When someone listens to Elizabeth Warren they must think that she is completely out of her mind.
I am not talking about conservatives who have a natural predisposition to thinking everything that she says it just horrid. I am talking about the average person that doesn’t really pay attention to politics to being with.
You take the average person on the street and give them a Lizzy Warren quote and not tell him who it came from they will immediately think that this person has totally lost their mind.
Massachusetts Sen. Elizabeth Warren really hates when companies don’t pay taxes. And she’s willing to take a crowbar to the U.S. economy’s knees to stop it.
Reports earlier this year that Amazon paid no federal income tax fueled a wave of progressive anger at how corporations “game the system” and avoid paying taxes. Capitalizing on that momentum, Warren recently proposed a massive corporate tax hike intended to prevent large corporations from getting off scot-free when the taxman comes calling.
Warren’s proposal is fairly simple. She argues that corporations report high profits to investors to boost stock value while reporting low profits to the IRS to lower tax liability — so, a new tax on the profits reported to investors would capture more money.
But here’s the thing: there’s a reason the profits reported to investors and the profits reported to the IRS don’t match up. They use different accounting systems — one overseen by the SEC and the other by the IRS — that serve different purposes. While SEC accounting rules exist purely for the purpose of representing a corporation’s fiscal health to shareholders, IRS rules serve broader, national goals.
While it is true that unnecessary carve-outs exist in the tax code, many deductions are there for good reason and enjoy bipartisan support. Most companies that have low tax liabilities aren’t using obscure technicalities; they’re using legitimate tax provisions that apply broadly.
Amazon paid no federal taxes last year by taking advantage of bipartisan deductions that serve good policy goals — such as by investing large amounts in research and development and capital improvements. One of the most important changes made in the Tax Cuts and Jobs Act allowed businesses to deduct the value of investments immediately rather than slowly recouping the value of their investment over many years, thereby encouraging an investment boom.
Warren’s tax, however, would effectively bypass these deductions, significantly blunting their impact. That means that businesses would have far less incentive to make investments in R&D and capital improvements — in other words, all the things that progressives claim they want businesses to do. The great irony of the public haranguing Amazon has received is that it is, in theory, a progressive’s dream: a corporation that avoids stock buybacks and engages instead in productive investment.
And the effect on the economy would be significant. The Tax Foundation estimates that Warren’s proposal would shrink the size of the U.S. economy by nearly 2 percent, while causing an across-the-board 1.5 percent cut to wages. It also estimates that the equivalent of 454,000 jobs would be lost thanks to Warren’s proposal.