When Bernie Sanders proposed using American tax wealth to cover all citizen medical and college tuition expenses, debates exploded over how much this would cost and how it could theoretically be paid for.
Covering all state university tuition fees would cost the government an estimated $63 billion a year, which is actually far less than the State currently spends on Pell Grants, loans, and other financial assistance for higher education. Universal healthcare would cost $1-2 trillion a year, not too different from what the government currently spends ($1.3 trillion annually) to cover Medicare and Medicaid.
Sanders plans to enact a tax on Wall Street speculation, increase income taxes on the wealthy by 5-7%, on everyday citizens by 2%, increase capital gains, dividend, and estate taxes, and close tax loopholes for the wealthy (the wealthiest Americans are supposed to pay a tax rate of nearly 40%, but in reality some only pay 18%, sometimes 15%).
Sanders would also close corporate tax loopholes. Many large corporations don’t pay federal taxes.
Corporations employ armies of lobbyists to bribe politicians with campaign funds or promises of future executive positions to deregulate industries and place tax exemptions in the U.S. tax code, while armies of lawyers and accountants make sure companies are using the loopholes most effectively to whittle down their taxes (see Nader, The Seventeen Solutions for a detailed look at this topic).
This has been underway for decades, and now the largest companies pay no federal taxes — and sometimes even get tax refunds.
For instance, “From 2008 to 2010, GE made $7.72 billion in profit in the United States, paid no federal income tax, and got $4.73 billion back from the U.S. treasury” (Nader). In 2011, the nonprofit research group Citizens for Tax Justice released a report showing 30 major U.S. companies (like GE, Verizon, and Wells Fargo) paid no net federal income taxes from 2008 to 2010. 26 of them enjoyed negative tax rates. Instead of paying 35% of their income (that’s supposed to be the corporate rate), they got a refund. These companies alone left the government short $78 billion in revenue over the course of 3 years.
In 2014, 13 major Fortune 500 companies, including Time Warner, Ryder, Priceline, Prudential, Mattel, and CBS, paid $0 in federal taxes, instead receiving rebates. Two others, GE and JetBlue Airways, paid less than 1% in taxes. These companies made $23 billion in profits in 2014, but tax loopholes left these fortunes untouched.
In the second quarter of 2014, 20 large companies, such as GM, Merck, and News Corp., paid $0 in federal taxes or got a government check, despite all making huge profits. Merck’s income soared 52% during the quarter.
The 280 most profitable U.S. companies alone, thanks to loopholes and subsidies Congress allowed in the tax code, did not pay $224 billion in taxes from 2008 to 2010 — most paid a rate of about 18.5%, rather than 35%, creating a huge shortfall.
Over the years, corporate tax revenue has not kept up with economic output, a huge favor to wealthy corporate owners and their firms. According to the Tax Policy Center, 60 years ago, revenue from corporations was 5 to 6% of the GDP, but by 2010 it was a mere 1.3%.
The tax burden rests heaviest on individuals. The Federal government collected $2.2 trillion in revenue in 2010. 82% came from individual income taxes and payroll taxes, while only 9% came from corporate taxes. In 2015, the government collected nearly $4 trillion in revenues and borrowed funds, taking $1.5 trillion in individual income taxes and $1 trillion from Social Security and Medicare taxes, but only $342 billion from corporate taxes.
(Naturally, the burden of taxes on wealthy individuals has also lightened. In the 2013 tax bracket, any income you made over $400,000 was taxed at 39.6%, down from 70% in the 1960s and 94% during World War II, averaging 81% from 1932-1980, according to Thomas Piketty in Capital. At least, that’s the way it’s supposed to work. In 2008, the IRS reported the 400 richest Americans only paid 18%. A third of these 400 paid less than 15%, the same rate as someone making $36,000 a year. At the same time tax rates fell, the richest 1% saw its share of the national income double since 1979; the share of the richest 0.1% almost tripled.)
The government hands out $1.3 trillion a year in tax breaks and subsidies, the majority of which benefit the top 20% of Americans and their businesses. $250 billion a year goes to the richest 1%. The Socialist Appeal reports, “It has been estimated that between subsidies, corporate tax underpayments and deductions, offshore tax havens, and various corporate tax loopholes, the wealthiest Americans avoid as much as $3 trillion in taxes every year. This is 3 times the U.S. annual budget deficit.” Oxfam found in April 2016 that the top 50 U.S. companies alone had $1.4 trillion hidden in tax havens.
Clearly, while free college tuition and healthcare are expensive endeavors, the possibility of cracking down on tax dodgers, rewriting tax laws to benefit ordinary working people instead of corporations, and ending the corporate welfare comprised of subsidies, deductions, and refunds, very much exists.
Doing so would go a long way toward funding programs that serve human needs.