America’s most generous welfare system is one in which the rich get richer, and the rest of us pay the bills.
Both Axios and American Progress have reported on the taxes paid–or more accurately, avoided– by members of the Fortune 500. This was at a time when corporate profits were more than healthy, and in the view of many, a time when corporate greed has contributed to the inflation that is eroding wage gains.
The table at the link shows 2021 federal income tax expenses, pre-tax earnings, and effective corporate income tax rates for 19 companies in the Fortune 100. Four of them show a negative tax rate, or zero taxes owed that year and for some, entitlement to a refund.
I’ve pared down the following list to the name of the corporation, its pre-tax earnings after allowable deductions and credits, and the effective tax rate. There are many more companies that fall into this category, but this will give you a (bitter) taste…
Exxon Mobil Corp.
JPMorgan Chase & Co.
Ford Motor Co.
General Motors Co.
Bank of America Corp.
United Parcel Service
Charter Communications Inc.
Merck & Co. Inc.
American International Group Inc.
A recent Guardian analysis of top corporations’ earnings shows most of them are enjoying significant profit increases while they continue to pass higher costs on to customers. And despite record profits and minimal or even negative taxes generating big refunds, several of these companies–Amazon is notable–are frantically opposing the unionization of their workforces.
If you wonder why the gap between the rich and the rest continues to grow…
A recent article from Time Magazine traced the history and effect of unionization.
Unions became popular in the U.S. starting in the 1930s, with membership rising from just over 10% of the eligible working population in 1936 to about a third by the mid-1950s, according to 2021 research published in the Quarterly Journal of Economics. That remained the case until the mid-1980s, when they fell out of favor, thanks to a culture in which companies refocused on maximizing shareholder value and minimizing worker benefits, as well as a court-backed emphasis on the value of private property and private profit. “Those years turned out to be basically a blip in what otherwise has been not only a very contentious, but many times a very violent interaction between workers and employers in this country,” Devault says of the mid-20th century.
During unions’ heyday in the U.S., however, the income gap between the richest and poorest Americans shrunk considerably. “The only time that the bottom tenth of the population and the top tenth of the population have come closer together has been during those years, when unions were operating in the largest corporations in this country,” Devault says. As unionization declined in the 1970s and 80s, that income gap grew once more. Today, it is at an all-time high since tracking began over 50 years ago, based on Census Bureau data. Research shows that as much as $50 trillion has migrated into the coffers of the top 1% of income earners in the U.S., an upward redistribution of wealth that has squeezed out the middle class.
Business schools are finally recognizing that shareholders aren’t the only stakeholders who matter to the success of a business enterprise. Employee morale is ultimately as important to the bottom line as tax avoidance. For that matter, a prosperous middle class consisting of people with disposable income is critical to sustained business success.
America’s tax system is an abomination. You need not be anti-capitalist to insist that the rich pay their fair share to the country that provides them with the wherewithal to make those fortunes.
I’d be willing to bet that the “captains of industry” who manage those tax-avoiding businesses don’t resent paying the dues charged by fancy country clubs; they know it takes money to maintain glitzy clubhouses and immaculate golf courses. It also takes money to maintain the roads and bridges over which manufacturers ship their goods. It takes money to pay the police and firefighters who provide businesses with security and public safety, and it takes money to compensate the judges and other personnel who administer the legal system all businesses depend upon.
During one of the 2016 Presidential debates, Trump responded to Hillary Clinton’s charge that he’d played fast and loose with his taxes by sneering that his tax avoidance meant he was smart. Too many executives agree with that sentiment, and they are all wrong.
The truth is, they are the “welfare queens” that they like to disparage.