Assaulting the Golden Goose

Photo: Jacquelyn Martin, AP

Hunt Lawrence and Daniel J. Flynn, writing in The American Spectator make some interesting points on how they think Big Business gaming the Tax Code parallels Hollywood stars bribing their kids into elite colleges. Let’s take a look.

In the wake of Lori Loughlin, Felicity Huffman, and other parents allegedly using the foul means of their considerable means to gain admittance for their children to elite schools, Senator Ron Wyden (D-OR) wants to end deductions for parents who donate to schools their children attend. Wyden cites deductions for the naming of campus buildings and scholarships, and for sports tickets, as of particular concern.

This is, apparently, not Ted Kennedy’s Democratic Party.

“[H]eadlines about the wealthiest Americans buying access to our elite colleges and universities is just a new version of an old story,” he explained after the scandal broke. “While the prosecutor attempted to distinguish these crimes from payoffs in the form of buildings or stadiums to secure access for the undeserving, it is all part of the same corrupt system.”

Is it? I’m not sure. Bribing your kids into a school is certainly wrong, no question at all, and it hurts the kids that might otherwise have been admitted, they are the victim here.

But giving scholarships and or donating building is quite a lot different, I think. Yes, a few kids might not be admitted for a (possibly) unqualified offspring of the donor to be. But data suggests that legacy admittees are well above average, so it is questionable.

What is not questionable is that the building or the scholarship, or for that matter the golf course, will benefit many other students and the local population than the donor’s descendants. I don’t think it is the same thing at all. It is an (at least) quasi-public benefit.

Remember my Alma Mater, Purdue got its starts because John Purdue a wealthy local businessman contributed $150,000 plus a hundred acres of land to another $400,000 in contributions. That gave Purdue a good start to becoming an exceptional University and greatly benefitted the Lafayette area as well. Not the same at all as buying admittance for your kid, is it? But yes, he got his name on the whole joint. Most universities have similar stories.

The authors go on to compare this with Amazon paying not taxes again this year.

Amazon, certainly as famous as Lori Loughlin, manipulated the tax code in such a way as to pay zero in corporate income taxes for the last two years.

“Amazon, the ubiquitous purveyor of two-day delivery of just about everything, nearly doubled its profits to $11.2 billion in 2018 from $5.6 billion the previous year and, once again, didn’t pay a single cent of federal income taxes,” the Institute on Taxation and Economic Policy points out. The online behemoth, in fact, reported a tax rebate of $129 million for 2018. Just as YouTube celebrity Olivia Jade took a deserving kid’s spot at USC, Amazon took a tax rebate better used to fix a road, pay a soldier, or reduce the debt.

Amazon, like parents who time donations to colleges in anticipation of a child seeking admittance, does not break the law. But to most it seems like they take advantage of the existing law, which begs for reform.

Amazon, like Laughlin and Huffman, did not alone transgress decency here. They merely acted as the most famous of those who did. They used shortcuts. But they did not create these shortcuts.

In the case of Amazon, the same government deprived of revenue created the shortcuts. And despite political rhetoric decrying the Trump cut of the corporate rate, the rates do not represent the problem. The labyrinthian loopholes do.

This is simply poppycock. The politics of raw envy in action. Nobody is insinuating that Amazon even lobbied for these loopholes. They exist. I’m no great fan of Bezos but, there is no shame in paying the lowest tax that one can legally. In fact, it is immoral for a company to deprive its shareholders, whether one or millions of them, of the profits of the company, derived legally. Judge Learned Hand* said it best:

Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. public duty to pay more than the law demands.

The only time that would change is if Amazon (or its stockholders) bribed Congress or the President, or for that matter the IRS to put in the loopholes. That many of them are unfair is pretty much a given, but they exist, and they exist for all taxpayers that they apply to equally.

Would a very low flat tax without deductions and only on individuals be more fair? Yes, Yes, it would. But to essentially accuse Amazon of tax evasion for doing what is not only legal but their fiduciary duty is well beyond the pale.

*Judge Hand was, in fact, a Progressive, although also believed in judicial restraint to a point, although he did indulge in legislating from the bench. What many conservatives today would call a “Hack-in-Black”.

About NEO
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4 Responses to Assaulting the Golden Goose

  1. Scoop says:

    It is almost humorous (if it weren’t so very sad) that in every run for election (for most of my life anyway) a flat tax or consumption tax is brought up and the people, as a rule like the fairness of this idea. And yet, in the end it is never brought up seriously in Congress and it probably never will as the beneficiaries of the federal ‘loophole’ tax-revenue scam which was invented by them reaps rewards both personally and in campaign contributions from the ‘special interest groups’ or corporations that benefit them. Now they may have occurred originally to help a new technology get out of the gates quickly and actually do something for the common good of society. But now, it has become so obvious that we hardly mention the fact that the ‘fix’ is in and it is the Tax Code that both Democrats and Republicans seem to want to close a blind eye to. It is similar, of course, to the laws which allows Congressmen to be exempt from some of the laws binding on everyone else . . . even insider trading is allowed by these hooligans. A thorough cleaning of Congress and a new batch with term limits enacted (another thing they don’t seriously want) would do a lot to fix what is now broken for the people and works great for those in Congress.

    Liked by 2 people

    • NEO says:

      Oh how I agree. It would fix many ills. Likelihood? Between slim and none, and Slim is running for his life.

      Liked by 2 people

      • Nicholas says:

        I liked this piece. If I were PM, I would work towards abolishing corporation tax – certainly lowering it. Although a corporation is a person for legal purposes, it is not a person in the human sense. Taxing a legal fiction seems highly questionable to me. It amounts to double taxation because the employees of the company are already paying income tax (and CGT and IHT), and shareholders will pay income tax on their dividends and CGT on profitable sales.

        My issue with corporations is when they lobby for laws/regulations that benefit a powerful subset, while making it harder for SMES to stay in or enter the market. Regulations inflate the cost of goods, which is hard on lower class families, and inhibits business start-up, which is bad for social mobility generally.

        As for the college scandal and endowments. I personally do not care what private institutions do: meddling in private affairs is the cardinal sin as far as libertarianism and conservatism are concerned. My objection is to dishonesty, which is morally offensive, and to institutions that receive tax-payer money behaving dishonourably. In both the USA and UK we need to serious think about tax-payer’s money in higher education – a lot of reform is needed there.

        Liked by 1 person

        • NEO says:

          Yep, I spoke only to what the reference post posited, That certainly does not indicate there is not a lot of reform needed, only that this is a stalking horse, used to demonize people doing a public benefit or simply obeying the law.

          Liked by 1 person

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