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Posted by on Apr 16, 2012 in Corporate Welfare, Fair Taxation & Revenue | 1 comment

Is Your Employer Keeping Your Personal Income Taxes?

How would you like it if you found out your employer was withholding taxes from your paycheck and putting them in their own pocket?  Angry? Ready to call the police, or at least the Department of Revenue? What if you found out your state government told them they could do it?  In Illinois and many other states this is exactly what is happening.

According to a study by Good Jobs First, a D.C. based non partisan think tank, 16 states collectively allow corporations, including the likes of Goldman Sachs and General Electric, to collect $700 million from workers for personal income tax withholding and keep it.  In Illinois, 315 companies keep employees’ personal income taxes, including Motorolla Mobility (now part of Google) which will keep $100 million of its employee’s personal income taxes over the next 10 years.

Let’s be clear, this is the price of corporate blackmail whereby corporations pit states against one another, threatening to leave and take their jobs with them unless states grant them special tax breaks. But now it has gotten even worse: Corporations get to collect and keep their own employees personal taxes in deals that last for as long as 25 years!

This practice is wrong in many aspects, but let’s focus on two of them: 1) As an expression of corporate power usurping the role and authority of democratic self-governance, and 2) As an expression of trickle down economics which has been completely repudiated by 30 years of failure.

First, corporate power has become so dominant that without much debate private corporations are able to seize the control and distribution of social goods and functions that rightfully should only be the authority of government.  For example, criminal justice and incarceration has no business being provided by private entities for profit. Without any history, any decent social ethicist would predict that this would create an incentive to criminalize more activities, incarcerate more people including petty criminals and the innocent, and keep them imprisoned longer. Yet this is exactly what is happening  in the nation that incarcerates more people than any other in both raw numbers and per capita. Education, supposedly the great equalizer of the masses and creator of opportunity is increasingly being replaced with private (or “hybrid) schools that enroll selectively, and cannot prove any better outcomes than their public counterparts yet further erode the concept of commonwealth. Now the Mayor of Chicago even wants to create privately financed and controlled “infrastructure”.  Privatization of such public goods creates the opportunity for rampant corruption and virtually eliminates any accountability to the public.  Allowing corporations to become tax collectors is the final step in this absurd march toward a nightmare scenario in which nation states are completely replaced by global mega corporations. I know its in the daily news, but it truly reads like apocalyptic science fiction.

Secondly, the whole idea of tax rates and business success is a complete hoax. Tax rates for both wealthy individuals and corporations were much, much  higher during America’s most prosperous era of the 40’s through the mid 70’s. The effective tax rate (without loopholes) of Europe, Japan and other high-end economies is greater than the United States.  Numerous studies show that tax rates are a relatively insignificant factor in business location decisions among states, and even countries. But if the dominant narrative is that you cannot tax corporations or that corporations can get out of them via loopholes, they will. There are many fortune 500 companies that pay more in either CEO bonuses or lobbying than they do in taxes. Our entire social infrastructure and safety net is imperiled as a result of corporations’ ravenous appetites for profit, at the expense of their workers, customers and their country.

We must insist that “our” lawmakers stop allowing corporations to keep employees personal income taxes. We must also insist that they stop subsidizing the profits of corporations at the expense of workers, consumers and communities. If a corporation cannot be profitable and pay its taxes, it should not be in business. Corporations derive benefits from the community and all jurisdictions of government, so they must pay their fair share of taxes just like all of us legal persons who do not have the benefit of tens millions of dollars for lobbyists and campaign contributions.

If our lawmakers truly want jobs for our people, they should create them directly through our government, especially those services that should serve the common good like education, infrastructure, health care, and the like. Our national infrastructure is crumbling and requires trillions of dollars in investment. Doing this necessary thing alone could go a long way towards solving our current stagnant and depressed economy. Please contact your congressperson, senators and the White House to insist that this happens along with raising taxes for the rich and corporations instead of cutting more jobs and vital public services.

What you can do right now!

At IIRON, we always want to have some immediate and practical solutions to organize, even as we envision bigger and more systemic changes in our society. Here are a couple for our Illinois lawmakers: 1) Close the corporate loopholes we called for in this blog at the beginning of this session; and 2) Pass transparency legislation that requires the disclosure of the taxes that are paid by corporations residing and doing business in Illinois. We have a right to know which of the scores of major Illinois corporations pay little or no taxes and to know the full extent of the tax breaks, public tax giveaways and subsidies corporations receive from taxpayers. As it stands now, we cannot even adequately close loopholes and address the tax code because so little of this information is available. This is an issue IIRON is pursuing this Spring with our allies in the Make Wall Street Pay Illinois collaboration. Contact us if you are interested in getting involved. And use this link to find your legislators to let them know they need to pass tax disclosure legislation.

1 Comment

  1. Great article!

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