How will Republicans pay for their proposal to extend Bush-era tax cuts for the wealthiest two percent of Americans? In part, by raising taxes on low- and moderate-income working families.
According to the watchdog group Citizens for Tax Justice, the GOP's tax plan would allow the expiration of tax breaks worth a total of $11.1 billion for 13 million working families. (Democrats want to keep those tax breaks in place.) That's enough money to make up for 40 percent of the value of the GOP's proposed tax cuts for the rich.
Here's a rundown of the GOP's proposed tax increases, and what they'll cost working families:
Child Tax Credit: A tax deduction for families with children GOP proposal: End a portion of the credit for families making between $3,000 and $13,300 Savings to federal government: $7.6 billion annually Tax increase for average family: $854 annually
Earned Income Tax Credit: A tax credit for people who work but have low wages GOP proposal: Reduce EITC for some married couples (i.e., bring back the "marriage penalty") and for families with three or more children Savings to federal government: $3.4 billion annually Tax increase for average family: $530 annually
According to CTJ, virtually all of these tax increases would apply to families making less than $50,000—people for whom a few hundred dollars can make a huge difference. Unfortunately for them, the media is focused instead on how Obama's tax increases on incomes above $250,000 will make life intolerable for rich people.
Corning International, the company best known for its heat-resistant glass cookware, paid zero federal income taxes on nearly $1 billion in income last year, but apparently that was still too much. Testifying at a House Ways and Means Committee hearing on corporate tax policy on Friday, Corning vice-president Susan Ford asked Congress for "a substantial reduction" in Corning's corporate tax rate.
To be fair, Corning would pay Uncle Sam much more than nothing it didn't resort to arcane accounting maneuvers. Ford told members of Congress that Corning paid a 36 percent income tax last year, but what she didn't tell them is that Corning once again deferred its tax payments. According to the watchdog group Citizens for Tax Justice, Corning has paid zero taxes in the past four years. Between 2008 and 2010, a period in which Corning made $1.9 billion in U.S. profits, Corning actually received a $4 million tax refund.
The hearing on corporate tax policy comes at a time when the White House has proposed lowering corporate tax rates while closing tax loopholes, leveling the playing field for business. The changes are supposed to be revenue neutral, though Corning and other companies seem to want more. "American manufacturers are at a distinct disadvantage to competitors headquartered in other countries," Ford told members of Congress. "Specifically, foreign manufacturers uniformly face a lower corporate tax rate than U.S. manufacturers."
Except when they don't. In 2011, Corning paid an average foreign tax rate of 17 percent—far more than what it paid in the United States.
Mitt Romney isn't alone. The world's wealthiest citizens have socked away a mind-blowing amount of money in offshore tax havens: Likely around $21 trillion, but as much as $32 trillion. That's according to a new report from the Tax Justice Network, a British think tank. To put that in perspective, the combined gross domestic products of the United States and Japan are around $21 trillion.
This gargantuan stash of money belongs to fewer than 10 million people, and $9.8 trillion of it belongs to just 100,000 people, the Tax Justice Network estimates. Here are the countries that are losing the most money to offshore tax havens:*
While offshore tax havens have an image of being operated by shady banks in tropical backwaters, the report found that the majority of the $21 trillion was actually managed by well-known private banks. The three largest tax haven players are UBS, Credit Suisse, and Goldman Sachs. For more on the Tax Justice Network's findings, you can read their full report (PDF).
Correction: The original version of this article stated that the countries in the chart were the top offshore destinations for tax dodgers. In reality, they are the top sources of money sent to offshore accounts in places like the Cayman Islands.
While most Americans don't object to Obama's plan to raise taxes on the wealthy, they're less excited about raising them for family-owned barbershops and ice cream parlors. This may be why Mitt Romney often claims that collecting more taxes from high earners would hurt mom-and-pop employers whose profits are taxed as individual income. "This is a direct attack on small business," he declared at a recent campaign stop in Virginia. His argument has the support of a powerful ally: the National Federation of Independent Businesses (NFIB), a "nonpartisan" small-business advocacy group that has put defending the Bush tax cuts for the richest of the rich near the top of its political agenda.
Often cited as the leading voice of small business, the NFIB was founded in 1943 by a former US Chamber of Commerce staffer who thought that business groups were neglecting the little guys. Today it claims 350,000 members, chapters in all 50 states, and a $95 million budget. In May, the Washington Postcited the NFIB to back up Romney's attacks on Obama's tax plan, reporting that the group had given an F to the portion of Obama's budget that deals with taxing the wealthy.
The recession has devastated the finances of many Americans, but it has been very good to the Walton family. Since 2007, Walmart stores have been flooded with millions of folks who've lost their shirts in the housing bust, stock market crash, and stalled job market—people who can no longer afford to buy anything that isn't made in China and sold by someone making close to minimum wage. Using newly released data from the Federal Reserve's Survey of Consumer Finances (listed as "SCF" below), labor economist Sylvia Allegretto has put together this chart on the diverging fortunes of the Waltons and their customers:
As Josh Bivens of the Economic Policy Insitute points out, the six Walmart heirs now have more wealth than the bottom 42 percent of Americans combined, up from 30 percent in 2007. Between 2007 and 2010, the collective wealth of the six richest Waltons rose from $73 billion to $90 billion, while the wealth of the average American declined from $126,000 to $77,000 (13 million Americans have negative net worth). Here's a chart of how many average Americans it has taken over time to equal the wealth of the Waltons:
It may be no accident that rising income inequality in America since the 1970s has coincided with Walmart's meteoric expansion: