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Release Date: November 4, 2011
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:
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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