Going for Tax Reform Big Time

By Ralph Nader
March 11, 2022

What if $10 billion were raised over ten years to transform Congress and make it do what it should be doing for the people (See, Think Big to Overcome Losing Big to Corporatism, 1/7/22)? In a more recent column, Facilitating Civic and Political Energies for the Common Good, 2/2/22, I outlined how $1 billion per year could be spent lobbying Congress for a people’s agenda.

First $100 million per year would be used to get through Congress long-overdue legislation such as full Medicare for All, a living wage, preventing corporate abuses, etc. The second $100 million would be devoted to create facilities making it easy for people to band together in their various organized roles (e.g., workers, consumers, patients, savers) so they could counter corporate bosses who unite their investors and many lobbying trade groups.

Now, I wish to suggest the third $100 million per year be used to make Congress change the disgracefully unfair, wasteful, and inefficient tax laws.

Start with Congress providing the Treasury Department with adequate funds to crack down on tax evasion – estimated to be between $600 billion and $1 trillion a year! Republicans in the Congress, since 2011, have strip-mined the IRS budget, especially in the area of enforcement against tax evasion by the Big Boys and the Big Global Corporations.

The GOP has cut the IRS budget by 20 percent below its 2010 level, inflation adjusted. Thousands of skilled IRS auditors, investigators, and accountants could not be retained. Audits of large companies plunged by 58 percent between 2010 and 2019. Congress was turned into a recidivist enabler of massive tax evasion – which if done by ordinary people would constitute a crime.

Last year, 55 large corporations made $40 billion in U.S. profits and paid NO federal income tax. Other companies paid less than 10 percent. To give you an idea of the size of yearly uncollected taxes, the lowest estimate is $600 billion, which is $168 billion less than the entire $768 billion military budget approved last year. The current IRS Commissioner, Charles P. Rettig, says the sum of uncollected taxes last year was a trillion dollars!

When super-rich individuals and corporations escape taxes, either middle-class taxpayers have to pay more or there are fewer government services or the federal deficit gets bigger. The last two results are the ones usually favored by Congress.

Turning to tax reform, there are lists and lists of proposals to get rid of grossly unfair tax loopholes, parking money in overseas tax havens, unjustifiable commercial tax deductions, arbitrary deferrals of income, rapid depreciation, shell corporations, and other complex travesties cooked up by corporate tax lawyers.

There is the notorious “carried interest” tax escape, condemned by Warren Buffett and just about every impartial tax expert. This is where private equity and hedge funds, in particular, get their no-risk net services for investors taxed at a much lower capital gains tax rate instead of higher ordinary income rates.

These legal tax escapes are called “tax avoidance” and are carved out by commercial interest lobbyists who wine, dine, and give campaign cash to many of the 535 members of Congress. Some of these “avoidances” have existed for years, while others are quietly pushed through at the end of many congressional sessions. If people only knew more specific examples of what profitable freeloaders are getting away with, their ire would spark indignation and civic action. Think tax deductions for extravagant entertainment or paying wrongfully injured people and so forth.

Spending $100 million a year could fund hundreds of skilled peoples’ lobbyists on Capitol Hill and back home in congressional districts. These advocates would make tax reform front-page news, push for revelatory public hearings and encourage disclosures by whistleblowers. They would also propose airtight specific legislation. These and other initiatives would make “tax reform” a top-ranked election issue.

For years, all kinds of fair tax proposals have been developed by law professors, and public interest groups, such as the Citizens for Tax Justice and its former director Robert McIntyre. But no legislative muscle has been applied to Congress to counter the relentless corporatist assault on fair and proper tax laws.

Some reformers are concluding that giant corporations are moving the tax code toward de facto tax exemption for themselves. David Cay Johnston, author of many articles and books on this subject, has concluded that corporations, using global tax escapes, can now decide what to pay, when to pay, and where to pay their dwindling taxes. He thinks unenforceable federal income taxes for corporations should be scrapped in favor of a much simpler, more collectible corporate tax system.

Western European nations rely heavily on “value-added taxes” a cascading form of sales tax starting with mining to manufacturing to wholesale and retail levels. Sales taxes are usually easier and quicker to collect.

Other tax reform advocates urge that we start first with taxing pollution, (“tax what we burn before taxing what we earn”) corporate crime, and financial transaction taxes on Wall Street trades and speculation.

Doubters of much success in Congress, take note. There are no more than a tiny handful of full-time advocates doing this work. Not a single full-time person, for example, is lobbying to end the “carried interest” tax escape. Similar voids exist for any one of hundreds of such unconscionable and indefensible schemes.

Why would you expect anything to happen with nobody on top of Congress? With $100 million a year, a corps of savvy experts, publicists and communicators could decisively take on Capitol Hill.

For now, Congress must pass the Biden administration’s restorative funding to the depleted IRS to make the Big Boys pay up.