A wrong decision in the Moore case could set back tax justice for years.
After 40 years as a warrior for tax fairness, Bob McIntyre has dealt with more political craziness over fiscal matters than just about anyone on the planet. Inequality.org co-editor Sarah Anderson turned to McIntyre, who directs the nonpartisan research and advocacy group Citizens for Tax Justice, for some battle-hardened insights on the surreal debate over Donald Trump’s taxes.
Do you think the news that Trump turned $916 million in losses into a tax windfall presents a “teachable moment” and if so, what do you want American taxpayers to understand?
Just as Mitt Romney illustrated how the special low tax rates on capital gains (or in Romney’s case, wages that were styled as “capital gains”) undermine tax fairness, the revelations about Trump’s tax situation offers a stark example of how real estate moguls are allowed to report “losses” even while actually making huge amounts of money.
Much of what Trump has gotten away with wouldn’t have been possible without the collusion between the real estate lobbyists and Congress, which undermined reforms in the 1986 Tax Reform Act that curbed tax subsidies for real estate.
Trump’s defenders argue that he was only doing what the tax code allowed. True, but the laws that allowed him to accumulate almost a billion dollars in tax “losses” by the end of 1994 weren’t invented by Congress. They were adopted due to the lobbying and campaign contributions of the real estate industry. Trump himself brags about his ability to influence Congress to benefit himself.
If American taxpayers want to stop tax avoidance by people such as Trump, then they need to elect public servants who are willing to stand up to the special interests when it comes to tax policy.
How does this rate among the major tax outrages that have occurred during your career?
Well, it’s a big problem. And has been for a long time. Sporadically, Congress and presidents have had the gumption to curb real estate tax breaks (notably under Kennedy in the early 1960s and under Reagan in his second term). But the tax code is not written in stone, and loopholes closed can be reopened.
What are some of the other ones that stand out as most memorable?
Considerably bigger in cost and unfairness, however, are the enormous tax breaks for U.S. corporations. Back in the mid-1980s, CTJ’s reports on corporate tax avoidance revealed how companies like General Electric were paying little or nothing in federal income taxes. These reports helped inspire the 1986 Tax Reform Act, which closed or narrowed most of the corporate tax subsidies. And the reforms worked for a while, as even GE started paying significant taxes on its profits.
But the corporate lobbyists and lawyers quickly went to work to undermine parts of the 1986 reforms and to come up with more tax atrocities. None are worse than the rules that allow companies like Apple, Microsoft, and other with valuable “intellectual property” (patents, trademarks, etc.) to tell the IRS that they make a big share of their profits in offshore tax havens. Of course, that’s a complete fiction, but our lawmakers have been unwilling, so far, to stop multinational companies from simply making stuff up. Solving this problem is number one on my tax reform list.
Are taxes playing a bigger or smaller role in the presidential campaign this year than in the past?
Tax policy has been a big issue in presidential campaigns for a very long time. But it has become weirder and weirder over the past decades. A key turning point was when Republicans lost all sense of fiscal responsibility and started touting big tax cuts targeted to the rich as the solution to all our fiscal and economic problems. In fact, they even claim that tax cuts will increase, not decrease, revenues! It’s a happy thought. But down is not up, even if asserted with great confidence.
This year’s Republican primary had the candidates falling over each other to propose the most costly and unfair tax plan. Trump led the way with his $12 trillion plan to bankrupt the government, but the others offered the same theme. As GOP Senator John Cornyn of Texas has aptly bragged, “tax cuts are our brand.”
Why do you think that is?
Apparently, arithmetic is not popular with most Americans. As a result, much of the media and the public don’t even raise an eyebrow when GOP candidates endlessly repeat their mantra that they will balance the budget by cutting taxes. Indeed, several reporters have admitted to me that they majored in journalism in college so they “wouldn’t have to take math.” I’m not sure how to fix that. Keep pointing out that something that’s too good to be true probably isn’t? But then, as P.T. Barnum may or may not have quipped, “there’s a sucker born every minute.”
Looking back at history, what president do you feel did the most to make our tax code unfair?
Yipes, there are so many. But at least in my lifetime, I’d say Ronald Reagan. His 1981 tax act slashed taxes on the rich and, more importantly, vastly expanded tax loopholes for corporations, and led to an explosion in tax shelters.
Which one did the most for tax fairness?
Number one? Well, I might credit Teddy Roosevelt. His decision, for petty reasons, to run against Republican incumbent William Taft for the presidency in 1912 as a “Bull Moose” split the Republican party and led to Democratic takeovers of previously Republican [state] legislatures. That delivered the three-quarters of states necessary to ratify the 16th Amendment, authorizing a federal income tax. Without Teddy’s petulance, the income tax amendment would almost certainly have failed to be adopted.
[pullquote]Without TR’s petulance, the income tax amendment would almost certainly have failed to be adopted.[/pullquote]
Number two, ironically, could be Ronald Reagan! His 1986 Tax Reform Act closed loopholes for corporations and the wealthy and cracked down on the tax-shelter industry. It did not, of course, solve the problem of insufficient revenue to pay for federal spending. But Reagan’s broader tax base set the stage for Bill Clinton’s 1993 increases in the top income tax rates on the highest earners. The combination of the two was essential to the balanced federal budgets that occurred in the late 1990s. (George W. Bush, however, undid that happy result, with his tax cuts and expensive, foolish warmongering.)
For people who are outraged about how billionaires and large corporations are able to game the tax system, what actions would you suggest they take?
Think before you vote?
How have you stayed motivated to work on taxes for so many years and when you’re not analyzing tax data, what do you do for fun?
Perhaps I have Sisyphus as my hero. But I’ve been pushing a rock up the hill (and having to do it over and over again), for most of my career, and the effort has taken its toll. While fighting the good fight (and often winning) has been lots of fun, I admit to be slowing down these days. So I plan to be spending more time on other fun things, such as playing golf and visiting with family (including our first grandson born this year) and friends.