The Politics of Taxes

republican tax cutsAlthough our nation, states and local communities need revenue to maintain highways, roads, public education, water and sewer services, and public safety and national security – who among us enjoys paying taxes?

In 1789, Benjamin Franklin wrote: “In this world nothing can be said to be certain, except death and taxes.”

Nothing has changed. The majority of the public loathes paying taxes, while tax cuts are popular election carrots.

For example, in 1981, President Reagan delivered massive tax cuts during recessionary times under the Economic Recovery Act. Thereafter, during his remaining time in office, eleven major tax increases helped regain half of the nation’s lost revenue.

In 2001, George W. Bush began his term as President with a surplus budget of $128 billion. He immediately proposed tax breaks and another round in 2003. Reportedly, according to the Tax Policy Center, the Bush era tax cuts caused our nation to lose $1.8 trillion in revenue – which contributed to the national deficit.

On December 31, the Bush era tax cuts are scheduled to expire. Recently, President Obama and Democratic leaders proposed continuing the same tax breaks for everyone but the top 2-percent of the nation’s taxpayers – approximately 750,000 individuals -

However, Senate Republican leader Mitch McConnell argued that increasing taxes on the nation’s top 2-percent would hurt small businesses.

But who are the top 2 percent of the nation’s small business owners?

The term “small businesses” conveys the image of family-owned small companies, small shops where we buy goods, quaint restaurants where we eat occasionally, and small businesses that provide services for us, whether it is dry-cleaning or pet grooming.

Most of the public does not understand the complex tax system or that the “small business” designation applies equally to partnerships, sole proprietorships and “S” corporations, allowed to pass through profits and losses on personal tax returns.

Last week, MSNBC’s Keith Olbermann identified some very large “small businesses.” They include: Bechtel, a global engineering and construction company which earned $31 billion. Ferrellgas, a propane company, which earned $2 billion. McIlhenny, which makes Tabasco sauce, earned $250 million. CoorsTek, a ceramics manufacturer founded by Adolph Coors, with $549 million.

These businesses are not “small” by any stretch of the term. According to Olbermann, in 2005, there were more than 20,000 “S” corporations which generated revenues over $50 million – but considered “small businesses.”

The Washington Post reports that increasing the amount of income tax for this group, the nation’s top 2-percent, “would miss more than 98 percent of small-business owners.”

tracy-emblemThe Center on Budget and Policy Priorities explains that the Bush “tax cuts have conferred the most benefits, by far, on the highest-income households – those least in need of additional resources – at a time when income already is exceptionally concentrated at the top of the income spectrum.”

Nonetheless, the debate was quickly shut down because anyone who suggests the “tax” word in this political climate, even when it does not apply to 98-percent of the American public and will reduce the national deficit, instantly becomes toxic.

Tracy Emblem

Tracy Emblem is an attorney in Escondido.

Published by the LA Progressive on September 28, 2010
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