While most of us struggle to pay our taxes with no loopholes, corporations receive immense tax breaks because of them. The Obama administration and Congress continue to talk about tax reform and closing tax loopholes. But it is way past the time when these folks needed to walk their talk and not just make empty promises they made years ago and that they continue to make to this day.
President Obama, the U.S. Senate, and the House of Representatives all have recently proposed tax reform that includes eliminating deductions and loopholes. But so what? Their talk is nothing new.
Many say, including the Christian Science Monitor’s Steve Bell that “The year 2013 just might be the year that tax reform gets done in the United States,” but there are doubts that will happen considering the political environment and the political need to pamper special-interest groups.
Citizens for Tax Justice (CTJ) provide an excellent example of how corporations make billions of dollars by paying no taxes and receive huge refunds.
CTJ reported, “… despite $1.1 billion in U.S. profits in 2012, Facebook did not pay even a dime in federal and state income taxes. Instead, Facebook says it will receive net tax refunds totaling $429 million,” all due to the tax deductibility of executive stock options. They report, “… in total Facebook’s current and future tax reductions from the stock options exercised in connection with its IPO will total $3.2 billion.”
CJI explains the stock option deduction: “Many big corporations give their executives (and sometimes other employees) options to buy the company’s stock at a favorable price in the future. When those options are exercised, corporations can take a tax deduction for the difference between what the employees pay for the stock and what it’s worth (while employees report this difference as taxable wages).”
Of course, it’s not illegal; we cannot blame any corporation or Facebook for taking advantage of such loopholes in the law. We need to place blame squarely on Congress and the system they created that allows it.
On March 1, as a result of “sequester” (automatic cuts in federal spending), imposed by the Budget Control Act of 2011, there will be more than $1 trillion cuts to defense and domestic spending. Democrats and Republicans agree that it will be a disaster for the country. But before they proposed raising any taxes, making cuts in any entitlement, cutting defense, or any other spending, they first should have resolved the issue of tax reform and closing loopholes. They have had more than enough time to get it done.