Will Corporations Face a Reckoning?

Historically, large corporations are paying less in taxes than at any point in the last 50 plus years and some paid no federal taxes last year despite billions of dollars in revenue.  Meanwhile, corporate CEO salaries have become obscene even when their corporations are losing money while employee wages have stagnated.  The situation is reminiscent of the Gilded Age with its robber barons.  Corporate leadership seemingly has forgotten that Gilded Age excesses lead to the so-called Progressive Age when tax policy went after both large corporations and the obscenely wealthy.   As the Biden administration rolls out its infrastructure and reinvestment plan, there is much popular support for raising taxes on the rich and corporations that pay little to support the nation.  A column in the Washington Post looks at the situation and a possible reckoning that might lie ahead.  Here are highlights: 

Corporations have talked a good game when it comes to civic responsibility. After the Black Lives Matter protests last year, we heard vows to diversify and paeans to racial justice. The Business Roundtable in 2019 declared that the obligations of a corporation went beyond shareholders and included customers, employers, suppliers and society at large. However, their devotion to short-term profits and tone-deafness to the threats to a democracy from extreme economic inequality have not abated. In the wake of two recessions and a pandemic, a reckoning may be coming.

Corporations got a huge windfall in the past four years, seeing their tax rate plunge from 35 to 21 percent as part of Trump’s 2017 tax bill. More than 50 of the country’s largest corporations paid no tax whatsoever in 2020. Stock buybacks soared in the immediate aftermath of the tax cuts (then fell dramatically early in 2020, before they began to rebound toward the end of the year). After the pandemic struck, corporations reaped hundreds of billions in bailout moneys.

Moreover, as the New York Times reports, despite massive losses “at many of the companies hit hardest by the pandemic, the executives in charge were showered with riches.” When Boeing loses $12 billion amid the 737 Max debacle but its CEO makes $21 million, or the hospitality industry sheds workers and suffers tens of billions in losses but CEOs make seven-figure salaries, Americans understandably think something is amiss.

And yet when the Biden administration proposes a modest increase in corporate taxes to 28 percent, these same corporate leaders warn about dire economic consequences. If only the 2017 tax cuts had resulted in long-term growth and narrowing of the gap between CEO and average worker compensation, they might have a leg to stand on.

When Georgia passes a bill, motivated by false claims of voter fraud, to make access to the polls more difficult, corporations have to be dragged by threats of boycott to issue bland platitudes in support of democracy. After promising to end donations to politicians who voted to overthrow the results of the 2020 election, some corporations quietly reneged and resumed their donations to those same Republicans.

It should come as no surprise then that average Americans are ready to curb the excesses of corporate greed. The most recent Post-ABC News poll shows Americans favor President Biden’s infrastructure plan by a margin of 52 to 35 percent. However, raising the corporate tax rate is even more popular; 58 percent approve while 36 percent disapprove.

However, they have yet to make good on the promise to end exclusive focus on short-term shareholder gains, diversify corporate ranks and pay their fair share of taxes. In 1952, corporate taxes were 32 percent of federal revenue; in 2013 that share was down to 10 percent. By 2019, corporations contributed only 6.6 percent of federal revenue.

If corporations do not exercise self-restraint and translate platitudes into action, you can bet on a political reckoning. If corporations want to stave off a true populist rebellion, they should consider some self-imposed constraints including significant limits on CEO pay in years of layoffs and economic losses; a permanent cutoff of contributions to anti-democracy politicians; an action plan to support voting rights that includes paid time off to vote, lobbying for the John Lewis Voting Rights Advancement Act and ending financial support for state and federal lawmakers who push legislation that harks back to the days of Jim Crow; and an end to their histrionic opposition to any corporate tax hike.

Corporate leaders would do well to remember that after the Gilded Age in which corporations amassed unprecedented wealth and power, the Progressive Era initiated an era of reform, government regulation and greater concern for what we used to identify as the “common good.” Corporations can be productive participants in a similar transition or they can get trampled in the rush to achieve economic, political and racial equality. So far, they do not seem to grasp the magnitude of the reckoning already underway.