Decries Cutting Pensions of Federal Workers by $17 Billion While Maintaining “Carried Interest” Tax Break for Hedge Fund Managers Saving Same Amount
FOR IMMEDIATE RELEASE: Dec. 9, 2013
WASHINGTON – Americans for Tax Fairness (ATF), a coalition of 325 national and state groups, reacted sharply in response to early reports of a budget deal that would take only modest steps to blunt the impact of new sequester cuts and not include closing any tax loopholes used by corporations and the wealthy – measures that are highly popular with the American public. Republican leaders have steadfastly refused to raise additional tax revenues by closing any loopholes during the current budget negotiations.
A recent poll by Hart Research Associates finds that by 53% to 27%, voters want to “Reduce the [$110 billion in automatic] spending cuts by fifty percent and replace them with new tax revenue from the wealthy and corporations,” rather than “Allow the full spending cuts to take effect.” [Q10a]. The public overwhelmingly approves, by a margin of 62% to 36%, of “clos[ing] tax loopholes that allow corporations and wealthy individuals to avoid paying U.S. taxes by shifting income to offshore tax havens.” [Q20ab]
“Restricting the use of offshore tax havens is overwhelmingly popular with the American people,” said Frank Clemente, campaign manager of Americans for Tax Fairness. “It’s a common-sense solution, and it needs to be on the table.”
The current budget deal reportedly would raise the FY2014 budget from the $967 billion mandated by the full sequester to approximately $1 trillion in total defense and non-defense discretionary spending. Americans for Tax Fairness and its coalition partners believe that such a deal would be an important step in the right direction, but that Congress should close tax loopholes in order to replace more of the mandated budget cuts.
There are currently two bills in Congress that would raise up to $220 billion over 10 years by closing tax loopholes to make corporations pay more of their fair share of taxes, which is enough revenue to fully eliminate sequester cuts for 2014 and 2015, as well as reduce the cuts by $38.6 billion in 2016. The Sequester Delay and Stop Tax Haven Abuse Act (HR. 3666) is authored by Reps. Rosa DeLauro (D-CT) and Lloyd Doggett (D-TX). The Stop Tax Haven Abuse Act (S. 1533) is co-sponsored by Sens. Carl Levin (D-MI), Mark Begich (D-AK), Jeanne Shaheen (D-NH) and Sheldon Whitehouse (D-RI). Both bills would close tax loopholes that encourage U.S. corporations to move jobs, profits and operations offshore. The Americans for Tax Fairness coalition and many allied organizations sent a letter to Members of the U.S. House of Representatives and a letter to Members of the U.S. Senate calling on them to co-sponsor these bills.
The idea of closing corporate tax loopholes was suggested in the early stages of the budget negotiations and was apparently overwhelmed by partisan differences. In an op-ed in The Washington Post, Sen. Patty Murray (D-WA) proposed including cutting two egregious corporate tax loopholes – one that allows corporations to easily hide foreign subsidiaries and profits offshore and another which allows them to deduct CEO bonuses and other incentive-based compensation. However, Republican leaders have been unwilling to include anything in the budget deal that might be construed as a tax increase, although they say they are open to small increases in “user fees.”
Republican leaders’ opposition to closing loopholes to make corporations and the rich pay their fair share of taxes has resulted in terrible tradeoffs for average Americans. For example, according to recent reports the budget deal under discussion would cut the pensions of federal workers by close to $17 billion over 10 years despite the fact that pension payments are guaranteed forms of deferred compensation — including these cuts is a priority of Rep. Paul Ryan (R-WI). In contrast, the deal does not close the “carried-interest” loophole that allows hedge fund managers to pay only a 20% tax rate on earnings instead of the top marginal rate, which is nearly twice as high. Eliminating this loophole would also save the same amount — $17 billion over ten years – eliminating any rationale for cuts to federal pensions. The Hart Research poll found that by 68% to 28%, voters want to “Eliminate the [carried interest] loophole that allows Wall Street hedge fund managers to pay a lower tax rate than middle-class taxpayers.” [Q20ab]
The Hart Research poll reveals that Members of Congress run considerable political risk by refusing to close tax loopholes or to raise taxes under any circumstances. Data show that 65% of voters have serious concerns about the fact that “nearly every Republican in Congress has signed an irresponsible pledge promising that they will never vote to raise even one penny of revenue by closing tax loopholes for the wealthy and big corporations.”
“The public wants action on corporate tax loopholes and especially tax havens,” said Clemente. “The budget negotiations offer a rare chance to make that happen.”
Americans for Tax Fairness is a diverse coalition of more than 325 national and state organizations that collectively represent tens of millions of members. The organization was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF is playing a central role in Washington and in the states on federal tax-reform issues.