As more middle class Americans than ever before wring their weary hands over whether to pay down their student loans or make their next mortgage payment, corporations are also experiencing a history-making moment. They’re sitting on record profits, and are taxed at historically low rates.
Between 2001 and 2010, corporate profits in America increased by 125%. Meanwhile, the median family income went down by 4.6% in the same time period. How was such growth in corporate profits possible, given the economic meltdown that started in 2007? Here’s the quick and dirty answer: They stacked the deck.
For decades, some of the nation’s most successful companies and CEOs have financed and lobbied enough politicians to curry a shocking level of influence over how laws are written and which ones pass. They’ve molded a system in which they can keep an ever-increasing share of profits for themselves, stunting the paychecks of working Americans and putting more burden on small businesses.
On top of that, corporations are contributing less in taxes to the federal government and to the communities where they conduct their business, meaning less money for serving the public good through education and other services. (A recent report shows 30 of the most profitable Fortune 500 companies pay more to their lobbyists than they do in federal taxes.)
“The middle class is being harmed by the structure of the economy, the structure of the tax burden, and the erosion of social services, including education,” said Robert Kuttner, a co-founder of the Economic Policy Institute and distinguished senior fellow at the non-partisan public policy center Demos.
When corporations don’t pay their fair share in taxes, Kuttner said, there are only three alternatives: “You either cut the services, you add to the deficit, or you make someone else pay—in this case, the middle class.”
We’re not talking chump change here. The Institute on Taxation and Economic Policy estimates that in the past three years, the federal tax revenue lost through corporate tax loopholes is $222.7 billion, which represents a loss of as much as $9.8 billion to public schools. State tax revenue from just the 265 largest companies saw losses of $42.7 billion in three years, roughly $15.4 billion of which would likely go to public schools if the loopholes were closed.
Photo: Gary Dincher