“The rich need to pay their fair share.” We hear and see that phrase so often that it hardly fazes us anymore. My Republican friends try to distract us by asking: “But what is their fair share?” They follow this by listing the total of taxes that corporations paid in a given period of time.
But they don’t tell us “the rest of the story,” a phrase that us oldsters remember Paul Harvey saying on the radio. So here it is, from the Institute for Policy Studies:
“35 major U.S. corporations — including famous names like Ford, Netflix, and Tesla — paid less in federal income taxes between 2018 and 2022 than they paid their top five executives. All 35 were profitable. ... The total compensation reported for named executive officers over this five-year period was $9.5 billion. Their combined federal income tax bills came to a negative $1.8 billion – that is, rather than paying taxes, they received refunds.”
And this comes at a time when pay for those five top executives has increased to unbelievable levels. Tesla, for example, made a profit of $4.4 billion during this time; its top executives were paid $2.5 million and the company got a federal income tax refund of $80 million. Ford Motor Company did even better, with profit of $7.8 billion, executive pay of $355 million and a federal tax refund of $121 million.
When I was young, Senator Everett Dirksen of Illinois once famously said “A million here, a million there. Pretty soon you are talking about real money.” We were amused by that, but now that “millions” has become “billions,” it doesn’t seem as funny.
It is even less humorous when that same report tells us that “for decades corporate profits as a share of the economy have been generally rising and CEO pay has been skyrocketing. However, the average corporate tax rate — what firms actually pay as a percentage of their earnings — has been steadily trending downwards.”
In addition, 64 of the firms the Institute studied paid “an average effective federal tax rate of 2.8%.” Don’t you wish your sales tax rate in Kentucky was that low?
All of this is certainly not fair, especially to those of us — Republicans and Democrats alike — who pay federal income tax and do not get refunds. Here are some suggestions that might correct this egregious inequity. Sad to say, they do involve action by the U.S. Congress.
Congress could simply raise the federal corporate tax rate. It was lowered by the Trump administration to 21%. If we raised it to only 28%, we could generate $1.3 trillion over ten years.
Another helpful move would be a federal law that would close loopholes in the current tax laws and reduce tax breaks. Congress could also reduce stock buybacks by corporations and also reduce the bonuses given to banks.
We cannot expect today’s Congress to make these changes, although President Biden’s 2025 Budget does propose a 28% corporate tax rate. If we were to elect a Congress controlled by Democrats in both House and Senate, and also reelect President Biden, there is a chance this change could be made.
Meanwhile, and at the very least, we could ask for some hard evidence that those high salaries being paid to those top corporate executives really do, as Republicans claim, result in trickle-down benefits for the workers in those companies and lower prices for products these companies produce and sell us.
Such evidence may be hard to find. I didn’t find any in the CATO Institute website article criticizing President Biden’s 2025 Budget, for example.
All things considered, I think that our best chance of restoring a measure of equality in our tax system is to just vote for Joe Biden and as many Democratic Congressional candidates (Senate and House) as we can.
A Democratic federal government will not fix all the problems in our tangled tax system, but it will at least point us in the direction of greater fairness.
And wouldn’t that be better than what we have now?
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