Congress needs to get serious about America's continually worsening debt situation. Many a politician have made careers out of complaining about the national debt, which now stands at $17.5 trillion and counting. We have no doubt even more candidates will be elected this fall so they can do something about it.
The trouble is, when presented with opportunities that might improve U.S. finances, these leaders fail to perform. Over and over and over. It matters not the political party, philosophical approach or even personal acumen.
Currently, Congress is going through the charade of whether to approve more than 50 tax breaks that actually expired at the end of 2013. The "temporary" breaks, which get reinstated so regularly for one- and two-year periods they're collectively referred to as "extenders," are worth some $700 billion during the next 10 years.
These tax breaks run the gamut. For individuals, anything from sales tax deductions, charitable donations, tuition and fees deductions, educators' out-of-pocket expenses and mortgage debt forgiveness are included. For the energy industry, the extenders include tax credits for renewable energy production, biodiesel blending and energy efficiency. For businesses, there are numerous depreciation experiments that benefit filmmakers, racehorse owners, motor speedways and small business expenses. There are credits for research and experimentation, plus an "active financing exception for Subpart F" that allows corporations to park income and profits overseas and avoid taxes until it's brought back to the U.S.
That last corporate welfare scheme incentivises companies such as Pfizer to buy competitor AstraZeneca simply to establish an overseas hub and avoid taxes, both past and present. Pfizer has close to $70 billion in profits sitting in international locations. If the company brought those dollars to the U.S., they would be subject to a 35-percent tax rate. If it uses that money to purchase AstraZeneca, suddenly there are no profits to be taxed. And the capital purchase would bring even more tax relief to Pfizer.
The legal manners in which corporations game the system lead to perverse results. A study by Citizens for Tax Justice earlier this year pointed out 288 large and consistently profitable U.S. firms paid a collective tax rate of 19.4 percent from 2008 to 2012. No less than 26 of the companies, including Boeing and General Electric, paid no federal income tax. Not one dime. In fact, some of the firms received refunds.
Many in Congress believe the current 50-some extenders need to be passed, with no off-setting budget cuts. In other words, simply add it on to the national debt.
The Senate wants to pass all of them together. The House at least wants to examine them one by one. In the end, however, the result will be the same. Large corporations will continue to benefit the most from government handouts, while wealthy Americans will benefit the most from individual tax breaks.
And the average Joe or Jane? They'll be the ones chastised for being on welfare. Wealth and income disparity will continue to widen, and politicians will continue to clamor for reform.
It shouldn't be a future endeavor.
Editorial by Patrick Lowry