A recent NPR story attempted to explain why it is so hard to tax billionaires. The expert NPR interviewed for the story ticked off the usual ways the 1 percent avoids paying its fair share of taxes:

Billionaires have the best accountants who know all the loopholes. Their wealth isn’t in income, but in assets. They often move to states (like Texas) that don’t have a state income tax, and move their money to offshore tax havens. They live off tax free loans. Legislation to tax billionaires goes nowhere because wealthy coal barons like Democratic Senator Joe Manchin don’t believe in taxing the “job creators,” a notion that has been debunked again and again. (Basically a thriving middle class creates jobs, while billionaires invest their profits in real estate.)

What NPR didn’t say, and what the corporate and corporate-sponsored media never say, is that it is hard to tax billionaires because billionaires rule America and they don’t want to be taxed.

“We live in a nation owned and controlled by a small number of multi-billionaires,” says U.S. Sen. Bernie Sanders.

Our political system is now “an oligarchy with unlimited political bribery,” says former President Jimmy Carter.

Americans like to think they live in a democracy, but a peek behind the curtain shows the real power lies not with the people, but the super rich. This fact seems obvious, but in the corporate media and corporate-sponsored media, this basic truth is still considered a radical notion fit only for magazines like, well, this one.

Thomas Picketty and other left-leaning thinkers have long maintained that the billionaire ruling class is hostile toward democracy because true democracy means sharing power with the masses. While a few prominent billionaires (Bill Gates, George Soros, Tom Steyer, Michael Bloomberg) like to portray themselves as pro-democracy and socially responsible, the overwhelming majority are anti-democratic and ultra-conservative, especially on economic issues. As Benjamin Page, Jason Seawright, and Matthew Lacombe wrote recently in The Guardian, “Most of the wealthiest US billionaires – who are much less visible and less reported on – more closely resemble Charles Koch… Obsessed with cutting taxes, especially estate taxes – which apply only to the wealthiest Americans.”

These conservative billionaires don’t talk publicly about their politics because the self-interested economic policies they work to implement are highly unpopular with American people. Take the wealth tax, a recent poll found that two-thirds of voters approve of it. You would think then that a wealth tax would be a slam dunk.

Not so much.

This billionaire class runs the country stealthily (through dark money groups, campaign contributions, owning the media, etc.), because doing so outright would make Americans wake up to the fact that their democracy has been hijacked by oligarchs.

Instead we find shadowy billionaire-funded groups like Americans for Prosperity spending millions to get their hand-picked candidates into elected office, candidates who have agreed to promote the billionaires’ agenda—like no wealth tax.

Recently, however, this reluctance to speak out has begun to fade. More and more, today’s super rich don’t even try to hide their disdain for paying their fair share. Elon Musk recently whined that U.S. Sen. Ron Wyden’s call for higher taxes on billionaires was targeting people like himself. “Eventually, they run out of other people’s money and then they come for you.” New York supermarket magnate John Casimatidids said politicians who are peddling a wealth tax—Wyden, Bernie Sanders and Elizabeth Warren— “are just nuts. They’re trying to change our way of life, and it’s not going to happen. If they don’t like the United States the way it is, I’m buying them a one-way ticket to Venezuela.”

Hedge fund manager Leon Cooperman recently complained that paying his fair share of taxes would be unfair. “The idea of vilifying wealthy people is so bogus,” he said.

Catsimatidis and Home Depot co-founder Bernard Marcus penned a recent piece in the Wall Street Journaltitled, naturally, “Making Money is a Patriotic Act.” “[W]e have nothing to apologize for, and we don’t think the government should have more of our profits,” they wrote.

That more and more billionaires are speaking out publicly shows how little concerned today’s real ruling class is about public opinion.

counterpunch.org

The answer is simple, says author and researcher Sam Pizzigati who coedits inequality.org. The United States has such rock-bottom low tax rates and legal facilities for evasion that its super rich do not have to bother going to the trouble of using exotic shell companies in far-flung global corners. They can easily do so right at home, and all legally too. The U.S. tax system – once a progressive model in previous decades – is now rigged to enrich the already rich while making the majority of working people pay far more than their fair share of the national tax burden. This has been the case since the 1980s when successive U.S. administrations have one after another soaked the super rich with generous tax breaks.

However, the chronic problem of wealth inequality in the United States (and elsewhere) is having such a damaging impact on its society, economy and ultimately the very functioning of democracy that policymakers are being compelled to find radical solutions. There is ample historical precedent for the benefit of implementing a progressive taxation system. The 1930s New Deal era of FDR made the United States a stronger democracy and a world-leading economy precisely because of its policy of increasing taxes on corporations and those who could afford it. That era has been largely undone by decades of neoconservative and neoliberal capitalism. But polls show that most American citizens regardless of party affiliation support the imposition of higher taxes on wealth.

