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Blogs, Crisis response (stimulus and austerity measures), Macroeconomic policies

US: Correcting tax and fiscal policy essential to realizing human rights

Fiscal policy—that is the raising and spending of public resources—is one of the most important structural policies which determines the degree to which a State can ensure human rights for all, without discrimination. As evidenced in the first-ever thematic audience on fiscal policy and human rights held by the Inter-American Commission on Human Rights (IACHR) this past October, who pays for what public services, and who truly benefits, are fundamental questions at the heart of any efforts to protect democracy and realize human rights.

Why is tax and fiscal policy essential to realizing economic, social, cultural and environmental human rights (ESCER) in the United States?

At present, fiscal policies throughout the Americas (including in the US) are characterized by regressive tax policies with low revenue potential, widespread tax avoidance and highly inequitable spending patterns. These policies are not serving to correct the structural causes of poverty, inequality and human rights denial. On the contrary, tax and fiscal policies have in many cases deepened economic, social and gender inequalities while further impoverished populations already pushed to the brink – resulting in some cases in violations that reach the magnitude of structural patterns.

Tax and fiscal policies have the potential, however, to be vital human rights tools, in at least four ways:

  1. By mobilizing sufficient domestic resources to finance essential public services, like access to quality education, healthcare;
  2. By redistributing economic gains biased toward the wealthy to reduce socio-economic and gender inequality;
  3. By ensuring a degree of accountability between the State and its people; and
  4. By correcting market failures which drive violations of rights and protect common goods, including to a healthy environment.

Aligning tax and fiscal policy with human rights standards and principles can be a powerful corrective force to foster sufficient, equitable, and accountable public financing—the life blood of democracy.

How does tax and fiscal policy affect human rights in the US

Today, more than 46.7 million Americans – more than 1 in 7 –live in poverty. That is 2.3 per cent higher than before the Great Recession. The US is the fourth most economically unequal country in the OECD, with very low inter-generational mobility, and gaping racial disparities in access to quality education, healthcare, housing, fair wages and wealth. A stunning 95 per cent of income growth since 2009 has gone to the top 1 per cent of income earners, making the 2009-2012 ‘recovery’ the most lopsided in favor of the ultra rich in US history. The top 10 per cent now hold 50 per cent of the income in the country, and this trend is only increasing.

Tax and fiscal policy is hardly disrupting the trends. In fact, in many ways, they are entrenching poverty and inequality. For example, federal income taxes are mildly progressive. Yet, astonishingly, state and local level taxes — where most public services are provided for in the US – in every state in the country impose higher effective tax rates on poor families than on the richest taxpayers. Some call it a “soak the poor” strategy, which pushes low-income families further into poverty and increases the likelihood that they will need to rely on social protection programs – which are themselves chronically under-funded.

These abstract statistics do not paint the full picture of millions of individual human stories of economic and social rights abuse in one of the richest countries in history – so many of which come back to failures and impunity in how the government raises and spends public resources.

  • Children in Flint exposed by their own city government to toxic levels of lead poisoning – with lifelong effects on these kids’ health, cognition and social integration.
  • Urban classrooms in Detroit plagued by rats, roaches, and mold, staffed by underpaid teachers, with huge education funding gaps based on race and economic status.
  • Denials of indigenous rights adversely affected by extractive industries.
  • Disproportionate exposure of communities of color to toxic waste sites, with serious health impacts on children.
  • Enormous disparities in access to quality, affordable healthcare, based on race, income, gender, health and disability status – leading to disproportionate infant and maternal mortality rates, in particular in communities of color.
  • Complete absence of federally-protected support for childcare costs and domestic care work, done mostly by women.
  • Even a model right to health bill passed in Vermont’s legislature struck down by its governor.

What connects all of these seemingly isolated incidents of basic human rights infringements in the US?

In every case, the local, state or federal governments have sought to evade their human rights duties by claiming that the budget is too weak and public revenue too shallow to afford a life of dignity for its people.

As the economic, social and cultural (ESC) rights situation in the US (and many countries in the region) illustrates, the human rights movement and its protection regime can no longer afford to stay silent about tax and fiscal policy. We must interrogate the scarcity claim and promote just and equitable tax alternatives. This would include, for example, the USD 90 billion a year we lose in the US to corporate profit-shifting and other abusive tax planning practices.

