True entitlement reform

 

With budget negations on high in Congress, the American people have gotten an earful from countless talking heads explaining where cuts in our budget need to come from.

One persistent idea is restructuring our welfare system and putting entitlement reform on the table. As one who identifies as more liberal, it pains me to admit that this is the right idea — however, it pains me much less to say that it’s not for the reasons many Republican pundits try to perpetuate.

The true entitlement problem in our country comes from a system of corporate welfare — at odds with the free market system that our country holds as a core value. The answer to this problem is not necessarily raising the corporate tax rate or increasing taxes on these businesses but ending the handouts.

Specifically, in more than half the states, big retailers pocket portions of their sales tax through a series of laws aimed at giving compensation to businesses for the cost of tracking transactions and collecting sales tax. This may have been justifiable in the 1930s when many of these laws were passed, but today it is out of date when a majority of the smallest businesses use computers to complete the calculations. This loophole allows Wal-Mart to keep upward of $60 million in state sales tax per year.

Another tax credit in 19 states allows corporations to keep the income tax withheld from their workers’ paychecks. In the name of job creation, upward of 2,700 companies withhold the required state income tax from their employees but instead retain that money and add it to their overall profit margins.

Minnesota has been attempting to combat another loophole, known as the “nowhere income” tax. This is based on a federal law that does not allow states to collect income tax from corporations that do not have physical facilities, or “nexus,” within said states’ borders. So, if a corporation operates its property and payroll out of one state and conducts sales throughout the rest of the country, it is not allowed to attribute any of its income to other states. Therefore, many companies enjoy a significant amount of untaxed income.

These are just three examples of countless loopholes in our state and federal tax codes that put smaller businesses at a competitive disadvantage, allow companies to pocket income that never trickles down to employees and workers and, frankly, is an affront to our free market. As a society, we’ve created a culture of dependency within our big-business industries — this is the entitlement reform that needs to be on the table.