Jay: “What do they call it when everything intersects?”
Sam: “The Bermuda Triangle.”
— Sleepless in Seattle
Sometimes events come magically together to provide what Modern America calls a “teachable moment.” That opportunity could be here on taxes — if our populace and political class could spot the true lessons behind some recent sensational headlines.
Take Amazon’s pullout from New York. The lesson here is a) threats to retract billions in tax giveaways obliterated 25,000 jobs b) it’s obscene to shower a nearly trillion-dollar company with largesse instead of investing in government services or c) none of the above.
If you answered c), go straight to the head of the class. Like a stopped clock at the right time, media darling Alexandria Ocasio-Cortez was correct for once — but for the wrong reasons. Research has repeatedly revealed two conclusive lessons: first, incentives rarely produce the jobs and growth promised. And second, the actual way to bump business creation and expand employment is a lower tax base for everyone, not goody bags for big-name enterprises.
Zero Corporate Taxes
How about the predictable expressions of horror that the selfsame Amazon, along with Netflix, paid zero corporate taxes last year? The correct lesson: a) huge, profitable companies should capitalize on proffered tax breaks b) it’s disgraceful that huge, profitable companies exploit such loopholes or c) none of the above.
If you chose c), you’re smarter than a fifth-grader — or at least most of our demagogic “leaders.” Once again, two principles to emphasize: first, the real scandal is not that sizable and profitable companies pay zero taxes — but rather, that they get better returns from investing in armies of lawyers and accountants and unproductive dodges than from investing in job creation and growth.
Both Netflix and Amazon reportedly reaped big benefits from a few favorable provisions. But certainly, their returns, and those of other tax avoiders, run into thousands of pages to exploit every possible tax break. And the fact that business decisions are directed by Washington, rather than the best interests of stockholders and stakeholders, is folly.
The second concept to be repeated ad infinitum by thinking politicians (I know, an oxymoron) is that corporations don’t pay taxes: people do. We pay these tech Gargantuas’ tax bills — or tax avoidance bills — in every item we order or movie we watch, as the cost of government is passed down in the least transparent manner possible with huge inefficiencies attached.
Ergo, zero should be the correct amount of corporate taxation — for all companies.
No Tax Refunds
Yet the biggest tax policy teaching of all comes from a third imbroglio: over worries that the 2017 reform may produce some lower-than-expected tax refunds.
The lesson to be gleaned from the media’s panicked reaction is a) per presidential candidate Kamala Harris, smaller tax refunds prove the legislation represented a tax hike on the middle class, b) taxpayers should adjust withholding to get bigger refunds, or c) none of the above.
If this time you answered c), you’re catching on. The outrage of the whole refund situation, to be shouted out the window Howard Beale-style, is that how Americans pay for government is insane.
Consider this scenario: a company knowingly overcharges customers every year, and earns interest on those overcharges. To get those overcharges back, consumers must correctly fill out a complex form or series of forms — sometimes running into dozens of pages — and ask for the correct amount. The company won’t tell them in advance of their filling out those forms what that amount is. And if the customer asks for too much money back, the company can charge them penalties and interest.
Picture the howling media. Politicians falling over each other to shout denunciations. State attorneys general and consumer organizations pouncing faster than you can say “class-action settlement.”
But that’s the mind-numbing reality we sheeplike taxpayers accept from revenooers — year in and year out.
Transparent Government Costs
Another favorite line from Sleepless in Seattle comes when Jonah, the son pining to meet a potential mate for his widowed father, asks Jessica, daughter of travel agents, how much it costs to fly to New York. “Nobody knows,” she shrugs. “It changes practically every day.”
Nobody knows the real cost of government — because it’s different for every taxpayer every year.
It depends on how much you make. How you make it. Where you live and the price of your house. How many kids. Gifts to charity. How organized you are and how good your accountant is. It depends on what changes Congress has made — and it made an estimated 4,680 to the code just between 2001 and 2013, even before the latest “reform.” Not to mention, again, that you pay the piper in a million hidden economic distortions and costs beyond your tax return.
The real teaching from Amazon’s misadventure, zero corporate tax bills and the refund ruckus is that we need — nay, we must demand — a dramatically simpler, easier, less expensive, truly fairer, more transparent, less intrusive way to pay for the service called government.
Is it at all possible that some straight talkers, like maybe that otherwise notably shy denizen of 1600 Pennsylvania Avenue, could shout down the inflamers drawing all the wrong lessons from these recent events — and connect the dots to the right “mad-as-hell” conclusions for taxpayers?
- Maistros is a messaging and communications strategist, crisis specialist and former political speechwriter. He can be reached at email@example.com.
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Author: JOHN MERLINE