As the debt feud looms above our heads, ambiguous statements involving taxes, entitlements and reform spew from our TVs with a renewed vigor. Listening to the polarized fiscal analyst, on any contemporary news channel, a viewer is bound to come away with two solutions to this debt dilemma: Tax increases or entitlement cuts. Or if a particularly bold analyst is speaking that day a "unique" mixture of the two. I'd like to propose an alternative. One that's already been proposed in Simpson-Bowels, and one Obama is likely to include in any debt solution emanating from his office: tax reform.
More specifically, a complete overhaul of so-called tax "expenditures." President Obama is not demanding higher taxes. He's asking Congress to close outdated and corrupt loopholes found in the depressingly complex and tangled web we call a tax code. This hasn't been done since the 1986 Reagan-O'Neill reform. The only difference is instead of 100% of the savings derived from closing these loopholes going back to taxpayers in the form of lower taxes, we need to split it. Say 50-50, like Charles Krauthammer proposed. Half of the new revenue goes into the federal treasury to lower the debt. Half of it goes back to taxpayers in the form of lower taxes. Simpson-Bowles identified $1.1 trillion of these tax "expenditures."
Now it would be silly to expect congress to quickly go through the thousands of tax expenditure clauses and decide which ones stay and which ones go; especially considering the power of the purse — the lobbyers. Martin Feldstein, a Harvard economist, has a proposal: give congress a few years to hammer out a new, hopefully not inefficient, tax code, but in the meantime cap the total claimable tax deductions at no more than 2% (excluding charities).
I'm not saying we should limit deductions at 2%. Simply noting someone else did, and that got me wondering: what are some of the most profitable U.S. companies tax rates? Having attended SXSW (an Austin music festival) a few weeks ago, and gas having been my most expensive investment (a 3 hour drive!) I decided to use U.S. gas companies as my case study.
According to American Progress, in 2011 Chevron (5th in global Fortune 500) paid a tax rate of 19%. ExxonMobil (2nd) paid 13%. ConocoPhillips (24th) paid 18%; "a far cry from the 35% top corporate tax rate." To compound this, these 3 companies combined produced 3% LESS oil in 2012 than they did in 2011. Collectively, BP, Chevron, ExxonMobil, and Shell have cut over 15,000 jobs between 2006 and 2011. To put it layman's terms these companies are cutting jobs, producing less and the Government is giving them tax breaks nearing 50%. This is unfair.
Debt relief and tax reform go hand in hand. We don't need to raise taxes exorbitantly to reduce the debt. We don't need to "sequester" cuts on welfare and other entitlement programs. We need to stop giving wealthy corporations government handouts. Private taxpayers and entitlement programs shouldn't have to bear the debt burden alone. They don't even need to bear the majority of it. All we need to do is stop catering to the "fortunate 500." Make them pay their fair share. No more no less. I think we'd be surprised at the result.
This piece originally appeared on TheCanKicksBack.org.