There are policy tools available to redress the imbalance such as linking the top tax rate to a minimum wage for low-income workers. This can apply to all nations, not just the United States.

Sam Pizzigati co-edits inequality.org which researches and highlights the growing wealth gap in the United States. The organization is widely respected as non-partisan, and has produced numerous papers and books on the subject which are used as critical resources by civic society and policymakers in the fight against economic inequality. His latest books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970.

Interview

QUESTION: The recently publicized Pandora Papers on global wealth accumulation in tax havens featured very few U.S. billionaires or politicians. And yet, as you have extensively documented at inequality.org, the U.S. has far more billionaires than any other country. What explains the strange absence of America’s mega-rich in the Pandora Papers?

Sam Pizzigati: We can point to two factors. The first: The nearly 12 million financial documents that make up the Pandora Papers come from 14 financial firms that provide “administrative services” for the accountants and lawyers who help the wealthy hide their wealth. These 14 firms sit in “offshore” locales like Samoa, Cyprus, and Singapore. The U.S. super rich don’t have to go that far afield to get help. They have plenty of “one-stop” support for sidestepping taxes much closer to home.

The second reason so few U.S. billionaires appear in the Pandora Papers: America’s super rich have less of a need to go the illegal tax-evasion route. Our U.S. tax code offers the rich lots of perfectly legal mechanisms for avoiding taxes. And these mechanisms – these loopholes – come on top of a rate structure that demands precious little from extremely rich Americans.

The current top U.S. income tax rate sits at 37 percent. Right now, if you make over $628,000, you pay a 37 percent tax on whatever you make over that. If you make $6.28 million, you still pay at that same 37 percent rate. And if you have income that comes from capital gains – the profits you make wheeling and dealing – you pay taxes on that income at no more than 20 percent.

You put all this together – the low rates and the legal workarounds to these low rates – and you get a stunning result: America’s 25 richest individuals paid taxes at just a 3.4 percent overall rate between 2014 and 2018.

QUESTION: Some observers have concluded that the Pandora Papers have been politicized or are serving a political agenda to smear the Russian and Chinese governments by focusing on businessmen who are said to be “close to” Presidents Putin and Xi – without providing evidence of the alleged closeness. Would you agree that the Pandora Papers appear to have a dubious focus that suggests a politicized agenda?

Sam Pizzigati: Some leakers have noble motives. Some have crass ones. Good investigators – like the reporters the International Consortium of Investigative Journalists lined up for the Pandora Papers project – take that reality into account. They work hard at checking out what they’ve leaked.

I haven’t seen any evidence yet that challenges the accuracy of what the Pandora Papers reveal. Those embarrassed by leaked information will always try to shift attention to the leakers.

QUESTION: U.S. President Joe Biden talks about closing loopholes for tax evasion and making corporate America pay more of its fair share in taxes, but how credible are his stated goals when as a Senator for over 30 years he helped his home state of Delaware become a top tax haven within the United States?

Sam Pizzigati: Those goals have become credible because progressives in the United States have, over the past dozen years, built up a political presence strong enough to shove tax and social justice onto the nation’s political center stage.

Delaware does indeed rank as America’s most corporation-friendly state. It’s held that distinction for over a century now. Joe Biden matured in that milieu. But that milieu, on the national scene, has changed. Progressive grassroots organizing has changed it – by building up in Congress a core of lawmakers too big to ignore.

QUESTION: It seems inescapable to make the conclusion that wealth inequality is growing vastly in the U.S. and across the world. How does the trend compare with previous decades over the last century?

Sam Pizzigati: In the United States, over the last century, we’ve had essentially a little over one generation of growing equality, starting in the mid-1930s. Wealth started concentrating again in the 1970s, and that concentration picked up spectacular speed after Ronald Reagan’s 1980 election. Every decade since then has seen growing inequality.

Just to put some numbers on that: In the 1920s, America’s richest one-tenth of 1 percent held a quarter of the nation’s wealth. That share dropped down – at its lowest point – to near 6 percent before trending back up. And now? Our super rich have regained that quarter share.

QUESTION: With such distorted wealth comes distorted power, so it would seem nonsensical to talk about democracy functioning given the gross inequality?

Sam Pizzigati: You got that right! As the great progressive U.S. Supreme Court Louis Brandeis once put it back in the early 20th century: “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”

QUESTION: Given the detrimental, destructive impact of inequality on societies, it seems strange that the Western corporate media do not give much coverage to the subject. The recent flurry of coverage on the Pandora Papers is more an exception than the norm. Or maybe that is because such media are part of the problem?

