American Corporations are the Welfare Queens

​Since the mid-1960s, United States corporate tax revenues have declined relative to the size of the economy.  Corporate tax revenue as a percentage of gross domestic product (GDP), 3.9% in 1965, has fallen to about 1.0% in 2020.  The effect of the tax cuts has been to over-enrich the wealthy resulting in hoarding of wealth, reduced opportunities for the bulk of the citizenry, and resultant class resentment, discontent, and civil unrest.  The Biden Administration’s unspoken goal is to roll back much of the benefits to the wealthy, attempt to raise prospects for the poor, and so quell civil unrest.

Corporate Taxes as a Percent GDP Over Time (OECD)

​The decline in corporate tax revenue since 1965 is due to several factors:

• The United States has reduced taxes on profits in both the statutory rate and changes in depreciation.
• Declining return on assets has reduced the corporate tax base.
• Increased use of the pass-through organizational form for businesses.
• International profit shifting to lower tax venues have lowered tax liability.

The Trump Administration-sponsored corporate tax cuts, represented as initiating corporate reinvestment and increasing worker wages, did not achieve their stated objectives.  Pertinent facts:

• Corporations are spending 154 times as much on stock buybacks as they are spending on workers’ bonuses and wages.
• Authorizations for stock buybacks, which overwhelmingly benefit the wealthy, have increased by $1 trillion since Congress passed the tax law, while corporations only provided $7.1 billion in one-time bonuses and wage increases.
• The richest 1% own 40% of all stock; the richest 10% own 84%.  The law was supposed to result in capital investments, creating more and better jobs but ultimately benefited the wealthy.
• Companies that declined to provide bonuses to their employees included ExxonMobil, UnitedHealth Group, General Motors, Ford, Amazon, General Electric, Walgreens, Chevron, Boeing, Microsoft, Citigroup, IBM, Target, Aetna, and UPS.
• Many corporations widely repackaged formerly planned projects and announced them as new capital investments.

​While U.S. corporate tax revenue has decreased, corporate tax revenues in other Organization for Economic Cooperation and Development (OECD) member countries have, on average, increased. Since 1965, typical corporate tax revenues collected by OECD countries have increased from 2.1% of GDP to 3.1% of GDP in 2018.  OECD data show that United States corporate tax revenue (including corporate tax revenue collected by state and local governments) fell from 3.9% to 1.0% during the same time.

The Wealthy in the United States Continue to Accrue Wealth

Modern neoliberal governance in the United States, initiated by the Reagan Administration, reduced marginal tax rates on the wealthy and corporations, while increasing global military presence and capabilities, resulting in a wider spread between the rich and poor.  Since 1981, the first year of the Reagan Administration, corporate tax revenue as a percentage of GDP has been less than the OECD average (which includes the United States).

The increased military presence was necessary to do more than project global empire; it also protected supply lines and markets, and included clandestine support and intervention.  The Reagan Administration initiated a conflict in Central America centered around toppling the Sandanista government in Nicaragua, covered in a previous investigation, and intervened to throttle a potential revolution in nearby El Salvador, among several few other actions.

Global hegemony and empire are debatable and debated widely and subject to democratic pressure.  Elected Presidents are technically responsible for presenting a proposed budget to Congress, and elected representatives are responsible for approving it.  However, the use of American’s taxes to support American corporations’ dependence on formal military and clandestine intelligence agency’s maintenance of supply lines and markets.  Regardless, as corporations pay less of GDP in taxes and the United States defense budget rises, individuals pay more, reducing net disposable income.

​One of the effects of taking citizens and turning them into soldiers includes the risk of later radicalization and possibly joining domestic terrorist organizations.  United States active-duty military personnel and reservists have participated in a growing number of domestic terrorist plots and attacks.  The percentage of all domestic terrorist incidents linked to active-duty and reserve personnel rose in 2020 to 6.4 percent, up from 1.5 percent in 2019 and none in 2018.  In addition, a mounting number of current and former law enforcement officers have been involved in domestic terrorism in recent years.

White Nationalist Torchbearers at the Unite The Right Gathering in Charlottesville, VA in August, 2017

​White supremacists conducted two-thirds of the terrorist plots and attacks in the United States in 2020.  Anarchists, anti-fascists, and other compatible extremists orchestrated 20 percent of the plots and attacks, though the number of incidents grew from previous years as these extremists targeted law enforcement, military, and government facilities and personnel.  The United States government arrested more than 1,000 people in the insurrection at the United States capitol in January of 2021, and other protests related to police violence, gun violence, and environmental issues generated additional arrests. 

Institute for Economics & Peace (IEP) develops an annual Global Peace Index (GPI) that captures the absence of violence or the fear of violence across three domains: Safety and Security, Ongoing Conflict, and Militarization.  The GPI ranks Djibouti, El Salvador, Thailand, Guatemala, Turkmenistan, Algeria, Mauritania, Honduras, Azerbaijan directly ahead of the United States at 121st.  Oddly many of the listed countries ranking above the United States would fall into the Trump-created category of ‘shithole countries,’ raising the obvious question of whether the United States similarly falls into that classification.  A direct corollary, Canada, ranked in the top ten most peaceful countries.  The report indicated the United States economic cost of violence was an astonishing 8% of GDP.

The Biden Administration has proposed a wide range of tax modifications that could affect corporations.  The corporate tax rate is currently 21%, levied as a flat rate, reduced from a top marginal rate of 35% before 2018 by the Trump Administration-sponsored tax cuts.  President Joe Biden has proposed increasing the corporate tax rate to a flat 28% tax rate.

The Biden Administration has also proposed the following measures to revise aspects of the tax codes and so help counter the structural issues in the United States:

• Repeal of Deduction for Foreign Derived Intangible Income (FDII).
• Limit Interest Expense Deduction for Multinationals.
• Modifying the Base Erosion and Anti-Abuse Tax (BEAT).
• Anti-Inversion and Treaty-Shopping Rules.
• Dual Capacity Shareholder.

​The Biden Administration-sponsored $1.9 trillion American Rescue Plan stimulus package provided several direct-transfer methods of enriching middle and low-income Americans:

• A fully refundable child tax credit for 2021, increasing the amount from $2,000 to $3,000 per child ages 6 to 17 and to $3,600 for children under the age of 6.  These payments begin to phase out for individuals earning more than $75,000 a year or married couples earning more than $150,000.
• $30 billion in emergency rental assistance, $5 billion to prevent Covid-19 outbreaks among homeless populations, and $10 billion for mortgage assistance.
• Direct payments to individuals earning an adjusted gross income up to $75,000 (and married couples earning up to $150,000) will receive $1,400 each, plus $1,400 for each dependent.
• Extends key unemployment programs through August 29.

The Biden Administration has several other proposals to put money into the hands of the lower classes in the United States.  The question is whether it is too late?