These four progressive proposals
have bipartisan potential.
Republicans
seem to have something against tax increases. I get that. But it’s still not
crazy to think we can win some important revenue battles during Obama 2.0. And
given this country’s pressing needs – from repairing our infrastructure to
rehiring teachers – it would be crazy not to try.
A
big question, of course, is how to peel off the 17 House Republicans needed to
win anything (assuming all Dems and President Obama are in favor). Openings
will come, though, when Republicans need votes from across the aisle on
something or other. The even more important challenge is to push progressive
reforms into the center of the debate so they get plucked when the stars are
aligned.
Here
are four that are not only solidly progressive but also have bipartisan
potential:
OK,
people, if we can’t fix this one during the second Obama administration, I’m
giving up on Washington once and for all and becoming a goatherder. How can we
continue to allow gazillionaires to pay only a 15 percent tax rate on the
profit share (“carried interest”) they get paid to manage hedge and private
equity funds?
Ray
Dalio of Bridgewater Associates, for example, was the highest-earning hedge
fund manager in 2011, raking in $3 billion. Forbes calculates
that if Dalio had paid ordinary income tax rates, he would have contributed an
extra $450 million to the Treasury.
The
loophole is so off-the-charts absurd even some hedge fund managers are ready to
give it up. Bill Ackman, of Pershing Square Capital, has
said he expects the loophole to disappear and thinks his peers won’t even mind
that much.
Formerly
problematic Dems have also changed their tune. Back in 2007, a fix passed the
House but never made it through the Democratic-controlled Senate because of obstructionism from Senator Chuck Schumer
(D-NY). Thankfully the Senator from Wall Street land has had a rethink.
2. Cap the deductibility of executive pay
The
more corporations pay their CEO, the less they owe in taxes. A 1993 law aimed
to fix this perverse incentive by capping executive pay deductions at $1
million. The problem is it left a huge loophole for “performance-based” pay.
Oracle CEO Larry Ellison, for example hauled
in $76 million in stock options and other so-called “performance-based” pay in
2011 — all of it fully deductible. And contrary to Clinton era thinking, stock
options do not improve performance. This became abundantly clear after the
dot-com crash and the 2008 crisis, when boards helped CEOs recoup their losses
by handing out boatloads of new options.
As
for bipartisan, “purple” potential, Senator John McCain (R-AZ) co-sponsored a
bill in 2009 that would’ve tightened up the loophole and former Senate Finance
ChairmanCharles Grassley (R-IA) has made
supportive comments. There are also two recent precedents. Both the bank
bailout and the health care reform legislation included $500,000 caps on pay
deductibility with no performance pay exemptions for financial and health
insurance executives. Guess what? The world didn’t end.
3. Adopt a financial transaction tax
This
is the idea of putting a very small tax on each trade of stocks, bonds, and
derivatives. Tax the Wall Street casino? Fat chance, you might say. But there’s
actually huge momentum on this, both at the grassroots and the policy level.
About
a dozen European governments have committed to coordinate such a tax. The
details still need to be hammered out, but the proposal on the table is for a
tax of 0.1 percent on stock and bond trades and 0.01 percent on derivatives.
Sure,
you might say, but have Europeans ever met a tax they didn’t like? How are you
going to sell this in the land of the “free”?
One
major selling point is that by taxing each trade, this tax would discourage the
controversial high-speed trading that now dominates markets. The chief
economist at the Commodity Futures Trading Commission, the nation’s top
derivatives regulator, recently found that this automated speed
trading is sucking significant profits from traditional investors. And a
growing number of these traditional investors are coming out in
support of financial transaction taxes.
Even
for tea partiers, if forced to pick from a menu of options for raising massive
revenue, what do you think they’d go for? One of the numerous proposals (e.g.,
value added taxes) that would hit the middle class? Or one targeted at the
bigtime gamblers on Wall Street who benefited the most from the bailout so
hated by the tea party?
4. Close offshore tax havens loopholes
The
rampant use of tax havens to stiff Uncle Sam has sparked outrage across the
political spectrum. In a nationwide poll, nine out of ten small
business owners said it was a problem when big businesses used offshore
loopholes to avoid paying their taxes. In the same poll, in which Republicans
outnumbered
Democrats 2-to-1, two-thirds of small business owners said big
business did not pay their fair share of taxes. Even Rush Limbaugh has
acknowledged that something is wrong when General Electric pays no taxes
despite earning tens of billions in profits.
Closing
tax haven loopholes could raise at least $100 billion a year. To move in this
direction, Congress could increase reporting requirements. Under the Dodd-Frank
financial reform legislation, energy corporations will now have to report on
their profits, taxes and other government payments, by nation. This should be
extended to cover all corporations. The intent of the Dodd-Frank disclosure is
to combat corruption, but it could also help combat tax avoidance. A recent survey of chief financial officers of
multinational corporations found 75 percent worry about the reputational impact
of their company’s tax disclosures.
Let’s
not be intimidated by Grover Norquist and his irrational tax-hating minions.
Obama’s legacy — and our nation’s economic future — will be determined by our
ability to build a solid and progressive revenue base.
Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies in
Washington, DC and is a co-author of the Institute's yearly Executive Excess
reports on CEO pay. www.ips-dc.org Distributed via OtherWords
(OtherWords.org)