Sam Pizzigati: Back in the 1960s, during the tumult around the Vietnam War, I read something the great social critic Noam Chomsky wrote that has always stuck with me. All the information needed to understand the horror of that war, Chomsky wrote, can be found in the pages of the mainstream corporate media. But you have to dig really deep to find that info.

We have the same situation today. You can find all the information you need to understand the horrible impact economic inequality is having on modern life right within the mainstream corporate media. But you have to dig deep to find it. For the casual media consumer, for people who don’t have the time to do all that digging, the horrors that inequality creates go largely unexamined.

But that situation is evolving. We have more and more alternative outlets to the standard corporate media. We need to keep growing them.

QUESTION: Is there a causal, empirical link between wealth inequality and a propensity for international conflict and war?

Sam Pizzigati: Just look around the world today. The nations that always seem to pop up on various peace-making fronts – the Scandinavian nations, for instance – all have significantly more equal distributions of income and wealth than the international norm.

After World War I, we in the United States had a brief intense focus on the notion of “merchants of death,” the idea that some people are getting rich off of preparing for and fighting wars that leave many people dead. And in the middle of the Cold War, in his farewell address, U.S. President – and former top general – Dwight Eisenhower warned Americans to beware the “military-industrial complex,” that vile combo with a vested economic interest in keeping lasting peace at bay.

Gross economic inequalities create tensions. A world of nations with only modest gaps between rich and poor would be a safer world.

QUESTION: What solutions are there to reverse and decrease inequality in the U.S. and elsewhere? Polls show that most Americans – both Democratic and Republican voters – support the idea of raising taxes on the super wealthy and corporations. Can any of the established U.S. political parties deliver such policies or, again, are they part of the problem?

Sam Pizzigati: Americans definitely do want higher taxes on the rich and the companies they run. Almost 80 percent of Americans, the prestigious Pew Research Center has found, feel that wealthy people aren’t paying their “fair share” of taxes.

During the New Deal years of the 1930-40s under the presidency of Franklin Delano Roosevelt, one of America’s major political parties – the Democrats – did deliver higher taxes on the rich. In 1942, President Roosevelt called for what amounted to a “maximum wage,” a 100 percent tax on income over $25,000 a year, about $400,000 in today’s dollars. FDR didn’t get that 100 percent top rate, but Congress did okay a 94 percent tax on income over $200,000, and the top U.S. tax rate would hover around 90 percent for the next two decades, years that would see the United States give birth to the first mass middle class in world history.

But those stiff tax rates on the rich didn’t survive, mainly, I think, because steeply progressive tax rates, as traditionally structured, have a built-in political asymmetry. The rich facing stiff top tax rates have an intense personal stake in doing everything possible to knock those rates down. But the benefits that average taxpayers see from high tax rates on the rich play out far more subtly.

Incentives matter. Traditionally structured progressive tax rates simply give the rich too much incentive to pound away against those rates politically until they pound them out of existence —and they have plenty of resources to do that pounding.

The alternative to the traditional progressive tax approach? Instead of keying the threshold for steep tax rates at a specific dollar figure at the top, we could link that threshold to incomes at the bottom. We could set a stiff tax rate – at 70 or 80 or even 100 percent – as a multiple of the minimum wage. Any annual income above, say, 50 or 100 times that minimum would trigger the steep rate.

With this tweak in place, a nation’s richest would suddenly have a vested personal interest in the well-being of their nation’s poorest. The higher the minimum wage, the higher their own after-tax income. And average earners would have a much more direct personal stake in the taxes rich people pay. The higher the minimum wage, the greater the economic pressure on employers to raise wages above the minimum.

Progressives in the United States are pushing right now to move things in this direction. One example: The AFL-CIO, America’s labor center, is now backing legislation introduced by Senators Bernie Sanders and Elizabeth Warren that would increase the corporate tax rate on companies that pay their top executives over 50 times what they pay their most typical workers. Last year, 58 U.S. corporations paid their top execs over 1,000 times what their typical workers were making.

Parents across the country are fighting to stop government schools from indoctrinating their children with Critical Race Theory. Critical Race Theory is a form of Marxism that focuses on the “oppression” of racial minorities. Central to Critical Race Theory is the belief that free markets are a tool of racial oppression that must be abolished and replaced with socialism.

This is dangerous nonsense. History shows that governments, not free markets, are and always have been the instruments of racial oppression. For example, legislators passed Jim Crow laws because private businesses refused to voluntarily segregate their customers.

Numerous scholars have documented how the welfare state and the war on drugs, as well as minimum wage laws, occupational licensing laws, and other anti-liberty laws, disproportionately harm minorities. Some of these laws were passed with the explicit goal of protecting white workers from competition with minorities.

Public outrage over teaching children that the only way to overcome racism is to sacrifice liberty helped build efforts to pass laws banning the teaching of Critical Race Theory. Some of these efforts are accompanied by advancing mandates that schools promote a “positive” or “patriotic” view of America. This can replace one form of indoctrination with another.

