Now that Republicans are running Congress and the executive branch, they're planning to "reform" (cut) corporate taxes (again). This time they using the subterfuge of "this will make companies more competitive." What does that mean? Of course, under Republicans, it really means one and only one thing: cutting taxes on the rich — rich people.
The top corporate tax rate used to be 52 percent. Under President Ronald Reagan it was 46 percent. Then Congress "reformed" corporate taxes and dropped the rate to just 35 percent. (Except for giant, multinational corporations. They were handed a "deferral" break that cut their taxes to zero.)
Corporations used to shoulder 32 percent of the total tax burden. Now they shoulder only 10 percent of the burden — a drop of two-thirds. The difference has been made up from cuts to infrastructure, schools, health care, scientific research and all the things our government does to make our lives better — and to help our economy prosper over the long term.
That's the trade-off when taxes are cut. It means our government has to cut the things it does to make all of our lives better.
Who Gets That Money?
As corporate taxes were cut (thereby making it harder for the government to do things that make our lives better), where did that money go instead? It obviously didn't go toward higher wages or shorter working hours or other things that might have made the tradeoff somewhat worth it for regular people, at least in the short term. No, time has shown us here it went: straight to a few at the top.
Politifact said it was true when Bernie Sanders, in Madison, claims top 0.1% of Americans have almost as much wealth as bottom 90%. Joshua Holland explains how it happened, writing at The Nation in 2015 in 20 People Now Own As Much Wealth as Half of All Americans,
The concentration of wealth at the top isn’t the result of some sort of organic process. The top one-10th of 1 percent of American households controlled about 7 percent of the nation’s wealth in the mid-1970s. By 2000, their share had grown to about 15 percent, and today it’s well over 20 percent. Those at the very top didn’t become three times as smart or lucky or good-looking in the intervening years. They’ve benefited from changes in things like trade policy, the tax code, and collective-bargaining rules — all policy changes they’ve used their wealth to champion.
That is where the money goes when corporate taxes (and rules and regulations and the bargaining power of regular people) are cut. It goes to a few actual, living people instead of toward the betterment of all of us and our economy.
Corporations Don't "Do" Things. They Don't "Make Decisions" or "Talk"
Over the last few decades a constant barrage of corporate/conservative propaganda has misinformed public understand of what corporations are, and why we have them. People have come to think of corporations as sentient beings that "do things," like make decisions and speak. But corporations are things, like chairs and hammers. (Actually, they are more like wills or sales contracts.)
Corporations are things — legal contracts — that people use to get certain things done, for themselves.
These days corporations have also become things that are used to obscure or mask what certain people do. A corporation doesn't "decide" to pollute a river or cheat a customer or hide profits in the Cayman Islands. And Bob in accounting or Alicia in marketing don't decide to do that, either. But "the corporations" get the blame while really a few people who manage the corporation do things, and they do those things for their own, personal gain.
This is the important thing to understand. People make decisions and personally benefit; corporations do not.
When we cut taxes on corporations we are actually cutting taxes on a few people. And not just people, but very, very rich people.
The "Competitive" Argument
This time around the Republicans are trying to bamboozle everyone by claiming that we "need" to cut taxes on corporations so they will be more "competitive." (As if our corporations are not already making the highest profits in history.)
Gayle Trotter captures the company line at the Washington Examiner, in Trump's corporate tax plan will make America competitive again,
Lowering the corporate tax rate from 35 percent to 15 percent will help, not only to keep businesses here, but also bring jobs and innovation back home by reducing wacky incentives for United States companies to migrate offshore in tax-driven "inversion" deals.
This is legislation-by-extortion. This argument has giant corporations threatening to renounce their U.S. citizenship, and harm our country by killing American jobs, etc., unless we give them (the executives who make the decisions — and the threats) more money. This argument also threatens American entrepreneurs who want to start companies here, with its appeal to giant foreign companies to move here and serve those markets instead.
The argument also ignores what really makes a country "competitive." That is the infrastructure, education, scientific research, court system and other things well-funded governments do to fertilize the soil from which companies can grow and prosper. Cutting corporate taxes cuts a government's ability to nurture that soil — for the sake of a short term gain for a few executives who are making these extortion threats.
Switzerland Got Wise to the Con
A week ago Switzerland had a vote on lowering their corporate tax rate, "to attract businesses," but the voters got wise to the con, with 60 percent of them voting to reject the extortion argument, as AFP reports,
The proposal would have leveled the tax rate for domestic and foreign firms while creating new deductions for innovation as well as research and development, tailored to attract global companies...
The left-wing Socialist Party (PS) called the government's plan a "scam" that would have forced ordinary taxpayers to fill inevitable revenue shortfalls.
The referendum had "shown the red card to arrogance," the party said in a statement, claiming the days of giving sweetheart deals to powerful corporations were "no longer tolerated."
"Dollars Go to Support the Communities That Help to Make Their Businesses Thrive"
In April, 2015, the Main Street Alliance pushed back against these extortion threats, issuing a statement that SMALL BUSINESS OWNERS JOIN OTHERS ACROSS THE COUNTRY, PLEDGE TO REMAIN AMERICAN BUSINESSES,
With Tax Season in full swing, business owners and working families across the country are standing together, proud to live, work, and support the United States and their local communities. Small business owners across the country know that their tax dollars go to support the communities that help to make their businesses thrive. Investments in our schools, public infrastructure, safety, and much more depend on everyone paying their fair share of taxes.
Good for them. And good for people like the voters in Switzerland who did not fall for this "competitiveness" bamboozlement.
This post originally appeared at Campaign for America's Future (CAF) at their OurFuture site. I am a Fellow with CAF, a project of People's Action. Sign up here for the OurFuture daily summary and/or for People's Action's Progressive Breakfast.