More than 130 countries, including China and India, are on board with President Biden’s proposal to set a minimum 15% global tax rate on multinational corporations. The proposal is backed by Treasury Secretary Janet Yellen and the Organization for Economic Cooperation and Development, leveling the playing field across the globe. While not yet adopted by all, a global minimum tax would remove some incentives for corporations to move profits to tax havens and jobs overseas.
But in this country, more work is needed. Corporate tax as a share of gross national product after the Republican-backed 2017 tax cut is less than 1%, and many — major corporations like Hewlett-Packard, Nike and FedEx — pay nothing at all. In fact, 55 of the country’s largest corporations paid no federal income tax on billions in profits last year. In addition, they received a combined rebate of more than $3 billion, resulting in an effective tax rate of less than 1%. The cost of government is born on the backs of the average American taxpayer, who paid on average 14.6% of their income in taxes in 2018.
We have allowed the creation of two sets of rules, which results in a wealth and income gap so extreme that we more closely resemble a third world autocracy than a democracy. The 2017 tax bill only made things worse. Since most of the richest among us derive the lion’s share of their income from their investments in the stock market, they are the greatest beneficiaries of the tax breaks, subsidies, write-offs and loopholes given to large corporations.
This “welfare for the rich” is estimated to cost the U.S. Treasury $1.4 trillion over a 10-year period. That’s the reason former President Trump fixated on the stock market as the sole indicator of economic health and the reason President Biden is focusing on a more equitable distribution of the tax burden.
Low corporate tax rates and accounting “loopholes” have allowed large corporations and big spenders to not only go scot-free, but to collect funds from the Treasury. Our former president paid only $750 a year when he was in the presidency, while he made millions. In previous years, he claimed a $72 million refund — the highest in history — and he claimed $130 million in rebates.
Matthew Gardner and Steve Wamhoff reported in a study for the Institute on Taxation and Economic Policy that 26 of the largest American corporations have paid no federal income tax since 2017 on more than $77 billion in profits.
In addition, these corporations received $3.5 billion in rebates. During the Nixon and Reagan years corporate tax cuts were sold to the American people as sure to result in more jobs and higher incomes — the “trickle down” theory. But it hasn’t worked out that way. Income growth for the average American has lagged behind per capita GDP, while incomes for the wealthy have soared by 500%.
The CEO of Wells Fargo, for instance, is paid 300 times the average salary of a Wells Fargo employee. At Weight Watchers, the ratio is a staggering 6,000 to 1. Lower taxes mean higher incomes for CEOs and shareholders but not for workers, and as work is sent overseas to increase profits, there are fewer jobs at home. More jobs in foreign countries — where workers do not pay U.S. taxes — means more profit to the companies, but no tax on those profits means a double-blow to our treasury. Meanwhile, our infrastructure — roads, bridges, communications technology and public buildings — is falling apart.
President Biden has proposed increases in corporate tax rates as a means to pay for the infrastructure bill, but clearly the loopholes in the tax system must be closed as well. Subsidies to large corporations need to be examined. We must explore the outsourcing of our jobs and consider higher taxes on corporations who send their work overseas.
Business groups oppose any increase, of course, saying it would be counterproductive to economic growth and job creation. But we know from our own history that keeping corporate taxes low does not increase industrial investment, or increase jobs or improve wages. Corporations use the gain to raise CEO salaries and buy back stock. But a government struggling to keep the lights on is not a government that can make improvements to health care, education and infrastructure.
Biden’s moderate tax increase on corporations will pay for his infrastructure bill in just 10-years — sooner if some of the loopholes and tax breaks are closed — but it still does not address the issues of inequity. It’s not about soaking the rich. It is about fairness. It’s about the rich paying their fair share. The social cost of the current inequity is staggering.
People don’t know who to blame. Sixty percent of the insurrectionists have serious money problems. Their lives have been upended by stagnant wages and loss of jobs, and they’re angry. We see it in the violence that has become so commonplace. We hardly have a chance to breathe between the tragedies. Racial unrest, over-policing actions, white supremacist threats and hatred are tearing our country apart.
And the common denominator is economic inequity.
Martha Johnson is a resident of Elizabeth City.