A “patriotic” curriculum could teach children that the change from a constitutional republic to a welfare-warfare state was a victory for liberty. It could also teach that the American government is morally justified in, and capable of, managing the economy at home and spreading democracy abroad. It could teach children lies like capitalism caused the Great Depression.

Instead of arguing over what form of statism government schools should indoctrinate children in, liberty activists should work to replace government control of education with parental control.

The key to this is to restore parental control of education dollars though education tax credits and tax-free education savings accounts. This can enable parents to afford to “ed-exit” from government schools by sending their children to private schools. It can also help parents afford the costs associated with homeschooling. Increased charitable deductions can help fund private education for low-income families. Tax credits can be implementing without increasing the deficit by tying them to legislation closing the Department of Education.

Homeschooling is an increasingly attractive option for many parents. Parents interested in providing their children with a quality education should consider my homeschooling curriculum. The Ron Paul Curriculum provides students with a well-rounded education that includes rigorous programs in history, mathematics, and the physical and natural sciences. The curriculum also provides instruction in personal finance. Students can develop superior communication skills via intensive writing and public speaking courses. Another feature of my curriculum is that it provides students the opportunity to create and run their own businesses.

The government and history sections of the curriculum emphasize Austrian economics, libertarian political theory, and the history of liberty. However, unlike government schools, my curriculum never puts ideological indoctrination ahead of education.

Interactive forums ensure students are engaged in their education and that they have the opportunity to interact with their peers outside of a formal setting.

I encourage all parents looking at alternatives to government schools — alternatives that provide children with a well-rounded education that introduces them to the history and ideas of liberty without sacrificing education for indoctrination — to go to RonPaulCurriculum.com for more information about my homeschooling program.

ronpaulinstitute.org

Here’s everything you need to know about the urgency of fair tax reforms to pay for vital public investments and reverse extreme inequality.

By Sarah ANDERSON, Brian WAKAMO, Justin CAMPOS

President Joe Biden and Congressional progressives have responded to public pressure by putting bold spending proposals on the table that would make our economy more fair, sustainable, and resilient in the face of future crises.

The chances of these proposals passing depends largely on whether lawmakers can reach consensus around tax increases on wealthy individuals, big corporations, and Wall Street. The 11 charts below show how such reforms would both generate revenue to help pay for transformative public investments while also curbing the skyrocketing inequality that is undermining our society and democracy. According to Americans for Tax Fairness, such fair tax reforms are extremely popular, with voters expressing support by 60-65 percent or more in 12 recent polls.

Taxes on the Wealthy

Biden aims to raise the top marginal tax rate from 37 percent to 39.6 percent, where it stood before the 2017 Republican tax cuts. Tax rate hikes at the top were an effective tool in reversing the extreme inequality of the “Gilded Age.” Under high top rates in the post-WWII decades, the share of national income flowing to the richest 0.1 percent fell significantly. When policymakers once again slashed those rates, beginning in the 1960s and accelerating in the 1980s, inequality shot back up. According to Professor Emmanuel Saez, the richest 0.1 percent of Americans pocketed 10.84 percent of total U.S. income in 2018, a level not seen since 1929. Contrary to the arguments of tax hike opponents, real U.S. GDP grew faster in the 1950s and 1960s than in more recent decades. The subsequent decade with the highest growth rate was the 1990s — after Congress enacted moderate top tax rate increases.

In the United States, wealth inequality is even more severe than income inequality, and the reduction in the top income tax rate has been a key factor. According to Institute for Policy Studies analysis of data collected by Saez and fellow economist Gabriel Zucman, the share of U.S. taxes paid by the top .01 percent was just slightly higher in 2018 than in 1962, despite the more than tripling of their share of the nation’s wealth. By contrast, the bottom 50 percent saw their share of U.S. wealth drop by more than half during this period. The top marginal tax rate in 1962 was 91 percent, compared to 37 percent in 2018.

Institute for Policy Studies analysis adds further evidence of the direct connection between tax policy and extreme wealth concentration. The rate of taxation of America’s richest .01 percent of households, as a percentage of their wealth, decreased by over 83 percent between 1953 and 2018. The decline in this relative tax rate accelerated after 1979. Stronger minimum wage, antitrust enforcement, and unionization rates during the 1953-1979 period undoubtedly had some equalizing effect, and yet during this period it required a top tax rate four times the current rate simply to keep the wealth share of the top 0.1 percent in check.

