Tax policy is complicated. You have to figure out who to tax
and how much, and how much revenue it will bring in and what you (the
government) needs to spend the money on and figure out how to match it up.
People of different political stripes differ with regard to how much money to
spend on what, and also who to tax. For example, is it better to have more
graduated income tax (a “progressive” tax, where the more you make the higher
percent you pay on the incremental amount),
or more “regressive” tax where everyone, regardless of income pays the same
amount, like a sales tax, or a “proportional tax” where everyone pays the same
percent but not the same amount, like some variations of “flat tax”?
In Kansas, for example, our Governor and Legislature have
made that decision. Faced with enormous budget deficits as a result of 2012 massive
tax cuts on corporations and wealthy individuals, and unable to make it all up
with one-time fixes such as raiding the state highway fund (hope those
corporations don’t need to transport goods on our roads), they have gone for
big sales tax increases. This is because, to them, the 2012 tax cuts are
sacrosanct, because they believe that this will stimulate the economy and
create jobs. They believe this even though such a strategy has not worked so
far in Kansas and has in fact not worked anywhere. They even brought in Arthur
Laffer, the trickle-down guru economist, to address the legislature. Nonetheless,
owners of “S” corporations (usually small businesses, like lawyer’s offices, or
the few remaining private practice doctors’ offices) do not pay state tax on
the income they make from being the owners. Their employees -- nurses and secretaries
and legal assistants – do, along with the new higher sales taxes. The Governor
and Legistlature have other plans as well; faced by a State Supreme Court
decision to increase public school funding by a half-billion dollars or so that
they don’t have (vide supra), they
are thinking about not funding the State Supreme Court. Could be a solution, if
they can get around the constitutional issue.
The Federal Government also has to deal with such issues. In
the last 50 years our income tax policy has become less progressive, with a top
rate of 35% rather than 90% when I was taking civics in junior high school. (Please
note that this is not a flat tax of 90% on all of top-earners’ income, but on
the marginal amount above the next lower tax rate; everyone paid the same
percent on earnings up to each next bracket.) Also in that civics class, we saw
that corporate income tax made up more income for the feds than personal tax.
Not any more. Corporations are getting away with paying very low taxes, and with
the new “global economy” taking more and more of their profits abroad, where
they can avoid paying tax until they are re-patriated. To encourage them to do
so, the Congress is considering legislation to create a “tax holiday”; this is
where corporations are rewarded for bringing their profits home by paying a
lower tax rate on them. This has been done before, and been amazingly
unsuccessful. So let’s try it again. Like Kansas, why learn from experience?
Why not, for example, tax those international earnings? After all, if they are
creating jobs, it is not in the US.
Also like Kansas, the US has a problem with roads and other
infrastructure, and the Federal Government funds much of the cost of repairs,
which are unfortunately not being done. A study by the Center for Effective
Government, “Burning
our Bridges” notes that “To modernize our infrastructure, the American
Society of Civil Engineers estimated it would cost $3.6 trillion by 2020. They
warned that if we fail to make these investments, American citizens and
businesses will face costs of $1.8 trillion a year in travel delays, water
leaks, and power failures.” How has Congress responded? It's slashed
infrastructure spending to the lowest levels since the post-WWII era.
But
where could we get the money? Is the amount of money not being paid by US
corporations on international earnings that big? Well, there is $2.1 trillion in untaxed international
income, so that could be a chunk of change. About half of it is held by 26
corporations. Apple has the most, and GE is #2. The enormously profitable
pharmaceutical industry (I have previously noted that it is, each year, either #1
or, well, #1 in profit among US industries) has about $82 billion among its 7
largest companies. Given that the report is called “Burning our Bridges”, it is
of interest to note that this is enough money to pay for all US bridge repair and maintenance needs.
I guess this is where the public health and medical part of
this post comes in. Let’s just think about that. We have drug companies
charging “whatever the market will bear” for their products; for some of the
recent recombinant DNA treatments for autoimmune diseases, Hepatitis C, and
cancer this can range into 5 digits (before
the decimal point) a month. They try
every trick in the book to keep their prices high and patents in place to
prevent generic competition. Some I have addressed before include changing the
formulation of the drug -- the FDA mandated elimination of fluorocarbons as
propellants in inhalers was a bonanza because changing to non-fluorocarbon
propellants was a “new formulation” allowing them to extend their patents. Or
taking drugs used by, but not previously tested and approved for use by,
children and testing them (when already, via practice, shown to be safe) in
children, also extending their patents. Or in some the most offensive
practices, testing drugs that have been used for generations and patenting
them, thus jacking up their prices. The prime example is the gout treatment colchicine,
formerly available for about 10 cents a pill and now available for $355 for 60 (about $5.20 a pill!).
In Canada, there are price controls on drugs, so they cost
less. Thus pharmaceutical manufacturers try to block import (and Internet sale)
of drugs from Canada. The Medicare drug benefit, (Part D) passed in the GW Bush
administration, forbid Medicare from
using its purchasing clout to negotiate lower prices. The new Trans-Pacific
Partnership (TPP) pushed through by the Obama administration will offer more
protections; corporations will be able to sue governments to ensure their profits, not in real courts but in
specialized TPP pro-business “courts”. I wonder how long the price restrictions
on drugs in Canada and elsewhere, not to mention the manufacture of affordable
generic equivalents of high-priced HIV drugs in Brazil, India, and Thailand, will
continue?
I personally am rooting for the success of the Brownback tax
cuts to create jobs in Kansas. Not because I think they were good or even close
to moral, or even because I think that they have a prayer of being successful,
but as long as they are in place it would be nice to see some new jobs. It’s
not going to happen with this state government. TPP passed, and there is no meaningful
effort to either tax the international profits of pharmaceutical and other
corporations, or to force drug manufacturers to make their products affordable
in the US.
In their recent paper “Fantasy paradigms of health
inequalities: Utopian thinking?”, Alex Scott-Samuel and Kathleen Smith note
that "In a capitalist society, where liberal macroeconomic policies
position virtually all economic activity – including unhealthy activity – as
beneficial, there is an inbuilt incentive to ‘blame the victim’ rather than to
tackle the corporate and economic causes of the problem."[1] We
prefer not to regulate unhealthy activity (when we have done so, such as with making cars safer and limiting smoking, it took intensive, long-term campaigns by public health advocates), and we allow corporations such as drug
companies to profiteer from our trying to repair the damage to our health. And
we also let them not pay taxes, which we really need.
It's time to get serious, and hold them responsible and make
them responsive.
[1] Scott-Samuel,
A. & Smith, K. E. (2015).Fantasy paradigms of health inequalities: Utopian
thinking? Social Theory & Health, advance online publication, 1 July 2015;
doi: 10.1057/sth.2015.12
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