Monday, October 13, 2014

WMC leaves out corporate-employee tax gap in misleading propaganda campaign

Other claims in videos, including that lower corporate taxes create jobs, are also misleading

Wisconsin Manufacturers and Commerce, the campaign arm of the Chamber of Commerce-like organization in Wisconsin, is hoping to “educate” the workers of this state.
Wisconsin’s Chamber of Commerce (WMC) is urging employers to educate their employees about how government policies affect their employees’ livelihood in an innovative series of animated videos, WMC announced Monday.

“We are launching a series of animations that employers can email to their workers or post on their company social media sites to help workers understand the importance of good public policy,” said Kurt R. Bauer, WMC President/CEO.
In other words, through a series of whiteboard animations, the WMC is launching a propaganda campaign meant to misinform the typical Wisconsin worker.

The way the WMC puts it, however, it’s purely educational -- it’s even in the title of their press release, “WMC Launches Employee Economic Education Program.”

That sounds wholesome, and the animations are indeed nice to watch. But they’re riddled with misinformation, with pro-business ideas that are omitting much needed details.

Take, for instance, the animation on taxation. It starts out talking about a regular employee named “Carl,” who “has to work almost twice as hard just to make money, because nearly a third of his pay is taken from him for taxes.” WMC offers no citation in this little “informative” animation, but they do list where Carl pays his taxes to:
Carl pays federal income taxes to the IRS, and he pays income taxes, sales taxes, gas taxes, even beer taxes to the state government. When Carl goes home, he pays local property taxes to the city, county, school district and technical colleges in his community. Carl pays a lot of taxes.
Again, there’s not much for citation in these animated shorts, but let’s assume that Carl is a manufacturer as he’s depicted in the cartoon, and that he earns a pretty modest income of $55,000 per year. At 40 hours per week, this means Carl is earning more than $26 per hour, the average wage of a manufacturer in Wisconsin according to the latest Bureau of Labor Statistics release.

Carl’s income would put him in the middle quintile range of income earners in the state -- in other words, he’s making a wage higher than the lowest 40 percent but lower than the highest 40 percent. As a middle class worker, we’d expect Carl to be paying a lot in taxes, right?

According to the Institute on Taxation & Economic Policy in a report published in January 2013 (PDF), the total amount taxes Carl pays to state and local government -- including income, property, sales, and other excise taxes and fees -- is about 11.3 percent of his paycheck.

What about federal taxes? If Carl was filing as a single filer, his tax liability would be around $9,606.25, or around 17.4 percent of his income (assuming he’s unmarried and childless). Add another 6.2 percent for Social Security, and Carl is paying around 34.9 percent of his income towards taxes.

That is indeed a third of his paycheck, which is a sizable chunk. The only problem is, the WMC video doesn’t talk about lowering Carl’s taxes -- it talks about lowering Corporate taxes:
Carl’s not the only one who pays taxes. Businesses pay taxes too. His boss, Pedro, tries to keep wages and benefits competitive so he can keep good employees like Carl.

But when the government raises taxes on Pedro’s business, there are fewer dollars available to pay Carl and the other workers. So higher taxes on businesses make it harder for workers like Carl to receive raises and better benefits for the work they do.
How terrible! So Carl and the business he works for are both being taxed at a third of the income they both earn, right? Not so much.

For corporations that make more than $500 per year, the corporate income tax sits at a flat 7.9 percent. That means Pedro’s business is only paying 7.9 percent in state taxes on all profits made. And while the corporate tax rate across the nation is technically 35 percent, the average corporation, through various loopholes and deductions, pays only 12.6 percent of taxes to the federal government.

So let’s see how this stacks up.

“Carl,” the typical employee in Wisconsin earning $55,000 per year, pays about 34.9 percent of his income towards state, local, excise, and federal taxes. The typical Wisconsin business, assuming again it’s paying the average national tax rate, is paying about 20.5 percent of its profits towards state and federal taxes.

Now I don’t pretend to speak for the typical Wisconsinite, but it seems like, with the tax burden hurting the worker much more than the business in this state, some shifting wouldn’t do much harm to the corporations of Wisconsin, specifically to those that earn a significant amount of profits. WMC leaves out any of these statistics, and makes no mention of the gap between employee taxes and corporate taxes.

WMC also makes some dubious claims -- like that higher profits for corporations means better wages and benefits for employees like Carl.
It’s simple actually: lower taxes equals higher wages, better benefits, more jobs, and a happier Carl
That line of thinking just doesn’t sit with what’s happening in the real world. According to the New York Times, in 2013 “after-tax corporate profits ... rose to a record of 10 percent of gross domestic product, while total compensation of employees slipped to a 65-year low.” And various other studies have demonstrated that lower corporate taxes do not create jobs (especially without demand driving higher profits). 

But any employee who takes to heart the video he’s watching that’s produced by the WMC would think otherwise. They would think, “Gee, the more my employer makes, the more I stand to make!” Sadly, this worker would be mistaken, given overwhelming evidence that shows otherwise.

The propaganda pieces put out by WMC are distasteful, and serve only one purpose: to misinform the workers of this state in an attempt to lower taxes for their bosses. Their own taxes, however, will remain burdensome.

No comments:

Post a Comment