Guest Spot: Middle class is shouldering unfair burden

03/31/2011 5:39 AM |
Tim Bishop

SAMANTHA BRIX FILE PHOTO Congressman Tim Bishop at a recent press conference at Brookhaven National Laboratory.

Benjamin Franklin once famously wrote, “In this world nothing can be said to be certain, except death and taxes.”

Well, leave it up to the ingenuity of American business 200 years later to prove him wrong.

Few people enjoy paying taxes, but most recognize that paying taxes is a necessity. While we can all debate the best level of taxation, we broadly understand their need and the value of the services they support.

This entire system is upended by efforts by the richest Americans and top corporations to use their resources and influence to avoid paying their fair share. In fact, a recent New York Times report showed that last year, not only did General Electric avoid paying taxes on its $5.1 billion in U.S.-based profits, GE actually got a $3.2 billion rebate!

This windfall is no accident; GE employs 975 highly paid lawyers and accountants to ensure the company pays as little tax as legally possible. GE’s tax shop is also on the lookout for ways to amend the tax code to the company’s advantage, with an army of Washington lobbyists at the ready. It is a sorry state when profitability is based on hiring accountants to devise new ways to exploit loopholes rather than workers to build better products.

The bottom line is that the tax code is written by Congress, and we all need to take responsibility, Democrats and Republicans, for devising a system with so many loopholes that a profitable company can escape taxes entirely. Much is made of the 35 percent federal tax rate for corporations, but virtually all corporations pay a far lower effective rate — and a great many profitable corporations pay no corporate taxes whatsoever.

The fact that corporations are able to avoid paying taxes is unfair to those of us who pay our fair share. But the issue takes on added urgency at a time when we are grappling to control a deficit that all sides can agree is unsustainable. It is neither fair nor sustainable to say that the deficit requires us to cut financial aid for nine million students, fire 1,000 scientists at Brookhaven National Lab and eliminate heating oil assistance for thousands of desperate Long Islanders, but heaven forbid we collect one dollar in revenue from General Electric. But that is what the House Republican budget does.

Additionally, the House Republican budget would cut $250 million from enforcement at the IRS. In other words, we’ll be making it easier for people who cheat on their taxes, putting an even heavier burden on the rest of us who play by the rules.

Perhaps some will say, “OK, they’re not paying taxes, but they’re putting people to work.” Unfortunately, in the past decade, GE has eliminated 20 percent of its American workforce while hiring workers overseas.

Over the next few weeks and months, I hope to join with my colleagues on both sides of the aisle and work to restore a fair tax code. Some may choose to demagogue an issue like this and say I want to raise taxes. If you consider that GE paid zero on more than $5.1 billion in profit, then yes, I suppose that’s correct. I also suppose you could say that if they paid one dollar that would represent an infinite increase in taxes.

I hope we can address this problem in the same spirit as when Ronald Reagan worked with Congressional Democrats in 1986 to support sweeping changes to the corporate tax code when he found that numerous large businesses were effectively paying no U.S. tax, including — you guessed it — GE. But that bipartisan reform has been steadily eroded over the past 25 years, to our nation’s great detriment.

Real reform will make the tax code simpler and perhaps lower rates, while eliminating loopholes to ensure that the effective rate is fair and evenly applied. This will help encourage job creation and investment in America, while ensuring that corporations, not just middle-class families, pay their fair share to fund our government.

Mr. Bishop is a Democrat and Southampton resident who represents New York’s 1st Congressional District.

2 Comment

  • It’s interesting that Congressman Bishop should write about his concerns for the middle class. If he really believes this, why did he vote for $3 billion in additional debt for his constituents to pay as their share of the $825 billion stimulus program? He laments the current tax code but makes no mention that the Chairman of the tax writing Ways and Means committee was fellow Democrat Charlie Rangel who failed to pay his own taxes. To his credit, Congressman Bishop voted to censure Rangel for ethics violations.

    He criticizes GE for hiring workers overseas, but Congressman Bishop voted to bail out GM and Chrysler who then increased offshore manufacturing by 50%, and built a $500 million engine plant in Mexico, respectively. For the record, I believe in free trade and I am against government interference in where a company hires its employees. I believe the congressman is a hypocrite for criticizing others for what he himself does, the only difference being that the congressman is doing it with our money.

    How about a flat tax? For individuals take the amount of money that they earned, subtract the amount of money they saved, apply a standard deduction that would equal the amount of income at the poverty line, and tax the rest at somewhere between 15%-20%. You could file your tax returns on a post card and eliminate 90% of the IRS. Do the same for business. Take their earnings, allow them to expense capital expendidtures when incurred rather than spreading over a number of years, a deduction for any dividends paid out to avoid double taxation and tax the rest at a fixed rate competitive with rates of other countries.

  • The flat tax? Is that like the Flat Earth Society? Makes about as much sense.