bdp (12/09/82)
This discussion of taxation reminds me of an article I posted in early September, but which never got of our system (pyuxcc). I present it again for your amusement. I apologize to those who may have seen this before. From "The Nation," 21-28 August 1982, by John McDermott Everybody in Washington deplores deficits, but nobody can agree on what causes them. Some blame the growing national debt on excessive spending for social programs. Others pinpoint Pentagon waste. Still others blame the recession, with its concomitant high interest rates and rising unemployment. Liberals and conservatives, hawks and doves, Keynesians and supply-siders all have different theories. But these explanations fail to consider an obvious cause: Federal tax policy. A cursory look at the nation's tax history since World War II shows that tax policy has been consistent in one area. The tax burden on big business has been systematically eased by shifting it -- or at least part of it-- to individual taxpayers. The resulting shortfall in revenues has been made up by borrowing. Let me illustrate. In 1946, individual taxpayers paid 50.1 percent of all the taxes Washington took in; 45.9 percent of this amount was paid in income taxes and 4.2 percent in payroll assessments. Corporate taxes made up 30.7 percent of the total, with virtually the entire amount coming from taxes on profits. For every $5 in Federal revenues paid by individuals, corporations paid $3. By 1976, the picture had altered dramatically. Personal income taxes made up 52.6 percent of Washington's take, and payroll taxes (which are notoriously regressive) had climbed to 24.5 percent. Big Business's share of the tax load, meanwhile had fallen to 15.5 percent. In other words, the Internal Revenue Service was drawing 77 percent of its collections from personal income taxes. For every $5 in Federal revenues paid by individuals, big business paid $1. By 1980, the corporations' share was 13.9 percent, an this should drop another percentage point or two once all the tax breaks written into the Reagan Administration's "economic recovery program" have taken hold. ..... The best way to alter the terms of the [budget] debate is to calculate the long-range effect of tax policies on the national debt. In the 1970's, U.S. corporations paid a total of $470.2 billion in taxes, or 16 percent of Federal taxes collected. Had corporations paid the same share of Federal receipts in the 1970s as they did in the previous decade, the government would have collected an additional $171.3 billion and would have saved an estimated $64.9 billion in interest payments on the money it borrowed to make up the difference. Thus the effect of tax changes during the 1970s was to divert $171.3 billion from the Federal treasury into the coffers of private corporations and to shift an additional $64.9 billion to big banks. And the national debt grew over $500 billion. Since the 1960s were prosperous years for big business, the 22 percent burden was apparently not harmful. The 1950s were also banner years for big business-- indeed, just about the best ever. During that decade business paid about 28 percent of all Federal taxes collected. Had it continued to pay the same share throughout the 1960s and 1970s, the Federal treasury would have gained $24.5 billion more than it did and there would have been a further savings on interest of an estimated $215 billion. Thus, changes in the Federal tax policy from 1960 to 1980 deflected $639.5 billion from the U.S. Treasury. In 1980, the total Federal debt stood at $907.7 billion, having grown by $616.8 billion in the previous two decades. The significance of that shift of $639.5 billion to big business becomes apparent. We can account for the entire rise in the Federal debt in terms of tax reductions that benefited big business and big banks. ..... Orthodox conservatives prefer to blame the deficit on excessive spending on social programs. But in recent years the United States has spent only about 12 percent of its GNP on social programs, compared with those paragons of fiscal rectitude, Japan, which allocates 20 percent to such programs, and West Germany, which spends 30 percent. Bruce Parker BTL Pissthataway
renner@sri-unix (12/14/82)
#R:pyuxcc:-40700:uiucdcs:29200004:000:455 uiucdcs!renner Dec 14 10:31:00 1982 I still don't think that taxing corporations makes much sense. The taxes just get passed on to the customers, who are eventually individuals. Furthermore, dividends end up being taxed TWICE. Taxes on corporations should be designed to make their actual production costs reflect social/hidden costs (economists have a special word for this); general income taxes are not appropriate. Scott Renner University of Illinois (uiucdcs!renner)