Nel's New Day

April 18, 2016

D.C. Pays Taxes with No Representation, Corporations Avoid Paying

Filed under: Income inequality,Privatization — trp2011 @ 7:24 PM

Your income taxes are due today, April 18. What happened to the deadline of April 15, you might ask. The exact due date is connected to the legal holiday in Washington, D.C. commemorating the date that Abraham Lincoln freed 3,000 slaves in the city. This year, April 16 was a Saturday, making Friday the holiday. There was nobody there last Friday to take your money.

Washington, D.C. is a unique place in the United States because its government has no rights to spend the money it raises from local taxes or pass any laws without permission from Congress. The GOP, the same party who demands states’ rights (unless they don’t agree with their laws) and small government, strictly controls the capital city of the nation. With a bigger share of jobs in high tech except for Seattle and San Francisco, D.C. has a bigger economy per capita that those of 16 states. The share of federal funds that the District relies on to balance its budget is smaller than that of 30 states, meaning that it pays more in federal taxes than it receives. D.C. has a higher population that the states of almost 700,000, larger than either Wyoming or Vermont. Each of those two states has two senators and one representative in Congress who are allowed to vote, but the lone representative permitted from Washington, D.C. can vote on procedural matters and in congressional committees but not on the House floor. The capital has no representation in the Senate.

The city is not allowed to spend any money that it raises from taxes until Congress passes its budget. While the federal government drags its feet, D.C. frequently has to borrow money and then pay interest for funding that it already has. Congressional budget stalemates force D.C. to austerity measures, causing delays in hiring and finalizing contracts. Government shutdowns that the GOP occasionally force on the country weighs down the District’s bond ratings which also increases borrowing costs for major projects.

Before GOP presidential candidate Ted Cruz decided to shut down federal agencies in 2013, Washington’s city officials set into motion a plan to financially disconnect D.C. Congress. They eliminated the city charter requirement that D.C. had to submit its budget to Congress for appropriation and unanimously adopted a budget autonomy amendment. In April 2012, D.C. voters overwhelmingly ratified the proposal that the District was not forced to wait for Congress to pass the federal budget to spend its own money and instead treat its plan as it does local legislation.

D.C. decided it will submit spending and laws to Congress for approval or rejection within 30 days. Both chambers must vote down the submissions before the president signs off, something that has happened only three times in the past 40 years. The budget autonomy amendment has been challenged in the courts, with mixed results. A U.S. District Court judge earlier ruled that the charter amendment was invalid, but D.C. Superior Court Judge Brian F. Holeman ruled last month in favor of the District.

Unlike previous years when the District has been forced to wait for Congress to approve its spending as part of the federal budget, the city plans to begin spending its money unless federal lawmakers act to stop it. Mayor Muriel E. Bowser has called for the end of slavery for all 672,000 Washington, D.C. residents:

“One hundred and fifty-four years after President Lincoln abolished slavery in the District of Columbia, we remain at the mercy of those we did not elect to office. It is just not right, and we must stand together until our rights are recognized.”

She calls congressional control over non-voting U.S. citizens the country’s “biggest ongoing voting rights violation.” District license plates read “taxation without representation.” Citizens pay federal taxes but have no voice in how that money is spent. The GOP has blocked the capital from funding abortion coverage for low-income women, needle-exchange programs, and counting ballots on legalizing medical marijuana.

Last week, the new head of Washington’s Metro met behind closed doors with senators from Maryland and Virginia. The issue was safety issue for the transit system, funding for repairs, and an unexpected shutdown of the Metro last month. No one from D.C. was allowed at the meeting.

Bowser also calls for the District could be admitted to the union under the “Tennessee model.” The former federal territory became the 16th state with no ratification from the other states by approving a state constitution and a pledge to form a republic-style government.

The deadline for passing a budget in the House is April 15, but Speaker Paul Ryan (R-WI) couldn’t manage to get his caucus together. House members left last week leaving that bit of unfinished business. With no budget, the House can pass a “deeming” resolution, setting a top line spending number in place of a budget resolution and acting as if a budget has been passed.

Residents of Washington, D.C. are paying more than $1.6 billion in taxes today—perhaps more than that because politicians who live in D.C. register in their home states. Meanwhile major U.S. corporations—Apple, Citigroup, Microsoft, Pfizer—avoid paying $700 billion in taxes because they stashed $2.4 trillion in other countries. U.S. residents—including those in D.C.—pay more in taxes than Fortune 500 companies PG&E, State Street, Con Edison, Weyerhaeuser, Duke Energy, and Qualcomm combined.

One-tenth of $700 billion could pay ten years of universal preschool for every 4-year-old child in low and moderate income families. One-half of $700 billion could double the five-year budget for highway repair and mass transit. Nine million students could get two years of free tuition at community colleges during the next ten years for only 11 percent of $700 billion. At this time, corporations are persuading Congress to forgive the taxes when they bring the money back to the U.S. The last time they did this, described as “repatriation,” they were given a tax rate of 5.25 percent in 2004 with promises for new jobs and then reduced their workforces. Corporations spent the money on mergers and stock buybacks before setting up more real or dummy operations overseas where they could shelter more profits.

Nearly 20 percent of large U.S. corporations reporting a profit on their financial statements in 2012 paid nothing in U.S. corporate income taxes. GOP campaigns loudly announce that a 35-percent top on taxes for corporations is far too much, but big profitable companies pay an average of 14 percent of pretax income for federal taxes. That’s about what the upper middle class pays.

State taxes differ across the country, but the poorest 20 percent of people in the U.S. paid an average of 10.9 percent of their income in state and local taxes while the middle 20 percent of Americans paid 9.4 percent. The top 1 percent, meanwhile, pay only 5.4 percent of their income to state and local taxes.

About 44 percent of the taxes you paid today goes to past or current military spending. With 25 percent going to the Pentagon and current military spending, another 19 percent goes to “veterans’ benefits plus 80% of the interest on the debt.” The veterans’ benefits come from the GOP insistence on causing more wars. Over half the Pentagon funding goes to private contractors with the largest part to procurement of weapons and other goods.  A large chunk goes to service contractors that charge three times as much for their services in the military as for non-military services. This corporate profit is most likely sheltered overseas with little or no taxes coming to the United States.

Conservatives mourn the passing of the 1950s, a “golden age” for the country as far as they were concerned. With a growing economy, the country was wealthy, jobs paid more and lasted longer, and the U.S. was seen as a powerful nation. The U.S. was #1 in GDP per capita. President Dwight Eisenhower was behind the building of the interstate highways that linked almost all parts of the nation.

I’ll join these conservatives in being wistful about the time. In 1950 corporate taxes accounted for 30 percent of federal revenue, compared to less than seven percent in 2012. The top corporate tax rate was 52 percent in the 1950s compared to the current 35 percent. The top marginal tax rate was 92 percent during that time compared to 39.6 percent now. Sheltering money, however, means that the wealthiest people pay a much lower percentage than the bracket. History shows a correlation between higher top marginal tax rates and economic growth, dropping from 4 percent to 2 percent when the top rate shrank to about 35 percent.

Meanwhile, happy Tax Day. You’re most likely paying more than the wealthy and far more than corporations. And almost half of it will go to war.

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