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Friday, April 08, 2011

America's Political Corruption and Taxes

Late Friday night, Republicans and Democrats in the Congress compromised and a government shutdown was avoided. The White House, many members of the news media, and elected officials from both political parties are celebrating nearly $40 billion in spending cuts:
The agreement cuts about $38 billion in spending for the fiscal year that ends on September 30, a decrease that the parties call the biggest annual spending cut in history.
Despite the celebration of "bipartisanship" at work, many top economists say that this is bad public policy. The U.S. needs more economic stimulus rather than reduced spending. Government spending foments demand that can help spark the economy.

In Britain, ordinary people opposed to their government's spending cuts organized and conducted high profile protests to highlight the fact that deficits could be addressed by taxing corporations. Specifically, UK Uncut points out that many very profitable businesses pay little to no taxes. A couple of weeks ago, they achieved a political victory -- a public inquiry into corporate tax avoidance.

The US has not yet had many protests aimed at corporate tax evasion, but the Wisconsin rallies signal the potential for mass unrest caused by government cutbacks. And the US is a prime target for US Uncut. As their new website points out, General Electric paid $0 in taxes on over $5 billion in profits. Bank of America, Verizon, and Citigroup likewise have lower tax burdens than the average American household, get billions in refunds from the government, or pay no taxes (despite getting bailouts as well).

Fareed Zakaria explains the problem, politically:
The American tax code is a monstrosity, cumbersome and inefficient. It is 16,000 pages long and riddled with exemptions and loopholes, specific favors to special interests. As such, it represents the deep, institutionalized corruption at the heart of the American political process, in which it is now considered routine to buy a member of Congress's support for a particular, narrow provision that will be advantageous for your business.
Instead of celebrating billions in spending reductions during difficult economic times, the U.S. could be collecting revenues from businesses that pay little to nothing in taxes.

And then, the government could go after government subsidies that encourage ecologically undesirable activity -- oil, mineral rights, etc. The libertarian right agrees that "corporate welfare" is anathema; thus, this could be a great area for bipartisan cooperation.

As I've blogged before, libertarians also agree with progressives that Pentagon spending should be in for a major correction. They might not agree to buy more butter, but they certainly favor fewer guns.

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