Jonathan has an open thread diary that touches on the economic and social problems created by providing excessive tax cuts for the top 5%. Mother Jones has a terrific interview with David Cay Johnston this month that specifies exactly how the tax code provides massive amounts of welfare to the super wealthy.
I wrote a primer diary about Wealth In America that provides some basic facts about the inequality of wealth in America. For those who are interested in the subject I wrote a series of diaries about The Liberal Opportunity Society. Super G thoughtfully provided a summary of links to my previous diaries on the topic.
On the flip I'll provide a few excerpts from the Mother Jones Interview, Our Indefensible Tax System.
As a result, most Americans remain unaware of the ways in which the wealthy cheat the system. And often, even when the public--and Congress--does become aware, nothing happens. Corporations and the superrich can continue to use tax dodges long after they're made illegal because tax law enforcement is so badly underfunded. Congress routinely cuts funding for tax auditors to save money, although as Johnston explains, the result is that the government often loses more revenue in uncollected taxes than it saves by firing IRS employees.
And that's because they pick almost all their investigative targets based on what the computer tells them. So if you don't file a tax return, or you file one that appears to be normal--you say you made $90,000 and you have normal sorts of deductions, when in fact you made $50 million--the computer won't identify you.
When you say the tax system benefits the rich, there are a lot of people who respond, "That can't be true, look at the rate of tax. The people who are rich pay a higher rate than you or I." Well, yeah, but if you don't have to pay taxes on a lot of your income, then your real tax rate is a lot lower. And if you're allowed to pay your taxes thirty years from now instead of today then you're a lot better off. People need to have a sophisticated understanding of how the system works to appreciate that the posted tax rate really has very little to do with the taxes people pay.
DCJ: Let me give you some numbers. In 1990, about 1 percent of American corporate profits were taken in tax havens like the Cayman Islands. By 2002, it was up to 17 percent, and it'll be up to 20-25 percent very quickly. It's a major problem.
DCJ: That's correct. Sixty-one percent of large corporations paid no federal income taxes for the five-year period from 1996 to 2000, according to the Government Accountability Office, the investigative arm of Congress. The companies that pay the least tend to be capital-intensive and multinational.
And the tax code is totally skewed toward multinationals