You can’t fix a problem unless you understand what the problem is. This video from The Center for American Progress explains the origins of our current budget deficit. It’s a good and simple 3-minute primer on how our nation’s finances got where they are today.

When it comes to defining the causes of our ballooning deficit, there’s an awful lot of finger-pointing, with some blaming increased government spending, others blaming Bush-era tax cuts, expenditures related to our wars in Iraq and Afghanistan, and stimulus spending. Some, but very few, mention the poor economy.

All these opinions are right . . . and wrong. Yes, each of these things are responsible for part of our ballooning deficit, but, as this video shows, no one component is responsible for all the deficit. If we are going to address the deficit problem, we need to address all of the components that created it. That means you can’t rely on reduced spending to do the job, nor simply raise taxes or expect an improved economy to fix things. You have to address the whole problem, you have to address all of these things.

The bottom line is we must reduce spending and improve the economy, but spending cuts alone won’t do the job, and the economy has and always will be an undependable component that performs well in some years, and worse in others. That means that, unless we address taxes, increase revenues, and restore equity to our system of taxation, we won’t close the deficit. It’ll continue to spiral out of control.

Center for American Progress, http://www.youtube.com/watch?feature=player_embedded&v=LcvLHHMC4iI

Conservatives like to complain that the United States has the highest corporate taxes in the world, and they’re right . . . sort of. The problem is that very few large corporations pay anything like the top corporate tax rate, and many pay no taxes at all. If you look at actual taxes paid by corporations in the developed world, you quickly learn that the US is not anywhere near the top. They are near the bottom¹, and if your company did $50 Million dollars of business or more last year, there’s a pretty good chance they paid no taxes at all².

Here’s the truth: Large corporations have lobbied Congress for, and Congress has granted, huge tax breaks that benefit them and leave smaller companies and the middle class to foot their tax bill for them. This situation is so bad that Edward Kleinbard, professor at the University of Southern California Gould School of Law, says that large US corporations have become the “world leaders in tax avoidance³.”

So, next time you hear a political candidate claim the US has one of the the highest corporate tax rates in the world, remember that’s not the whole truth. It’s time we demanded tax equity: If politicians want to reduce corporate taxes, demand that they also level the playing field by eliminating tax loopholes that favor large corporations.

References:

1) United States Government Accountability Office, July 2008, Comparison of the Reported Tax Liabilities of Foreign- and U.S.-Controlled Corporations, 1998-2005.

2) United States Congressional Budget Office, November 2005, Corporate Income Tax Rates: International Comparisons.

3) David Kocieniewski, New York Times, May 2 2011, But Nobody Pays That . . . U.S. Business Has High Tax Rates but Pays Less.

Two telling facts that explain how the income tax deck has been stacked against the middle class. First, Elisabeth Warren notes on the Daily Show (at index 17:00-18:30) that, “Thirty of the largest companies in the United States are now spending more on lobbying than they pay in Federal taxes¹,” and, in his opening, John Stewart shows how (at index 4:00-6:30) Mitt Romney’s Bain Capital lobbied hard to keep Mitt’s taxes low.

References:

Comedy Central, January 24, 2012, The Daily Show with John Stewart

1) U.S. Public Interest Research Group, January 2012, Representation without Taxation, Fortune 500 Companies That Spend Big on Lobbying and Avoid Taxes.

In an interview with BBC News Bill Gates asserts that taxes have to go up, and that it is “justice” for rich people to pay more that those who earn less.

“Taxes . . . should go up more on the rich than everyone else. That’s just justice.”

http://www.bbc.co.uk/news/world-us-canada-16714480

This is a new website that challenges America to establish a new model for taxation, one that:

• Is fair and equitable: The middle class should not pay a higher effective tax rate than those who earn more.
• Pays our Bills: A tax system that will reduce and eventually eliminate our national deficit.

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