Corporate Power and Influence
Excessive corporate power and influence in politics boost economic inequality, erode workplace standards, and threatening democracy.
Corporate profits have hit a new, disturbing milestone. The U.S. Commerce Department data show that, in 2013, after-tax corporate profits were 10% of the entire economy, the highest level since the government began tracking this figure 85 years ago. Of every dollar generated in the economy and taken as income, fully $1 in $10 went to after-tax corporate profits. Not even in the late 1920s did after-tax corporate profits devour such a large share of the national economy. Forbes magazine also acknowledges the record profits.
The Commerce Department data also show the flip side to high corporate profits. In 2013, employee compensation (wages, salaries, and the costs of fringe benefits) as a share the economy hit its lowest level in 65 years (the lowest since 1948). Of every $10 generated in the economy and taken home as income, just $5.27 went to pay the wages, salaries and fringe benefits of workers. (The other main components of national income include propietors' income and rents.)
Corporate taxes are very low. Revenue from corporate income taxes, measured as a share of national income, has been declining for decades. In the 1950s, corporate taxes totaled 4.8% of national income. The share fell to 3.8% in the 1960s, to 2.7% in the 1970s, and reached a low of 1.7% to 1.9% in the 1980s, 1990s, and 2000s.
Many huge corporations pay little or no tax. A three-year study of 280 Fortune 500 corporations found they paid just 18.5% of their profits in taxes, on average, roughly half the official corporate tax rate of 35%. Thirty corporations, including GE, Boeing, Pepco, and others paid no taxes during the three years.
Corporations regularly call for tax reductions saying their tax rates in the U.S. are much higher than in other countries. This is true. But because of the all the legal tax avoidance opportunities (tax loopholes, tax shelters, tax exemptions, etc.) and all the illegal (but usually undetected) methods of tax evasion, corporations actually pay lower taxes in the U.S. than in nearly all other 25 major industrialized countries (Iceland is the only exception). Fundamental reform of the corporate tax system is needed.
Both corporations and individuals move assets offshore into “havens” to avoid taxes. One recent study estimated the value of global private wealth (not just that of U.S.-Americans) held in offshore havens, evading taxes, totaled $21 to $32 trillion. (By comparison, total U.S. national income in 2012 was $13.6 trillion.) To reduce or eliminate tax liabilities over half of the world’s trade passes through tax havens (on paper, not literally) as do over half of all bank assets.
More info from Citizens for Tax Justice: “Corporate lobbyists incessantly claim that our [U.S.] corporate tax rate is too high, and that it’s not ‘competitive’ with the rest of the world … [but] both of these claims are false. … [F]ar too many aren’t paying U.S. taxes at all. Most multinationals are paying lower tax rates here in the United States than they pay on their foreign operations.” See the great work on corporate taxes from Citizens for Tax Justice.
See the General Synod resolution on tax reform which called for "reform of the corporate income tax to 1) boost revenue, 2) close loopholes and stop the use of tax havens, and 3) end incentives that encourage corporations to move jobs offshorean increase in corporate taxes." Also see the UCC back-grounder on tax reform. Oppose reductions in taxes paid by corporations. Any reduction in the corporate tax rate must be more than offset by closing loopholes, ending the use of tax havens, and eliminating the deferral of taxation on foreign earnings. Taxes paid by corporations must rise. More
Corporations and the Courts. The Supreme Court favors corporate interests – not just in campaign finance but in many other ways. “With decision after decision coming down on the side of big business, the Supreme Court under Chief Justice John Roberts has proven itself to be willing and eager to twist the law to favor powerful corporate interests over everyday Americans.” See The Corporate Court by the Alliance for Justice.
Corporate money in politics influences policy and regulatory decisions. The Center for Responsive Politics on their OpenSecrets.org page has extensively investigated the impact of money in politics, the revolving door between lobbying and public service, and the influence purchased with campaign dollars.
