How Fiscal Policies Are Used to the Advantage of Politicians and Big Businesses: Convention of States Activist

A man waits at a bus stop that displays the national debt of the United States in Washington, D.C., on June 19, 2020. Olivier Douliery/AFP via Getty Images

Tax policies and government spending are used to encourage or discourage certain behaviors within society and can be considered instruments of social policy, said Wendy Damron, external relations manager at Citizens for Self Governance Charleston and the district captain for the South Carolina Convention of States Project.

There are some favors and loopholes in the tax law that cater specifically to certain groups and certain constituencies, as well as carve-outs for a lot of different things, Damron said in an interview on The Epoch Times’ “Crossroads” program.

Big corporations can afford to pay lobbyists to influence lawmakers to write tax laws that favor them, but it impacts small businesses that get stuck paying more taxes to compensate for the big ones that received the favors, Damron said.

This is why big corporations love big government, she added. “They can afford to sort of steer things to favor them and kind of kill out their competition.”

Some tax laws include exceptions for companies that started on a particular date in a certain industry, Damron said, so select laws don’t apply to excluded companies.

“There’s just so much more to the tax system than what you hear, and there’s so much going on behind the scenes,” Damron said, “it’s payoffs, favors from certain officials to supporters and unions.”

Damron said she would love to see just a flat tax law even though she would lose opportunities to prepare people’s taxes in that case. An easy and straightforward flat tax would be the fairest one, she added.

President Donald Trump and members of Congress celebrate the passage of the tax bill on Dec. 20, 2017. Samira Bouaou/The Epoch Times

Before former President Donald Trump’s tax cut, the corporate tax rate was one of the highest in the world and motivated businesses to move their operations overseas, Damron said.

Trump cut the corporate tax rate from 35 percent to 21 percent in 2017. The move made U.S. tax rates competitive and brought money back to the country, Damron said.

On March 31, President Joe Biden unveiled his $2 trillion infrastructure plan, consisting of traditional projects such as roads and bridges as well as funding to combat climate change.  A second component of the package contains benefits for workers including free community college, universal pre-kindergarten, and paid family leave.

The plan will be paid for by increasing the corporate tax rate to 28 percent from the current 21 percent.

Trump called Biden’s  proposal “the largest tax hike in American history.” With the infrastructure plan’s tax rates, “if you create jobs in America, and hire American workers, you will pay MORE in taxes—but if you close down your factories in Ohio and Michigan, fire U.S. workers, and move all your production to Beijing and Shanghai, you will pay LESS,” Trump said in a statement.

Damron is concerned that Biden will reverse Trump’s tax policies, prompting corporations to go overseas.

Trump’s tax reform actually decreased individual tax rates, but many people did not notice it because they received bigger paychecks due to less taxes withheld and subsequently received a lower tax refund, Damron said. She advises people to compare this year’s tax liability to previous years’ tax liability—before Trump’s tax cuts—rather than compare the current year’s refund to prior years’ refunds.

“I guarantee you the tax liability you had this year in 2020 compared to before Trump’s tax cuts were actually lower,” Damron added.

“People really love the idea of that rich person paying more money: we’re gonna get them, we’re gonna punish them, they need to pay more,” Damron said,  “so they actually will overlook paying a little bit more themselves as long as the other guy is getting stuck with more.”

People are being played against each other, Damron explained, adding that “no one considers themselves as being rich; it’s always someone else is rich.”

However, there is so much debt mounting in this country, due to lavish spending, that it is impossible not to pass it down to the middle class (in the form of tax), Damron said.

Democratic U.S. Senate candidates Jon Ossoff and Rev. Raphael Warnock hand out lawn signs at a campaign event in Lithonia, Ga., on Oct. 3, 2020. Elijah Nouvelage/Getty Images

Biden promised at a rally in Atlanta in January that voting for Democratic candidates in the Georgia Senate runoff election would lead to $2,000 direct payments.

“By electing Jon [Ossoff (D)] and the Reverend [Raphael Warnock (D)], you can make an immediate difference in your own lives, the lives of the people all across this country. Because their election will put an end to the block in Washington, that $2000 stimulus check, that money would go out the door immediately. ... If you send Senators Perdue [(R)] and Loeffler [(R)] back to Washington, those checks will never get there,” Biden said.

However, “there’s no consideration, there’s no talk of where is this money coming from. Are we printing it? What are we doing to our children? What are we doing to our grandchildren? How are they going to pay this back?” Damron said, referring to Biden’s promise.

The Treasury Department stated that the U.S. national debt exceeded $28 trillion at the end of March. The federal debt-to-GDP ratio rose significantly in 2020, reaching slightly above 100 percent–the highest share of GDP since World War II, according to a report by Congressional Research Service.

The Democrats just try to buy votes by pushing more high-dollar spending packages, Damron said, adding that the growing national debt may lead to inflation.

Joshua Philipp contributed to this report.