Another Point of View: Paying for Infrastructure
It is now a month after the White House and the Bipartisan Infrastructure committee agreed on a general framework for the bill, and Congress adjourns in August. But there are still many details to resolve before time runs out. The most serious of those is how to pay for the many, many items that few even debate that we need: repair and upgrades to bridges and highways, clean water, and upgrading and expanding broadband to reach rural citizens who have been at a great disadvantage during the last year and a half. These all are assets necessary to keep our economy functioning well.
We must not continue to use the credit card as we did for 20 years of war. (Both of the last two tax cuts, mostly for the wealthy, were passed while those wars were raging, and that is no way to do business.) The 2017 tax cuts made it much easier for big corporations to avoid paying any income tax, let alone the 21% we are led to believe they pay. Many now earn tax rebates larger than their tax, effectively producing a negative tax rate.
November 4, 2019 Business Insider gave these examples of negative tax rates for 2018 (created by the 2017 tax bill.)
- IBM: Effective tax rate: —68% (negative because of rebates paid for by U.S. taxpayers)
- 2018 US income: $500 million
- Federal tax after rebates: —$342 million
- Activision Blizzard: Effective federal income tax rate: —51%
- Pitney Bowes: Effective tax rate: —40%
- JetBlue: Effective tax rate: —27%
- Delta Airlines: Effective tax rate: —4%
- Goodyear: Effective tax rate: —3%
- Netflix: Effective tax rate: —3%
- General Motors: Effective tax rate: —2
- Amazon: Effective tax rate: —1%
- 2018 US income: $10.8 billion
- Federal tax after rebates: —$129 million
Amazon’s income has since exploded: According to Forbes, “Amazon delivered a record performance in 2020 with annual revenue up 38% to $386 billion, a yearly increase of over $100 billion [since 2019]. Net profit for Amazon was up 84% for the year as compared to last year.“
Many of the items in the bipartisan infrastructure bill are imperative for businesses who have been raking in record profits, but paying little tax thanks to the many loopholes. Can you imagine Jeff Bezos keeping his Amazon delivery trucks moving efficiently without all the streets, roads and bridges taxpayers have paid for? These are part of his cost of doing business that he has been (legally) dodging.
I think most working Americans would find it difficult to argue that the 2017 tax loopholes for the wealthy are justified, especially when many economists would argue that while the tax cuts may have produced a temporary surge, they did not produce long-term substantial returns on investments in education, workforce retraining, research and development, and infrastructure.
Now we must play catch-up after years of neglect. It is NOT unreasonable for us to expect these wealthy businesses to step up and pay their fair share, but the only way that can happen is to roll back some of the recent tax breaks and perhaps institute a wealth tax to keep the country’s income inequality gap from widening even further.
Another way to raise revenue is to properly fund the IRS so that tax cheats pay their share as well. Most, but not all, Americans pay what is owed. (Even undocumented immigrants pay $7—$12 billion dollars a year according to various sources.) And yet many in the GOP oppose any increase in funding to the IRS.
Economists on both sides of the aisle debate these thorny question, but Maya MacGuineas is with the Non-partisan Committee for Responsible Federal Budget. She worries that our national debt continued to grow when times were good, as they were before the pandemic. At the beginning of Trump’s administration the national debt was about 20 trillion dollars and increased almost $8 trillion in the following four years. Unfortunately this was NOT because of public investments that would have strengthened our economy.
Instead, MacGuineas believes Trump’s cuts put us on a sugar high (which rarely lasts) and that it is time to wipe out our tax expenditures and to increase revenue. She recommends not only paying for all new initiatives when our economy is strong, but also to tie any borrowing to long term off-sets to get the debt under control when the economy is solid.
Raising new revenue by reducing the 2017 tax expenditures is precisely what Biden is proposing, but Republicans are resisting, trying to protect their big donors at all costs. Will they be able to finalize the bipartisan infrastructure deal that is so important for the future of our nation?
History could provide some incentive: in the 1950s corporations paid for 45% of our government’s budget. Now they pay for only 7%, leaving 93% for the rest of us, or to be put on the credit card for our children.
"Another Point of View" is a column written by rotating authors dedicated to providing a variety of perspectives on life and politics.