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Child Watch® Column: "Corporate Loopholes: The Tip of the Iceberg"

Release Date: November 4, 2011

Marian Wright Edelman

Picture an iceberg. Many children know the danger from the "Titanic Song" they learn in school or summer camp. One verse goes like this: "It was off the coast of England not very far from shore, when the rich refused to associate with the poor. So they sent them down below, where they were the first to go. It was sad when that great ship went down. Oh it was sad, so sad. It was sad, too bad. It was sad when the great ship went down . . . husbands and wives, little children lost their lives—it was sad when the great ship went down."

Some days it feels like America may be speeding towards that iceberg. Every day there is more disturbing evidence of the growing income and wealth gaps between rich and poor. Recent poverty data shows the number of people in extreme poverty, defined as a family of four living on less than $30 a day—one in 15 Americans—has reached a 35-year high. At the same time the gap between CEO and average worker pay rose dramatically from 263-to-1 to 325-to-1 last year. Twenty-five of the 100 highest paid CEOs last year took home more in pay than their company paid in 2010 federal income taxes.

A new study by Citizens for Tax Justice reported that 30 companies paid no federal income taxes at all for the last three years and that the 280 biggest publicly traded American corporations on average paid federal income tax equal to 18.5 percent of their profits during the last three years—about half of the full corporate tax rate of 35 percent. This tax payment rate was lower than in many industrialized countries. In fact, the report found two-thirds of American companies with significant profits overseas actually paid more in taxes to foreign governments than to the U.S. government.

As the Supercommittee struggles to make difficult decisions in the coming weeks to reduce the budget deficit, one of the proposals they are considering is reducing the corporate tax rate. Corporations are pushing for a cut in their official rate, claiming they are at a disadvantage in the global marketplace. Their evidence is not so clear. We should all be looking closely at the important choices the Supercommittee could and should be making to ensure everyone—including the rich and powerful—contributes their fair share. It would be deeply disturbing if all or any of the Republicans on the Supercommittee continue to refuse to put revenue on the table and insist on a cut-only approach to deficit reduction at the expense of children and the poor who did not create our fiscal crisis.

By the end of last year, American corporations reaped profits of more than $1.5 trillion. Each minute, $195,967 are lost to corporate tax loopholes. Every hour, corporate tax breaks cost the U.S. government about $11.8 million. If Congress were to balance corporate profits against critical child needs, just one hour of revenue generated by closing corporate tax loopholes could pay for:

  • Medicaid health benefits for 4,800 poor children for a year, or 
  • Women, Infants, and Children [WIC] nutritional benefits for 23,600 women and children for a year, or 
  • Supplemental Nutrition Assistance Program [SNAP] benefits providing food for 9,700 children and adults for a year at a time when hunger affects 1 in 6 Americans, or 
  • Pell Grants for 3,100 low-income students to attend college.

Corporate excess looks a lot like General Electric's balance sheet at the end of 2010. Huge pretax profits of $5.1 billion filtered through corporate tax loopholes meant GE paid no federal income taxes. To add insult to injury, had GE paid the full 35 percent corporate tax rate, it would have paid $1.8 billion in federal income taxes. Add this to GE's reported $3.3 billion in tax benefits and you get a grand total of more than $5 billion of federal tax breaks for the year. This lost revenue could have been used to fund Head Start for an additional 670,000 preschoolers, creating at least 67,000 new jobs in the process.

Budget cuts already enacted on the federal, state, and local levels have harmed children and their families, especially low-income families hit hardest by the recession. Education cuts have led at least 292 school districts to cut back to a four day school week for children when more than 60 percent of our children in all racial and income groups cannot read or do math at grade level in the 4th, 8th, and 12th grades. According to the Washington Post the number of school districts using a four day school week has more than doubled in two years. Arizona, Florida, Georgia, Illinois, Massachusetts, North Carolina, Texas and other states have cut funding—including critical early childhood education programs that help children get ready for school—to help close their budget shortfalls and adversely affecting hundreds of thousands of at-risk children.

What other choices could citizens demand our political leaders make? If they closed tax loopholes for the oil and gas industry it would generate at least $45 billion over ten years. About one year of that money could fund slots for over half a million infants and toddlers in Early Head Start, a program that currently reaches only four percent of eligible children during their period of crucial brain development. Expanding Early Head Start would create almost 150,000 new teaching positions.

The tip of the iceberg is the budget deficit; the failure to invest in our human capital deficit—our children who are the poorest age group in America—is the rest of the iceberg that will sink America's ship of state. This is the critical time to raise our collective voices and tell members of the Supercommittee, Congress, and the White House we want them to cut and not increase corporate tax breaks and make sure rich corporations and rich CEOs pay their fair share. We must not balance the budget on the backs of our babies who need health care and nutrition, quality early childhood development and education, an affordable college education, and good jobs to build a strong America and rescue America's vanishing dream. Children did not cause the budget deficit and they must not be sacrificed to help solve it.

