Despite hostile conservative rants, there is now widespread public
support for the federal law mandating that major public initiatives
must pass an environmental impact analysis, detailing what harm--or
good--a new highway, airport or dam will do to the environment.
Perhaps it is time to require an even more valuable review for all
public policies: an equity impact analysis.
Every time legislation is proposed--such as privatizing Social
Security, allowing school vouchers or creating new tax loopholes--there
should be a careful assessment of how such a policy would affect
the distribution of income and wealth in the country, access to
housing, jobs and education, and opportunities for both security
In theory, such an equity impact statement should appeal even to
conservatives. After all, they are always insisting on cost-benefit
analyses of every new regulation of corporate behavior. In many
cases, congressional committees and watchdog groups already make
some calculations of relative benefits of some legislation, but
doing it systematically would help focus attention on how much public
policy redistributes income--usually upward.
For example, after an orgy of tax cutting and loophole creation
in the early '80s resulted in big corporations paying, on average,
less than 15 percent of their income in profits (and many of them
paying nothing at all), there was a public backlash. The subsequent
1986 Tax Reform Act effectively raised the average corporate tax
rate to 26.5 percent.
But over the years, according to a new report from the Institute
on Taxation and Economic Policy, changes in tax policy and new corporate
tax strategies steadily lowered the effective rate on big corporations
to about 20 percent in 1998. Certain industries--oil, electronics,
forest products, motor vehicles and pharmaceuticals--benefited most
from loopholes, cutting their taxes by 42 to 65 percent.
One increasingly lucrative escape route permits corporations to
write off stock options for employees--mainly executives--as business
expenses for tax purposes, even though they are not counted as expenses
when calculating profits. Largely as a result of that one provision,
last year neither Microsoft nor Cisco Systems, two of the wealthiest
corporations in the country, paid any federal income tax.
As a result of these breaks, other taxpayers pick up a larger tab--especially
individuals but also other corporations and industries that are
not as tax-favored. Moreover, there's little evidence that these
tax breaks yield any social benefits, let alone benefits commensurate
with the costs. That's especially evident compared to the alternative
of spending the money--nearly $100 billion over three years for
250 of the nation's biggest companies--on education, health care,
research or environmental protection.
These federal tax breaks are only a small part of the problem.
States and localities have been bludgeoned for decades by businesses
demanding tax breaks as enticements to relocate or simply stay where
they are. There is substantial evidence that these tax breaks are
not effective in creating jobs or even influencing location decisions,
but few political leaders have been willing or able to stand up
to this corporate blackmail. Increasingly, however, local communities
are demanding some accountability from businesses--such as provisions
that "claw back" subsidies if they do not yield promised job growth.
But a recent study by Good Jobs First, an affiliate of the Institute
on Taxation and Economic Policy, concluded that state and local
governments rarely have adequate tools to audit corporate performance.
Greater disclosure of business tax breaks would be necessary for
future equity impact analyses at all levels of government, but information
and analysis are not enough by themselves. Business wins the tax
breaks it has because of its power, both through political contributions
and the threat of moving investment. Exposing existing inequities
and making the case for a fairer distribution of wealth and income
are only the first steps in a much more ambitious effort to curb