The incoming Republican Congress in the United States, elected by the smallest voter participation since World War II, provides a new opportunity for galvanizing a winning coalition on tax reform. This new Congress faces the spate of tax-avoiding “reversion”: companies moving their taxable “headquarters” offshore by acquiring foreign firms (e.g. Burger King’s acquisition of Canada’s Tim Hortons); demands by business for reducing corporate tax rates (now the highest nominal rates worldwide); and call for further tax cuts by the Tea Party and Libertarians.
Today these demands by powerful corporate, Wall Street and conservative interests are aligned with many progressive groups demanding similar cuts on income and payroll taxes. These groups include environmentalists and economic justice groups targeting inequality, poverty and inadequate wages. Many small businesses, including the American Sustainable Business Council (ASBC), also want taxes shifted away from incomes and payrolls to all kinds of pollution and other activities harming human health and community wellbeing.
A winning coalition is now in sight as more public understanding grows of the pernicious practices still condoned in many obsolete economic textbooks: “externalizing” social and environmental costs from company and government agency balance sheets. Our economies expanded using this narrow accounting – spawning many costly efforts to clean up or mitigate the toxic wastes and health effects. Additional problems range from addiction to urban blight, the housing bust, lost jobs, foreclosures to climate risks and global warming.
Economic textbooks call all these social and environmental costs: “market failures” and advocate “market-based reforms” rather than regulations of bad behaviors and pollution. Their market-based reform is one the winning coalition can buy: shifting taxes from the “goods” we want: more incomes, jobs and clean healthy products and services to the “bads” we don’t want: pollution, unhealthy goods and all those “externalized” costs that we taxpayers bear to foot the cleanup bills. This is the fundamental rationale in all tax policy in all countries: tax those things less wanted.
Many groups, including Ethical Markets, work to reform markets and their failures as well as correcting their faulty metrics, including GDP; promoting higher accounting standards such as by Sustainability Accounting Standards Board (SASB), International Integrated Reporting Council (IIRC), Global Reporting Initiative (GRI) and including environment, social and governance criteria. An ever-growing coalition of investors and business groups now advocate pollution taxes, particularly on carbon: Business for Social Responsibility (BSR), World Business Council for Sustainable Development (WBCSD), Ceres, Global Climate Change Alliance, Investor Network on Climate Risk, Global Investor Coalition on Climate Change, International Investor Group on Climate Change, and the UN-inspired Portfolio Decarbonization Coalition (PDC). The Carbon Disclosure Project, now CDP, forced disclosure of carbon risks to investors and now focuses on water risks and governance issues. Trucost led in revealing the externalized costs of major corporations worldwide at $4.7 trillion and how prices were distorted by appearing “cheaper” while passing on real costs to taxpayers.
Companies “downsizing” by firing employees to cut costs raise taxpayer costs of unemployment checks and welfare payments. With full accounting, all economies are circular: what goes around comes around. Washington-based Get America Working! (GAW!) addresses the downsizing of jobs: the 27 million part-timers and those discouraged and dropped from the official US unemployment count currently at 5.8 percent, and the shrinking labor force participation rate hovering in the 60% range. This non-partisan GAW! group joins Ethical Markets Quality of Life Indicators in pointing out how this official 5.8 percent unemployment figure masks the truth and that over 100 million working-age Americans are not working – some by choice but the overwhelming majority for lack of job opportunities.
All of these growing concerns across the political spectrum can promote this winning coalition: to shift taxes from those jobs, payrolls and healthy products and services we all want to the “bads” we don’t want and can’t afford as taxpayers: pollution, toxic wastes, businesses and financial firms that profit excessively by defrauding consumers. GAW! calculates that cutting the cost of hiring and payroll taxes by 17% while offsetting this by shifting them to pollution, waste and inefficiency would create 45 million new permanent jobs in the USA while conserving natural resources.
Let’s get this wining coalition moving in 2015!