Trump and
congressional Republicans are engineering the largest corporate tax cut in
history in order “to restore our competitive edge,” as Trump says.
Our competitive edge?
Who’s us?
Most American
corporations – especially big ones that would get most of the planned corporate tax cuts – have no particular
allegiance to America. Their only allegiance is to their shareholders.
So restoring their “competitive edge” has little or nothing to do with helping American workers.
For years they’ve been
cutting the jobs and wages of American workers in order to generate larger profits
and higher share prices.
Some of these jobs have
gone abroad or been outsourced to lower-paid contractors in America. Others have been automated. Most of the remaining jobs pay no more than they did
four decades ago, adjusted for inflation.
When GM went public
again in 2010 after being bailed out by American taxpayers, it boasted of making 43 percent of its cars
in places where labor is less than $15 an hour – often outside the United
States. And it got its American unions to agree that new hires would be paid
half the wages and benefits of its old workers.
Capital is global. Big
American corporations are “American” only because they’re headquartered and
legally incorporated in the United States. But they could (and sometimes do) leave at a moment’s notice. They employ or contract with
workers all over the world.
And they’re owned by shareholders all over the
world.
According to research by the Tax Policy Center’s Steven Rosenthal,
about 35 percent of stock in U.S. corporations is now held by foreign
investors.
So when taxes of “American” corporations are cut – as the Trump-Republican tax bill seeks to do – foreign
investors get a windfall.
The Institute on Taxation and Economic Policy estimates that the
Senate majority’s tax bill would give foreign
investors a tax cut of $31 billion in 2019. The House bill would
give them $50.4 billion.
That’s money that foreign investors would otherwise be paying into
the U.S. Treasury.
By way of comparison, the combined tax cuts for families in the
bottom 80 percent of the income distribution in the 30 states won by President
Donald Trump comes to just $39.4 billion. That’s far less than the House bill gives away to
foreign investors.
I’m not blaming
American corporations. They’re in business to make profits and maximize their
share prices, not to serve America.
I’m blaming
politicians like Trump and the Republicans who are trying to persuade Americans that tax cuts on American
corporations will be good for Americans.
It’s different for many corporations headquartered in Europe or Canada. Big corporations
headquartered there are far more responsible for the well-being
of the people living in those nations. That’s mainly because labor unions there are typically
stronger there than they are here – able to exert pressure both at the company level
and nationally.
As a result, American corporations distribute a smaller share of their earnings to
their workers than do European or Canadian-based corporations. And top American
executives make far more money than their counterparts in other wealthy
countries.
Governments in other
rich nations often devise laws through bargains involving big
corporations and organized labor. This process further binds their corporations
to their nations.
But in America, lawmakers
respond almost exclusively to the demands of big corporations and of wealthy individuals
(typically corporate executives and Wall Street moguls) with the most
lobbying prowess and deepest pockets to bankroll campaigns. Meanwhile, unions are weak here, and “the
preferences of the average American appear to have only a miniscule, near-zero,
statistically non-significant impact upon public policy,” according to
researchers.
Which is one reason why
most Europeans and Canadians receive essentially free health care, generous unemployment benefits, paid medical leave, and an average of five weeks paid vacation.
So it shouldn’t be
surprising that even though U.S. economy is doing well by most measures, and American-based corporations are overflowing with profits, the benefits are not trickling down to most Americans.
Given the dominance of American corporations on American politics, combined with their singular
concern for share prices rather than the well-being of Americans, it’s folly to
think they’ll turn tax cuts into good American jobs.
The tax bills big corporations are
pushing through Congress are designed for one thing: to boost their share prices, not to boost the vast majority of Americans.