These and many other tax abuses are not victim-less practices. Every dollar in taxes that corporations and the super-wealthy avoid must be balanced with either deeper deficits, higher taxes on middle-income people, or cuts to essential public services necessary to realize ESC rights, especially of the most disadvantaged.

How is the US undermining human rights-aligned fiscal policy throughout Latin America?

This systematic permissiveness of tax evasion and avoidance by US authorities not only affects people lives in the US. It undermines the fiscal space for human rights in countries across the Americas.

As just one example, the US has become—whether by design or by default—the world’s third most important financial secrecy jurisdiction. As a result, the US now plays a central role in attracting illicit financial flows, enabling tax abuse and allowing economic elites and tax evaders to shield themselves from paying their tax dues in countries around the region.

These tax haven-like policies and practices in place in various US states —such as the protection of anonymous shell corporations and the failure to make fully transparent the profits US companies make overseas –represent a tremendous material cost on many governments in the Americas, undercutting their redistributive capacities to reverse growing economic and gender inequalities. These tax abuses also deepen mistrust in how fiscal policy is governed and thus how effective it can be, especially for the most disadvantaged. 

Human rights as guide to just fiscal policies in the United States

The good news is that human rights experts, advocates and practitioners have begun working alongside economists and tax experts to interrogate the largely-false scarcity claims of governments, and in doing so also promoting just financing alternatives.

Various human rights bodies at the global and regional levels—such as the UN Special Rapporteur on extreme poverty and human rights, the UN Committee on Economic, Social and Cultural Rights, the Council of Europe’s Human Rights Commissioner and various constitutional courts and National Human Rights Institutions at the national level—have begun to apply human rights standards and principles into tax and fiscal policy. What is emerging is a compelling interpretation and application of the human rights normative framework and set of operational principles to guide the design, implementation and monitoring of tax and fiscal policy, including with regard its extraterritorial or spillover effects.

Enhanced monitoring by human rights mechanisms like the IACHR could help prevent the type of serious systemic violations of civil and political as well as economic and social rights which stem from ill-conceived fiscal policy.  The current situation of “fiscal impunity” and ineffective scrutiny of fiscal policy has fissured the social compact in many countries across the Americas. A robust interrogation of the human rights consequences of tax and fiscal policy is imperative.

What role could the the Inter-American Commission on Human Rights play?

In the light of the factors described above, it is time that tax and fiscal policy moves from the margins to the center of efforts to realize human rights. In a report submitted to the IACHR at its last period of sessions in October, Center for Economic and Social Rights (CESR) together with various partners called for the regional system of human rights to consolidate its scope of protection for human rights violations resulting from the impact of regressive and unfair tax and fiscal policies.  In the US context, the Inter-American Commission on Human Rights could helpfully:

  1. Organize a consultation and thematic report on fiscal policy and human rights in the Americas aimed at contextualizing and operationalizing human rights principles into fiscal policy within the framework of the Inter-American System, and consider including an analysis of how fiscal policy affects human rights in its other relevant thematic reports, such as on poverty.
  2. Formulate guidelines to states in the region on human rights-aligned fiscal policies, in particular promoting gender, equality and human rights impact assessments of tax and fiscal policies.
  3. Seek ways to bring corporate tax practices in line with the UN Guiding Principles on Business and Human Rights when advising Member States and supporting the integration of business and human rights standards into the work of the IACHR. (Various relevant proposals for implementing these concerns into the US National Action Plan on Responsible Business Conduct were submitted in the context of those consultations.).
  4. Monitor the degree to which the US’s tax and financial policies have negative spillover effects on domestic resource mobilization and ESC rights in other countries in the region.

After almost a decade of austerity in countries across the globe, building these foundations for more effective accountability over tax and fiscal policy from the local to the global is an imperative for those seeking justice and human rights.

Niko Lusiani is Director of the Human Rights in Economic Policy program at the Center for Economic and Social Rights (CESR). This blog is an adapted version of a presentation given by the author at the 6th Consultation on the Situation of Economic, Social and Cultural Rights in the United States and Canada, held by the ESCR Unit of the Inter-American Commission on Human Rights (IACHR) on January 27, 2016.


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