Democrats in Washington, D.C., want to spend money on infrastructure. A lot of it.
President Joe Biden plans to spend $3 trillion on infrastructure, education, and green energy systems. To help pay for it, the Democratic majority in Congress wants to raise taxes, primarily on the wealthy, a measure that many elected Republicans oppose. If the federal government wants to raise revenue, however, it should start where both sides agree and eliminate tax loopholes.
The federal tax code is a mess. It’s incredibly long and complicated to the point that not a single person in the world knows it all. That’s bad, but at least some Democrats and Republicans see how ridiculous it is and could work together to change it.
Some small but frivolous pieces of the tax code should go. The system lets racehorse owners deduct the depreciation value of their horses and wealthy corporations write off 50% of their booze and lobster as business expenses. There are some strange provisions that cost the country money.
For more significant sources of revenue, closing offshore tax loopholes is likely the easiest way to get both sides to come together. Offshore tax havens cost the country about $150 billion per year in lost revenue. That’s $1.5 trillion over a decade. Places such as the Cayman Islands and the British Virgin Islands have no capital gains tax and no corporate income tax. While the United States probably won’t get them to raise taxes, politicians should do what they can to make this offshoring process harder and to try to recoup some of this money.
The other significant revenue source, albeit likely harder for the country to quit, would come from ending corporate welfare, which includes some domestic tax loopholes. Whether it’s wealthy farms receiving payments from the federal government, municipal bonds for taxpayer-funded stadiums being exempt from federal taxes, fossil fuel subsidies, or tax credits for purchasing electric vehicles, corporate welfare is the antithesis of the free market and costs taxpayers more than $100 billion annually.
In addition to being unfair to small businesses and working families that don’t receive this kind of special treatment, this central planning tends to be ineffective at achieving its desired outcomes.
Even if Democrats raised the tax rates for corporations and high-income earners, these problems would still exist. Regardless of how one feels about what the proper tax rate should be, how about we make sure corporations are actually paying taxes and not receiving Big Government handouts that they don’t need?
Tom Joyce (@TomJoyceSports) is a freelance writer from the South Shore of Massachusetts.