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Submitted by Kim at: May 22, 2012
Don't make all our money go away like all those lives lost on the titanic.

Submitted by Deborah L. Arhur-Stone at: November 12, 2011
As a former Head Start/Early Head Start Parent Coordinator who was laid-off after 11 years of service from the largest school district grantee program in my state, I am more than aware of the negative plight facing our nation’s infants, pre-school, and school age children. I’ve been fortunate enough to not only work in early childhood for 11 years, out-of-home care residential services for children and teens for 10 years, but also in juvenile detention services for 5 years. My experiences have provided me with extensive knowledge of multiple human service fields and the internal workings and external pressures as a direct care service provider and as an early childhood manager. These experiences have permitted to comprehend the true effectiveness of management systems and how they often clash against the very essence for which they are created as a tool to ensure the implementation of quality services for which they are needed most. Crimes are committed in my neighborhood against children daily and often end with fatalities. Juvenile detention and residential facility populations are at an all time high. And many Head Start programs throughout all states are forced to surrender what once was high quality child and family services to simple stay afloat and become puppets for misinformed grantees. Our low income public school children are continuously failing while my bureaucratic school system is in the news daily with headlines noting the continuously rise of employees who are now members of $ 100k annual salary club at the district level while teachers’ salaries are minimal. Neighborhood schools are being reconsidered when there aren’t enough schools in the heavily populated urban areas anymore thanks to closures and our expensive busing plan. Those few schools that still exist have become Magnet and/or Traditional schools which require application and school district approval for the limited slots that are available. The option of charter schools is being fought hand and foot by a failing system that needs total revamping. SNAP benefits are constantly rising. Unemployment is outrageously high. And, age discrimination is now being added to the dark pot for those who did seek to better themselves through higher education. Obtaining a livable wage to eventually pay off high student loans has become a night mare for educated African American females like me who have struggled as single parents, motivated grand and great grandparents, and spiritual mentors. As one who has become committed to extensive community volunteerism to keep myself engaged while searching for gainful employment - I’ve watched programs that provide support for parents, foster parents, youth, and the elderly become targets of continuous cut-backs while public officials benefit immensely from long-term political position perks. Crime is steadily escalating, the emergency rooms have taken the place of doctor’s office for preventive health services, values are falling, and the stress for men, women, youth, and children is at an all time high – not to mention the overall decrease in the quality of our health. We have become a nation that attends to the many needs of others, while ours is suffering immensely. Financial literacy is a subject not only foreign to our children but also foreign to our nation’s adults. For if we really knew the history of America’s taxes and the evolution of big government - we would all become incorporated because corporations are the only entity receiving any type of legal break for personal gain to maintain high profit margins and gain incentives in the US and abroad. While I could go on and on…; I’ll stop and would like to make two recommendations: 1) Every US citizen should read the book Rich Dad Poor Dad by author Robert T. Kiyosaki with Sharon L. Lechter to fully comprehend the American way of life and our current class system. 2) There are enough resources in this great nation of ours to eliminate poverty except for one negative concept titled - GREED. So since greed stems from moral decline why don’t we consider as a great nation this solution as indicated in 2 Chronicles 7:14 “If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sin, and will heal their land”. All of our efforts – whether political, social, psychological, physical, etc... will never exceed those we can receive as a nation of believers and doers of the Word of God.

Submitted by sashachai at: November 5, 2011
And we wonder why "Occupy" was born. The only answer to this absurd inequity is grass roots effort from the 95% of us...through all the strategies of non violent strategies: writing our editors, refusing to purchase products or buy media from these corp., and whatever means we can. Otherwise, we are like the bystander watching a thief beating up his victim. We are silently enabling the thief. 2

Submitted by Wool at: November 5, 2011
Children are one of if not our greatest natural resources. Why are they ignored or abused by our society so often? As a nation we have no future worth considering without promoting and protecting them. The Robber Barons even produced a group of philanthropists!

Submitted by spikymegan at: November 5, 2011
The phrase "human capital deficit" is key in Ms. Edelman's piece. This conversation has to be re-phrased as a human capital deficit to help everyone understand that for American to remain the land of opportunity, we MUST invest in our human capital, which means education, social services, and reasonable regulations. Those at the top are not interested in sweet, sad pictures and stories of children and adults who have less or might be sick. That is not their problem, those people are not working hard enough. But they are interested in workers who can get the job done and less crime, making those at the top more profitable.