A recent issue of The Nation magazine (March 10-17, 2014) had an article about lobbying, Where Have All the Lobbyists Gone? (The number of people doing this work is exploding, they are just no longer registering as lobbyists.) The author cites two studies showing that investing in lobbyists is much more profitable than actually building or expanding a company. “A November report from the international consulting firm McKinsey & Company estimated that the ‘business value at stake from government and regulatory intervention’ is about 30 percent of earnings for companies in most sectors. Simply put, government policies can mean the difference of billions of dollars for major companies, and spending on politics offers a superb payoff. A study from the University of Kansas found that companies lobbying for a tax holiday received a 22,000 percent return on the money they spent to influence the legislation.”
Corporate money is shaping our national public policies and driving inequality.
- In Winner-Take-All-Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class, political scientists Jacob Hacker and Paul Pierson trace the rise of the winner-take-all economy back to the late 1970s when a major transformation of American politics began. Big business and conservative ideologues organized themselves to undo the regulations and progressive tax policies that had helped ensure a fair distribution of economic rewards. Deregulation got underway. Taxes were cut for the wealthiest. Business decisively defeated labor in Washington. This transformation continued under Presidents Reagan, both Bushes, and Clinton, with both parties catering to the interests of those at the very top. The battle continues. Hacker and Pierson say our growing inequality is “politically engineered.” It is not the inevitable economic consequence of globalization or technological change but the foreseeable result of the public policies that politicians at the local, state, and federal level have put in place. Also see their interview with Bill Moyers on Moyers and Company.
Lethal but Legal: Corporations, Consumption, and Protecting Public Health by Nicholas Freudenberg reviews the rise of corporate power and how we are being affected by it. The focus of the book, ultimately, is public health but the author’s description of the rise of corporate power is broader, covering all industries. See the following paragraph, taken from an excerpt that appeared on Alternet. “Between 1960 and 1980, under three Democratic and two Republican presidents, Congress passed an astonishing forty-nine laws that gave consumers, workers, and the environment new protection. These new laws, and the agencies that implemented them, governed the practices of the auto, alcohol, firearms, food, pharmaceutical, and tobacco industries, discussed previously, as well as every other industry in America. While each law had limitations, and many were inadequately enforced, together they constituted a sea change in government and corporate relations and signaled the willingness of both Republicans and Democrats to expand the rights and protections of consumers. After 1980, new regulations were of course still promulgated, but at a much slower pace, and many of the new laws limited or rolled back those passed in the previous two decades.”
- In Unequal Democracy: The Political Economy of the New Gilded Age, Princeton political scientist Larry M. Bartels uses data from the last six decades to show that growing inequality is not just the result of economic forces. Rather it is the product of policy choices made within a political system dominated by partisan ideologies and the interests of the wealthy.
Corporate money is influencing state legislators who are actively working to support a corporate agenda. The American Legislative Exchange Council brings together state legislators and corporate representatives with money and policy proposals. At ALEC, corporations “have a voice and a vote,” right alongside many of our state legislators. ALEC Exposed names names and alerts the rest of us to what is underway. Also read the important report on ALEC-inspired legislators' attack on workers, The Legislative Attack on American Wages and Labor Standards, 2011–2012, from the Economic Policy Institute.
Trade agreements provide a huge opportunity for corporate representatives to write and re-write national and international policies. Trade negotiations happen outside the view of the public, the media, and even Congress. But corporate interests are well represented at the table. The Trans-Pacific Partnership is currently being negotiated between the U.S. and 11 other Pacific-Rim nations. Among the 566 official advisors who are participating in the talks, 480 represent corporations or trade associations. Read about the Trans-Pacific Partnership, currently being negotiated with 12 Pacific-rim nations and the role of corporate interests.
- Raise the minimum wage
- Support workers in their struggles for unions, higher pay, and better benefits. More
- Oppose the Trans-Pacific Partnership and the “Fast Track” authority that lets this bill go through Congress with scant debate and oversight.
- Oppose reductions in taxes paid by corporations. Any reduction in the corporate tax rate must be more than offset by closing loopholes, ending the use of tax havens, and eliminating the deferral of taxation on foreign earnings. Taxes paid by corporations must rise.
Corporate power and high corporate profits tend to concentrate wealth in the hands of a few. Observing a prior period of extreme income and wealth inequality, former Supreme Court Justice Louis Brandeis warned
: “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both."