Taxes on some corporations, wealthy people unfairly low, Americans say

A smaller majority of conservative and moderate Democrats (68%) want rates raised on these households. The fact that some very profitable U.S. corporations have reported high profits but low taxable income and thereby low tax liabilities has been confirmed by IRS administrators, academic researchers, and news reports. The new 15% alternative corporate minimum tax in the recently enacted Inflation Reduction Act of 2022 (IRA) is intended to counter corporate tax avoidance, at least by giant corporations, by using financial, “book” income as the tax base instead of taxable income. Many of these taxpayers suspect that wealthy individuals can reduce, or even avoid, their tax liability through aggressive strategies including by reporting questionable deductions and exclusions to offset income from their businesses and investment activities.

• Over time, administrative burdens have been “best understood—and most effectively used—by political actors seeking to make government dysfunctional,” argue Pamela Herd and Donald P. Moynihan in their comprehensive survey of American bureaucracy and rules.
• The papers will be shared with mayors and leaders in churches, nonprofits, and community organizations across the nation, where much of the reform effort is taking place.
• Tax reforms to benefit the rich and big corporations have exacerbated inequality and drained resources from funding vital public programs.
• For years, budgetary limitations on the Internal Revenue Service’s ability to address non-compliance have resulted in substantial shortfalls in tax revenue.
• However, to raise the level of revenue required for government operations, it would be necessary to adopt a rate so high that the burden on lower-income taxpayers has been judged economically and politically unrealistic.
• For the SALT and mortgage interest deductions, the JCT provides data on the amounts deducted by various taxpayers.

In contrast, the average payroll tax rate for households in the lowest income quintile is 6.9 percent (the same as the 6.9 percent average rate for all households). The payroll tax is by far the most significant federal tax for households citizens struggle under unfair tax burden in the lowest income quintile, in terms of how much they pay. Among Democrats, large majorities of both liberals (93%) and conservatives or moderates (78%) say that large businesses and corporations should have higher tax rates.

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But huge loopholes in the U.S. tax code have lowered the effective rate that corporations actually pay the IRS. In fact, the Institute on Taxation and Economic Policy found that 55 large, profitable U.S. corporations paid zero in federal income taxes in 2020. Because of these loopholes, U.S. corporate tax revenue as a share of GDP is actually lower than in any other G7 country.

Over the years, Congress has created many rules and exceptions as incentives for taxpayers to use their money in certain ways. But these incentives — such as encouraging certain forms of energy — are concealed under mounds of instructions, so many people don’t realize they exist and don’t get to take advantage of them. Over time, administrative burdens have been “best understood—and most effectively used—by political actors seeking to make government dysfunctional,” argue Pamela Herd and Donald P. Moynihan in their comprehensive survey of American bureaucracy and rules.

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The United States had arguably the world’s most progressive tax code, with a top income-tax rate of 91 percent and a corporate tax rate above 50 percent. A flat, single tax rate on all income has had some adherents who emphasize its simplicity and argue that it would be fairer to charge all taxpayers the same rate. However, to raise the level of revenue required for government operations, it would be necessary to adopt a rate so high that the burden on lower-income taxpayers has been judged economically and politically unrealistic. When rich individuals or multinational corporations stash their wealth in tax havens, they can dodge paying their taxes in the countries where they do business and where they make their money. By doing so they deprive governments of the resources they need to provide vital public services and infrastructure like schools, hospitals and roads, and to tackle poverty and inequality. Changes in tax policies that benefit the wealthy and large corporations have been a key driver of America’s skyrocketing inequality.