Wal-Mart paid $7.1 billion in income taxes during 2012 on $22 billion in pre-tax profits.
Facebook founder Mark Zuckerberg paid $1.1 billion in income taxes during 2012 based on $13.3 billion personal income.
It was the same year PG&E paid zero income taxes on $4.8 billion in profits.
And according to the Tax Policy Center, 46 percent of Americans paid no income taxes that year.
There’s been a lot of political basketball played with the number of Americans that don’t pay income taxes because of loopholes or because they don’t make enough.
Putting aside companies like PG&E that sweet talk Congress with campaign donations to secure tax breaks for simply investing in infrastructure so they can make more money, the current political year tax fairness debate centers around how we are becoming a social-welfare state or how nearly half the country is so poor they don’t pay income taxes.
While Wal-Mart’s tax liability bill was reduced to $7.1 billion thanks to various tax credits and loopholes, who do you think paid the Walton family’s tax tab?
Obviously their signatures are on the check. They wouldn’t have the money, though, to cover the $7.1 billion tax bill they did pay unless people shopped at their stores.
The odds that Mark Zuckerberg shops at Wal-Mart aren’t all that great. A lot of the 46 percent of Americans that didn’t pay federal income taxes do. The odds that the 20 percent of Americans that have a negative tax rate — they get money back beyond what they earned from the Earned Income Tax Credit administered by the Internal Revenue Service — do so is even greater.
Americans who are viewed as either being so poor they don’t pay taxes or as examples of the growing welfare state via either direct subsidies or avoiding income taxes altogether are indirectly paying federal income tax. And it’s not just for stores they shop at such as Wal-Mart. Every firm that manufactures items that Wal-Mart shoppers buy is having their tax bill covered by those same shoppers.
Besides property taxes, the poor pay federal excise taxes when buying cigarettes and alcohol as well as essential items such as gas that carries an 18.4 cents per gallon federal excise tax.
The argument advanced for whatever purpose that the poor or those Americans that receive government subsidies in some form aren’t paying taxes is rubbish.
The same is true when it comes to property tax. First of all, there is no house in Manteca whose owner pays their fair share of general fund financed services such as police and fire protection given the breakeven point from taxes a typical household pays.
With a $36 million annual general fund budget, the per capita cost of city general fund services is $480 yearly. For a three person household that is $1,440 a year. Given the city only gets roughly 15 percent of all property tax a homeowner pays, a home with three people would require a tax bill (not including bond and Mello-Roos assessments) of $9,504 a year for Manteca to collect $1,440 in taxes. That means the house would have to have an assessed value of $950,400. There aren’t any homes worth that in Manteca.
Now let’s talk about renters. They don’t pay property taxes right? Wrong.
The owner pays their property taxes from the rent they collect. Renters don’t get a ree ride.
Manteca collects taxes on sales, cable service, electricity and natural gas services, and from other sources to cover the $36 million annual tab of running the city.
The real problem with taxes is they are anything but transparent and simple.
The package of four rolls of toilet paper you buy has all sorts of taxes collapsed into the price from property and sales taxes for various items paid by the firms that harvested trees, transported the logs, ran the sawmill that produced wood shavings, the firm that transports the wood shavings, the toilet paper manufacturing company, the firms that ship it to distribution centers, and the retailer that sells it. That’s not to mention franchise fees passed on to those firms as business consumers for electricity, natural gas, phone service and a host of other items including fuel.
Then there are payroll taxes paid on the employer’s side of the bill of each of those firms.
Those four rolls of toilet paper are fairly heavily taxed. Consumers ultimately cover the tab.
Our existing system is ideal for those that want to hide the true cost of government as well as distort who is paying taxes.
Universal taxes on purchases by consumers for the three basic levels of government — federal, state, and local — with no other taxes would be transparent and arguably the most fair. It could easily translate into a combined 25 percent sales or consumption tax for all three levels just to cover the status quo of current taxation.
Having one tax except for special districts such as mosquito abatement, community colleges, and such that would still rely on property taxes would go a long way toward getting the attention of the American taxpayer.
Eliminating hidden taxes we all pay and replacing them with federal, state, and local sales taxes would make us 100 percent aware of what government is really costing us. It could temper us when it comes to demanding more and more services from government. And it would bring fairness to taxation.
If you are rich and buy a $200,000 Rolls Royce you’d pay $50,000 in taxes. If you are rich and buy a basic used commuter car for $3,000 you’d pay $750 in taxes.
Of course, that would make it harder for politicians to use class envy to get elected.