Every April 15, as millions of people rush to file income tax forms, the big-business media have articles that feature what different components of the federal budget are paid for by the taxes withheld from our paychecks. Articles highlight the special-interest programs that are the whim of this or that particular congressperson. These articles show the waste and arbitrary dispersal of our money by the U.S. Congress.
The aim is to reinforce a cynical “you can’t fight city hall” mentality that stifles any sentiment to change the situation. There will be a few articles about the largest corporate scofflaws who made a profit and failed to pay any taxes.
But the story not told is how the tax structure in the United States—like in the rest of the capitalist world—is a reflection of the exploitative nature of the system that exists to benefit the rich and ruling class. It is reflected in how little corporations contribute to the running of the federal government, while so much of the government expenditures benefit these same corporations.
In 2003, a little over 7 percent of federal revenue came from taxes on corporate profits. This represents the lowest proportion of federal revenues since 1934 (with the exception of 1983).
In 2003, the federal government collected $2.2 trillion in revenue. Personal income taxes, what individuals paid the government when they filed their income tax forms, account for almost half or a little more than $1 trillion. Payroll taxes, money taken from paychecks, accounted for about one-third or $766 billion. Taxes on corporate profits accounted for about 10 percent, at $227 billion.
In 2003, domestic corporate profits in the United States were a staggering $640 billion after taxes. In the same year, the U.S. Senate considered a bill to waive taxes on an additional $400 billion in profits made overseas by U.S. corporations. A bill was subsequently passed giving those companies a limited period to repatriate overseas profits and be taxed at only 5.25 percent as opposed to 35 percent.
In the capitalist United States, the right to make a profit is the most sacred right of all. The laws, tax codes and federal disbursements are all geared to provide the billionaire and multi-millionaire ruling class with the maximum profits possible. Everything else—a person’s right to a decent job, a home, health care and education—are secondary and to be sacrificed in the interest of profits.
Social benefits under capitalism
The social service programs that serve the needs of working-class and poor people, such as welfare, unemployment benefits, public housing, Medicaid and Medicare, free education, food stamps and the supplemental nutrition program for women, infants and children (WIC) are viewed by the ruling class as unnecessary expenses dictated by the class struggle between rich and poor. This view is not limited to the capitalists residing in the United States. It is a global view.
For example, taxes on corporate profits accounted for 7.5 percent of total tax receipts in the United States—compared to 5 percent in France, 4 percent in Germany and about 12 percent in Japan. While personal income taxes in the United States accounted for a much higher part of the total than in other European Union countries, those countries rely much more heavily on “value-added” or sales taxes—a form of tax that falls hardest on the working class.
The working classes in other imperialist countries, especially in Europe, enjoy greater social benefits than workers in the United States. This is partly due to historically more successful struggles by the working class. It is also a remnant of the times when the socialist camp existed, and European rulers were forced to devote a greater part of their surplus to compete with the social benefits of a planned economy.
For example, the EU countries spend one-third more on public pensions as a percentage of their gross domestic product than the United States. In France, Sweden, Germany and Italy, the bosses all pay more into workers’ retirement plans than in the United States.
In Sweden, in particular, 40 percent of salaries are put into the public retirement program. Of that, workers pay 8 percent and bosses pay the other 32 percent.
But Sweden and the other Scandinavian countries have both high income and sales taxes. In 1999, for example, close to 80 percent of tax revenues in Norway came from workers in the form of income or sales taxes.
Despite the much-vaunted benefits of the “welfare state,” social benefits in capitalist states, when they exist at all, are paid for out of the pockets of the workers. Profits go into private hands.
Even in those “welfare states,” since 1991, European capitalists have launched an assault on the social safety net won before the demise of the socialist camp. The owners of wealth in Bonn, Paris, London and Rome yearn for the “freedom” to profit from the labor of their workers as is done in the United States. They have their sights set on gutting the benefits enjoyed by the European working class.
The Pentagon and budget cuts
The federal government functions to manage the common affairs of the ruling class and enforce these priorities. The federal budget reflects this reality—with the Pentagon receiving over half of all discretionary spending.
The Pentagon has several functions. It acts as a global cop to protect corporate interests around the world, and it is a source of enormous profits from its spending.
Year after year the Pentagon budget grows and consumes more and more of the national economy, surpassing $700 billion for 2008.
This virtually limitless military spending that guarantees global profits for the U.S. capitalist class creates a budget deficit that then is used to justify cutting back on social programs. Impoverished seniors are asked to go hungry, public housing tenants are forced out of subsidized housing and student loan programs are cut from $9.7 to $6.6 billion.
The Bush administration’s 2008 budget would eliminate funding for the Commodity Supplemental Food Program, terminating food assistance to 440,000 low-income seniors. This program, which costs the government $20 a month per person, helps low-income seniors who make less than $13,000 a year maintain a minimum diet. The cost was a little more than $108 million in 2006.
The corporate media works 24 hours a day falsely framing the discussion of the budget deficit as if the revenue pie is fixed and certain expenditures cannot be cut, in particular military spending and paying the banks’ interest on the national debt. With this false depiction, the only solution that results from this discussion is the need to cut social programs as drains on the economy.
The Pentagon budget, an ostensibly public expense, is reviewed and debated. Superficial cuts are made to programs that the generals and admirals do not need, but the budget always passes. The media pundits or the Congress never ever raise the possibility of enlarging the revenue pie by increasing taxes on corporate profits in order to meet the needs of the people.
While racist and anti-poor politicians pontificate about poor people working the system to survive, branding them as welfare cheats, the real welfare cheats go unnoticed. In 1999, the Microsoft Corporation made $12.3 billion in profits and paid zero taxes. Ford Motor Corporation made $18.6 billion in U.S. profits in 2001-2002 and paid taxes at a rate of 5.7 percent. Colgate-Palmolive made a meager $1.6 billion from 1996-2000 and got a tax rebate by paying 1.3 percent in taxes. A senator or representative who would call into question the profits of any of the Fortune 500 would immediately become a one-term politician.
While the tax breaks for corporations are substantial, there are times when the enormity of profits is so great that there are no more loopholes that can be used to avoid paying taxes. In 2005, ExxonMobil set a record for corporate profits earning $36.13 billion, a 27 percent increase from 2004. Yet the company taxes rose by 14 percent.
A 2002 study by the Citizens for Tax Justice estimated that from 1996 to 2000, ten large corporations whose collective profits were $191 billion received $50 billion in tax breaks in that same period.
What could it be?
What programs and social needs could be addressed if the $50 billion these ten corporations avoided paying were collected? For less than $10 billion, another 1 million low-income children could receive educational, health, nutritional and social services from the Head Start program. Another $15 billion would double the number of students receiving Pell grants for college.
Five billion dollars would double the number of women and children served by WIC, from 8 to 16 million. Another $5.5 billion would provide permanent housing for the 33,000 homeless people who sleep in New York City shelters for the next 10 years.
Another $15 billion would provide free mass transit in New York City for almost four years.
These are examples of the human needs that could be addressed by collecting just $50 billion in additional taxes over a five-year period from 10 U.S. companies. Imagine a society where there were no corporate profits. Imagine a society where the entire $640 billion in profits made by corporations in 2003 were used to meet human needs. Imagine if this was done year after year after year. Add to this the $700 billion Pentagon budget, which would not be needed to police the world to protect imperialist profits.
Imagine socialism.
Corporations are paying less and less of the total tax revenues.
The tax code is structured for the benefit of billionaries like Warren Buffet and Bill Gates, pictured here.
Photo: Nicholas Roberts/AFP/GettyImages
