is shaped heavily by the federal programs, like the auto-bailout and TARP, that were created to deal with the largest economic crisis since the Great Depression. Additionally most loans and bailouts are paid back in full with interest. There are also relevant distinctions to be made between companies and sectors on their tax practices and their receipt of federal support.

Companies benefit in different ways from federal investments and from tax laws, only some of which are revealed in the data Oxfam analyzed. The data also does not show the value of other forms of federal support that companies receive beyond loans, loan guarantees and bailouts.

Nonetheless, the data is useful to observe in aggregate because it puts in stark relief the taxpayer financed benefits large companies in general enjoy in relation to the taxes they pay.

In addition, those same corporations hold $1.4 trillion in offshore cash reserves, which are not subject to taxation. And they spent roughly $2.7 billion on lobbying from 2008 to 2014.

That means for every $1 they invested in shaping federal policy through lobbying, they received $130 in tax breaks and more than $4,000 in federal loans, loan guarantees and bailouts.

Those breaks indicate that not only is the U.S. tax system broken; so, too, is the political system.

Except, of course, for U.S. corporations.

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The other day, I wrote that, while the United States government is not broke, corporate income taxes represent a small percentage of total federal tax revenue and they’ve been steadily declining for a very long time.

And that’s because, as demonstrated in a new study by the U.S. Government Accountability Office (as requested by Senator Bernie Sanders), a large percentage of U.S. corporations pay no federal income taxes.

In each year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability. Larger corporations were more likely to owe tax. Among large corporations (generally those with at least $10 million in assets) less than half—42.3 percent—paid no federal income tax in 2012. Of those large corporations whose financial statements reported a profit, 19.5 percent paid no federal income tax that year. Reasons why even profitable corporations may have paid no federal tax in a given year include the use of tax deductions for losses carried forward from prior years and tax incentives, such as depreciation allowances that are more generous in the federal tax code than those allowed for financial accounting purposes. Corporations that did have a federal corporate income tax liability for tax year 2012 owed $267.5 billion.

Keep that in mind the next time someone claims that the U.S. corporate tax rate needs to be lowered. The fact is, effective tax rates are much lower than statutory rates. Thus, for example, the statutory tax rate on net corporate income ranges from 15 to 35 percent, depending on the amount of income earned. For tax years 2008 to 2012, profitable large U.S. corporations paid U.S. federal income taxes amounting to, on average, only 14 percent of the pretax net income that they reported in their financial statements.

Thus, the country is not broke—but the tax system, especially when it comes to large corporations, certainly is broken.