Why do the rich pay such a small share of total U.S. taxes, relative to their great wealth? Beyond their ability to hide their money from the IRS, the rich benefit from the tax code’s preferential treatment of income from investments. Currently, the top marginal tax rate for the richest Americans is 37 percent, while the top rate for long-term capital gains is just 20 percent. The higher the U.S. income group, IRS data show, the larger the share of income derived from investment profits. By contrast, Americans who are not among the ultra-rich get the vast majority of their income from wages and salaries.

The rich are well-positioned to benefit from the discount tax rate on investment earnings because of their dominance on Wall Street. Federal Reserve data indicate that the richest 1 percent hold more than half of all stocks and mutual funds, while the bottom 90 percent of Americans own just 11 percent. The disparities in stock ownership are even starker if race is factored in. While 61 percent of white families owned at least some stock in 2019, only 34 percent of Black and 24 percent of Latino families did, according to the Federal Reserve.

Biden’s plan would close the capital gains loophole for the rich by requiring individuals earning more than $1 million a year to pay the same tax rate on the sale of stock and other assets as they pay on income from wages.

America’s richest also exploit estate tax loopholes, shell corporations, trusts, and other sophisticated methods of shielding their accumulated fortunes from taxation. This has accelerated the accumulation of wealth — and power — in the hands of a few individuals while entrenching oligarchic dynasties. According to Institute for Policy Studies research, America’s 50 wealthiest family dynasties together held $1.2 trillion in assets in 2020. By comparison, the bottom half of all U.S. households—an estimated 65 million families — shared a combined total wealth of just twice that, at $2.5 trillion. The five wealthiest dynasties (the Walton, Koch, Mars, Lauder, and Cargill-MacMillan families) saw their wealth increase by a median 2,484 percent from 1983 to 2020.

The Biden plan would curb wealth concentration by strengthening the estate tax and closing a loophole that allows the wealthy to escape capital gains taxes altogether on assets they pass on to their heirs. Senators Bernie Sanders and Elizabeth Warren and other Democrats have also called for an annual wealth tax. Their proposal would raise an estimated $3 trillion over a decade by taxing fortunes worth more than $50 million at a rate of 2 percent and those with wealth of more than $1 billion at 3 percent. Institute for Policy Studies Associate Fellows Lee Price and Bob Lord have suggested a third tier of 10 percent on wealth in excess of $5 billion.

Taxes on Corporations and Wall Street

America’s wealthy have also benefited enormously from reductions in the corporate tax rate, which has fallen from a peak of 52.8 percent in the 1960s to 21 percent under the 2017 Republican tax law. The windfalls of lower corporate taxes flow primarily to high-income Americans because of their disproportionate ownership of corporate stock. Wealthy corporate executives, who receive most of their compensation in some form of stock-based pay, also benefit, while evidence of gains for workers is lacking.

This corporate tax rate-cutting, combined with rampant use of offshore tax havens and other avoidance schemes, puts a strain on public budgets. The percentage of total federal revenue from corporate tax receipts dropped from 32.1 percent in 1952 to 6.6 percent in 2019, according to Office of Management and Budget data.

Most Democrats agree on the need to increase corporate taxes, but views differ on the ideal rate. Biden has proposed an increase from 21 to 28 percent, along with a global minimum tax and other measures to curb offshore tax dodging. Senate Budget Chair Sanders would like to see a return to the 35 percent rate, while some moderates have proposed 25 percent.

As corporate tax obligations have declined, CEO pay has skyrocketed. According to Office of Management and Budget data and Economic Policy Institute research, when corporate tax receipts made up 21.8 percent of all federal revenue in 1965, the average CEO-to-median worker pay ratio was 21 to 1. After the 2017 Republican tax cuts, corporations plowed significant windfalls into stock buybacks and executive bonuses. By 2019, corporate tax receipts had fallen to just 6.6 percent of federal revenue and the average pay ratio had risen to 320 to 1.

Progressive senators and House members have introduced the Tax Excessive CEO Pay Act to incentivize corporations to narrow their economic divides. The bill would apply graduated tax increases on corporations with large CEO-median worker pay gaps, beginning with 0.5 percentage points on corporations with pay ratios of 50 to 1 and rising to 5 percentage points on firms with ratios above 500 to 1.

Opponents of raising the U.S. corporate tax rate often point to lower statutory rates in other large economies. But huge loopholes in the U.S. tax code have lowered the effective rate that corporations actually pay the IRS. In fact, the Institute on Taxation and Economic Policy found that 55 large, profitable U.S. corporations paid zero in federal income taxes in 2020. Because of these loopholes, U.S. corporate tax revenue as a share of GDP is actually lower than in any other G7 country. By contrast, average CEO pay at large U.S. corporations is off the charts compared to their international counterparts, according to Institute for Policy Studies analysis of Willis Towers Watson data.

