Why has the United States become so much more unequal over the last four decades? Any number of factors have been driving our increased inequality. But no single factor may have been more significant than the behavior of the modern American corporation. Corporations are contributing to inequality on two fronts. On the one hand, they’re systematically depressing incomes for average Americans, via everything from outsourcing to pension cuts. On the other, they’re just as systematically stuffing the pockets of America’s executive class.
Sen. Bernie Sanders' focus on reducing what he calls "the outrageous level of inequality that exists in America today" has been a significant part of his campaign for the Democratic presidential nomination. To address that issue, Sanders has announced a number of proposals -- chiefly, increased income taxes on higher-income households and a new tax on the wealth of the richest Americans. Most recently, Sanders announced a plan for additional taxes on corporations whose CEOs make a lot of money relative to the average wage of their employees.
One area where the two parties of the millionaires and billionaires put in place policies that favor the rich are tax laws. Tax policy has favored the wealthy under both parties, but the Trump-administration has brought this tax corruption to new levels. We need to transform tax policy to build the working class base of the economy, shrink the wealth divide, and confront the climate crisis. An honest analysis of the tax code calls out in stark detail the extreme injustice of the economy in the United States. The tax system favors the wealthy as low- and middle-income people are hit the hardest while big business and high-income people are subsidized.
More than half of the coalition of companies that fought for slashing the corporate tax rate have made layoffs since the GOP tax bill's enactment. A new review by ThinkProgress has found that about half of companies comprising the Reforming America’s Taxes Equitably (RATE) Coalition have made layoffs since the tax law’s enactment. The RATE Coalition was formed in the lead-up to the Tax Cut and Jobs Act so that big business could band together to fight for lowering the corporate tax rate. The dozens of companies and trade groups that joined the coalition all claimed that lowering the corporate tax rate would inevitably lead to more jobs.
By Josh Bivens for EPI - Bivens and Blair (2017) explain in detail how the theory for corporate tax cuts as a wage-boosting tool breaks down in the face of real-world data. This report provides a quick overview of this theory and then highlights how its predictions compare with real-world data. The theory is the following: First, corporate income tax cuts boost post-tax profits, which then boost the returns to owning stocks or bonds. These higher returns induce households to spend less and save more, and this increased supply of savings pushes down the cost of borrowing, or interest rates. Lower interest rates then induce firms to borrow more to finance new plants and equipment, and this raises productivity by giving workers more and better tools to work with. Second, competitive labor markets force employers to reward workers for their productivity increases buy paying them higher wages. This theory provides a number of empirical propositions regarding the effect of corporate tax changes on wage growth that can be tested with real-world data. The data show that many of the key predictions will almost surely fail. Before looking at the specific weak links in the causal chain, we review evidence relating to the overall claim that lower tax rates will boost productivity growth and wage growth.
By Joseph E. Stiglitz for Project Syndicate. A politically astute president who understood deeply the economics and politics of corporate tax reform could conceivably muscle Congress toward a reform package that made sense. Trump is not that leader. If corporate tax reform happens at all, it will be a hodge-podge brokered behind closed doors. More likely is a token across-the-board tax cut: the losers will be future generations, out-lobbied by today’s avaricious moguls, the greediest of whom include those who owe their fortunes to scummy activities, like gambling. The sordidness of all of this will be sugarcoated with the hoary claim that lower tax rates will spur growth. There is simply no theoretical or empirical basis for this, especially in countries like the US, where most investment (at the margin) is financed by debt and interest is tax deductible. The marginal return and marginal cost are reduced proportionately, leaving investment largely unchanged. In fact, a closer look, taking into account accelerated depreciation and the effects on risk sharing, shows that lowering the tax rate likely reduces investment.
By Thalif Deen for InterPress Service - One of the major sticking points during the negotiations in New York was the creation of a global tax body, including international tax reforms. The final decision, however, will be made by ministers and high-level officials from 193 governments in Addis Ababa, the third in a series, the first FfD conference being held in Monterrey, Mexico in 2002 and the second in Doha, Qatar in 2008. “Without the commitment to create a truly global tax body, any outcome from these negotiations will continue to place all of the burden of financing for development on developing countries’ own doorsteps. They would be told to improve their own tax systems and live with current broken tax system.” Holder also said rich countries are refusing to recommit to their decades-old promise to deliver 0.7 percent of their national income in aid – which would release an estimated 250 billion dollars a year. Official development assistance (ODA) is declining and countries need taxes to fill the gap.