President Obama made clear in his State of the Union Address that community action funds would go on the chopping block. Nevermind that such funds are needed to insure that undereducated and/or lower-income families have access to social and economic opportunities our unchecked society would otherwise deny them. The President said: “Already, we’ve frozen the salaries of hardworking federal employees for the next two years. I’ve proposed cuts to things I care deeply about, like community action programs,” as if freezing the bloated six-figure salaries of SEC employees is any consolation, particularly when government contractors, postal workers, members of Congress, Congressional staffers, federal court judges and related workers are exempt from the freeze. Put differently, President Obama’s cuts mean that government workers in low-paying jobs, such as those working within the civil rights office or the FDA, must make due with their $60,000 pay while contractors and members of Congress may continue to experience exponential wage growth.
While President Obama asks the poor and the working class to accept austerity, he promises to shift even more taxpayer assets to big business by reducing corporate taxes. It remains unclear how such a move will help the poor or working class in any way. Corporations making record profits are creating jobs overseas rather than reinvesting in education and jobs in the US. Moreover, indicators show that corporate taxes are already strikingly low, and in some instances corporate taxes are virtually non-existent.
Forbes magazine took a look at how much tax corporations paid in 2010 and found that by and large, corporates paid very little. General Electric ( GE) “generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.” Forbes goes on to report that GE’s tax rate” in 2008 was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%.”
Another titan of industry, ExxonMobil, reportedly “paid none of its 2009 income taxes in the U.S.” despite generating over $15 billion in income taxes.
If GE and ExxonMobil’s effective 0% tax liability is in any way reflective of the taxes most large corporations pay, then there are no corporate taxes to cut. Assuming President Obama is aware that major corporations pay very little tax, his speech becomes either empty rhetoric or a signal that his administration plans to gift even more taxpayer dollars to corporations in the form of tax credits and more welfare-like bailouts at the tax-payer’s expense.