Policymakers should not tie their hands by requiring every dime of new spending to be offset with new revenue, especially given the enormous long-term benefits of health care, education, and climate change investments. But there will be pressure to pay for a considerable share of new spending, and Biden’s total proposed corporate tax changes, including a global minimum tax and other loophole closures, would generate an estimated $2.2 trillion. This chart compares revenue from just one of Biden’s proposed reforms — an increase in the corporate rate from 21 percent to 28 percent — with the cost of select investments that would help American families fulfill their potential and live in dignity.

Ordinary Americans are used to paying sales taxes when they purchase a car or home, a tank of gas, or a restaurant meal. But when a Wall Street trader buys millions of dollars’ worth of stocks or derivatives, there’s no sales tax at all. This tax-free approach has also contributed to the explosion of the algorithm-based computerized trading that dominates our financial markets while adding no significant value to the real economy. Just one indicator of the disparity between these traders and low-wage workers: since 1985, the average Wall Street bonus has increased 1,217 percent. If the minimum wage had increased at that rate, it would be worth $44.12 today, instead of $7.25, according to the Institute for Policy Studies.

Lawmakers have introduced several financial transaction tax bills that would generate massive revenue while curbing short-term speculation. Under one proposal, a tax of just 10 cents on every $100 worth of trades in stock and other securities could raise some $750 billion over 10 years.

The raging debate over public investment financing has created a huge opening for long overdue fair tax reforms. Without drastic changes in the tax code, we will continue to see those at the top accumulate ever more obscene levels of wealth and power while our physical and human infrastructure crumbles and low-income Americans, particularly people of color, get left behind.

inequality.org

By Sarah ANDERSON

During the pandemic, low-wage workers have lost income, jobs, and lives. And yet many of the nation’s top-tier corporations have been fixated on protecting their wealthy CEOs, even bending their own rules to pump up executive paychecks.

A new Institute for Policy Studies report finds that 51 of the country’s 100 largest low-wage employers moved bonus goalposts or made other rule changes in 2020 to give their CEOs 29 percent average raises while their frontline employees made 2 percent less.

Among these 51 rule-rigging companies, average CEO compensation was $15.3 million in 2020, while median worker pay was $28,187 on average. The average CEO- worker pay ratio: 830 to 1.

How exactly did these companies rig their CEO pay rules? Let’s look at a few examples.

Hilton CEO Christopher Nassetta had the largest paycheck among the rule-rigging companies. After he failed to meet the goals associated with his multi-year stock awards, the board “modified” the awards by disregarding poor 2020 financial results and changing the performance metrics. Those maneuvers inflated his total compensation to $56 million — 1,953 times as much as the company’s median worker pay of $28,608 in 2020.

At YUM Brands, the owner of KFC, Pizza Hut, and Taco Bell, CEO David Gibbs garnered positive media coverage by donating $900,000 of his salary to pay for $1,000 bonuses for restaurant general managers. But the board changed its bonus metrics to give Gibbs a special cash bonus and stock grant worth more than 2.5 times his voluntary salary cut. This largesse boosted Gibbs’s total compensation to $14.6 million — 1,286 times as much as median worker pay of $11,377. The fast food giant did not offer hazard pay to these frontline employees, whose average wages are just $9.75 per hour, according to Payscale.

At Coca-Cola, none of the top executives met their bonus targets last year either, but the company board used “discretion” to give them all bonuses anyway. For CEO James Quincey, that $960,000 bonus, combined with new stock-based awards, drove his total compensation package above $18 million, over 1,600 times as much as the company’s typical worker pay. In December 2020, Coca-Cola announced plans to cut about 2,200 jobs, or 17 percent of its workforce. About 1,200 of the layoffs will hit U.S. workers.

How did corporations justify such extreme disparity in a year of extraordinary hardship for workers?

The most common defense was the “talent retention” argument. In a report filed with the SEC, for example, Hilton explained that the “projected zero payouts” on the CEO’s performance stock awards would’ve “impaired the awards’ ability to retain key talent.”

This is the Great Man Theory: one heroic individual in the corner office almost single-handedly creates company value, so pay him whatever it takes to prevent him from abandoning ship.

The notion that one CEO is worth hundreds — if not thousands — of times more than their workers has always been absurd. But in the middle of a pandemic crisis, when frontlines employees are demonstrating just how essential they are to our economy and health, it’s even more preposterous.

So what can we do about it?

One bill pending in Congress, the Tax Excessive CEO Pay Act, would use tax policy to incentivize corporations to narrow their pay divides by reining in executive compensation and lifting up worker wages.

Under this proposal, companies with pay gaps between their highest-paid executive and median worker of less than 50 to 1 would not owe an extra dime. Corporations that refuse to narrow their gaps below this threshold would face graduated rate increases starting at 0.5 percentage points on ratios of more than 50 to 1 and topping out at 5.0 percentage points for companies with gaps above 500 to 1.

The Tax Excessive CEO Pay Act would generate an estimated $150 billion over 10 years that could be used to create good jobs and meet human needs. If the bill had been in place in 2020, Walmart, with a pay gap of 1,078 to 1, would have owed an extra $1 billion in federal taxes — enough to fund 13,502 clean energy jobs for a year.

Amazon, with a 1,596-to-1 pay ratio, also would have owed an extra $1 billion, enough to underwrite 115,089 public housing units for a year. (Amazon’s highest-paid exec last year was Worldwide Consumer CEO David Clark, with $46.3 million.)

Home Depot, with a 511-to-1 gap, would have owed an extra $800 million, enough to create 18,329 jobs that pay $15 per hour with benefits for a year.

It’s time for public policy to shift corporate America away from a business model that creates obscene wealth for a few at the top and economic insecurity for so many of the rest of us. By inflating executive compensation while their workers struggled during a pandemic, corporate boards have just strengthened the case for tax penalties on huge CEO-worker pay gaps.

inequality.org

Treasury Secretary Janet Yellen has proposed that governments around the world require payment of at least a uniform “global minimum corporate tax.” A motivation for Yellen’s push for a global minimum corporate tax is fear that the Biden administration’s proposed increase in the US corporate tax will cause some American corporations to flee the US for countries with lower corporate taxes.

President Biden wants to increase corporate taxes to help pay for his so-called infrastructure plan. The plan actually spends more on “progressive” priorities, including a down payment on the Green New Deal, than on infrastructure.

Much of the spending will benefit state-favored businesses. For example, the plan provides money to promote manufacturing and electric vehicles. So, the idea is to raise taxes on all corporations and then use some of the received tax payments to subsidize government-favored businesses and industries.

The only way to know the highest valued use of resources is by seeing what goods and services consumers voluntary choose to spend their money on. A system where the allocation of resources is based on the preferences of politicians and bureaucrats — who use force to get their way — will be less efficient than a system where consumers control the allocation of resources.

Thus, the greater role government plays in the economy the less prosperous the people will be — with the possible exception of the governing class and those who make their living currying favor with the rulers.

Yellen’s global corporate tax proposal will no doubt be supported by governments of many European Union (EU) countries, as well as the globalist bureaucrats at the Organization for Economic Cooperation and Development (OECD). For years, these governments and their power-hungry OECD allies have sought to create a global tax cartel.

The goal of those supporting global minimum taxes enforced by a global tax agency is to prevent countries from lowering their taxes. Lowering corporate and other taxes is one way countries are able to attract new businesses and grow their economies. For example, after Ireland lowered its corporate taxes, it moved from being one of the poorest countries in the EU to having one of the EU’s strongest economies. Also, American workers and investors benefited from the 2017 tax reform’s reduction of corporate taxes from 35 percent to 21 percent.

Yellen and her pro-global tax counterparts deride tax competition between countries as a “race to the bottom.” In fact, tax competition is a race to the top for the countries whose economies benefit from new investments, and for the workers and consumers who benefit from new job opportunities and new products. In contrast, a global minimum corporate tax will raise prices and lower wages, while incentivizing politicians to further increase the minimum.

A global minimum corporate tax will also set a precedent for imposition of other global minimum taxes on individuals. This scheme may even advance the old Keynesian dream of a global currency. The Biden administration is already taking steps toward a global currency by asking the International Monetary Fund to issue more special drawing rights (SDRs).

Global tax and fiat currency systems will only benefit the world’s political and financial elites. In contrast, regular people across the world benefit from limited government, free markets, sound money, and reduced or eliminated taxes.

ronpaulinstitute.org

Telling you that Donald Trump lied, or that the one percent continue to succeed in their incessant class warfare, ranks in the astonishment department with being told the Sun rose in the east this morning. Do we really need more evidence?

Necessary or not, more evidence continues to be delivered. The latest delivery comes courtesy of the Institute on Taxation and Economic Policy, which has found that 60 of the largest corporations in the United States paid no income taxes for 2018 despite earning a composite $79 billion in net income. Worse, these companies actually received $4.3 billion in tax rebates.

Had these companies paid taxes at the newly reduced corporate tax rate of 21 percent, these companies would have paid $16.4 billion in taxes. So we have a difference of more than $20 billion — quite a nice return on their lobbying expenses and donations to the Trump campaign.

Heading the list is none other than Amazon. Run by the world’s richest person and recently extracting billions of dollars in subsidies in a sweepstakes in which cities across the United States competed to give away the most money, Amazon racked up $11 billion in profits last year and not only paid no taxes but received a rebate of $129 million. A total of 26 companies, including Chevron, Delta Air Lines, Duke Energy, General Motors, Molson Coors and Prudential Financial, reported net income of more than $1 billion while paying no taxes.

President Trump claimed that his massive tax cuts for corporations would directly result in the average United States household getting an annual increase of $4,000 in wages. That magical figure came from his own Council of Economic Advisers, which further claimed that the $4,000 was a “conservative” estimate. The Council went on to claim that the average U.S. household might see a raise of $9,000.

The web site FactCheck.org, noting that the Council never said how it arrived at these magical figures, used old-fashioned math to reveal the lack of reality here. The site’s analysis of the purported $9,000 raise concluded: “That would amount to a $1.1 trillion annual income gain from simply reducing a corporate tax burden that is currently only $297 billion.”

Still waiting for that extra $4,000 in your paycheck, aren’t you?

Don’t hold your breath

Wages actually fell two percent, adjusted for inflation, from December 2017 to December 2018, reports the Economic Policy Institute. But it would have been fruitless to wait for the promised largesse. The Communications Workers of America made a gallant effort to get commitments for corporations to pass on the tax savings to their workers, to no avail, the Center For Public Integrity reports:

“Corporations balked at saying tax cuts would lead to higher wages because they didn’t want to be bound to a promise to increase pay, a lobbyist for the companies said. When the White House’s Council of Economic Advisers predicted hat a 20 percent corporate rate would hike average annual household income by $4,000, the Communications Workers of America, a 700,000-member union, asked eight major corporations to pledge to hike worker wages by $4,000 if they got the tax cut. The companies didn’t respond. That ‘shows you the difficulty they have, and not only in messaging but also why people don’t like them,’ said one lobbyist who asked to remain anonymous so as to be able to speak freely.”

This sort of class warfare is not new — wages around the world have fallen far below productivity gains over the past three decades, pay inequality has reached gigantic proportions and corporations have showered speculators with so much money that in some recent years the total of money paid to them in dividends and stock buybacks exceeded net income.

The Trump administration, however, has intensified these trends. Worldwide, financiers pocketed an astounding US$1.37 trillion in dividends for 2018, a total that has nearly doubled in less than a decade, and is predicted to be even bigger in 2019. Stock buybacks in the U.S. alone accounted for another $1.1 trillion last year.

In contrast, six percent of the tax cuts given to corporations went to employees in increased wages and in bonuses, while more than half went directly to stock holders.

The costs of poverty

This ever-mounting inequality has real costs. For example, almost 13 million children in the United States (20 percent of the country’s children) live in poverty. The Children’s Defense Fund pulls no punches in assessing the cost of that poverty:

“When we let millions of children grow up poor without basic necessities like food, housing and health care, we deny them equal opportunities to succeed in life and rob our nation of their future contributions. Poverty decreases a child’s chances of graduating from high school and increases her chances of becoming a poor adult. It makes her more likely to suffer illnesses and get caught in the criminal justice system. Beyond its human costs, child poverty has huge economic costs. Our nation loses about $700 billion a year due to lost productivity and increased health and crime costs stemming from child poverty.”

Don’t hold your breath waiting for the Trump administration to address any of these problems. Far from the magic fountains of money pouring into your paycheck and reductions to the federal budget deficit, the country’s accumulated debt is rising fast. The Congressional Budget Office estimates an additional $1.9 trillion will be added to the U.S. government’s budget deficit over the next 10 years thanks to a drastic decrease in corporate tax payments. For the first six months of fiscal year 2019 (which began with October 2018), corporate tax payments to the federal government declined $11 billion (a fall of 13 percent) compared to a year earlier, according to the Center For Public Integrity.

How will this be paid for? Naturally, in cuts to the safety net. The Trump administration’s proposed budget for fiscal year 2020 calls for $845 billion in cuts to Medicare, $1.5 trillion in cuts to Medicaid and $84 billion in cuts to Social Security disability benefits. President Trump, you’ll recall, promised during his election campaign that he would make no cuts to those programs. Then again, what would we expect from a serial liar whose total of false statements since taking office has surpassed 10,000 — and who has a long history of failing to pay contractors who did work for his casinos and other businesses.

As historically weak as the so-called “recovery” from the 2008 economic collapse has been, all history points to the fact that we are now overdue for the next recession. Nor is the little bit of sugar high the U.S. economy received from the Trump tax cuts (in reality, a bump for the owners of capital but not those who work for a living) going to last.

In a CounterPunch commentary, economist Jack Rasmus explains that the rise in U.S. gross domestic product for the first quarter of 2018 was due to corporations building inventories to get ahead of the Trump tariffs and a temporary decline in imports (thus providing an artificial boost to the import-export ratio) stemming from the administration’s trade wars. Household consumption, the driver of the U.S. economy, is actually decreasing, Professor Rasmus said, which does not bode well for the future.

We are losing one of the most one-sided wars in human history.

counterpunch.org