Representation Without Taxation: The Importance of Corporate Taxes
November 2023
Corporations have been taking advantage of our government for as long as it’s been possible, and they have an equally infuriating history of avoiding every chance to pay back their fair share. The largest of these companies, of course, have the means to commit this treachery legally—often by storing money in offshore accounts or other such loopholes. However, this results in an economic imbalance that allows the dirtiest, least-ethical companies to rise to the top while those that conform to tax laws are left at a clear disadvantage. This is the root of the problem with corporate taxes; any financial system that’s deserving of its citizens’ trust should absolutely not be encouraging and tolerating greed—especially not via tax avoidance. In fact, the American economy goes such a step further as to actually bail out many of these large companies through subsidies and tax breaks as though they aren’t benefiting enough from our capitalist structure already. Considering all of this, it becomes clear who the United States government favors in terms of fiscal spending, and it certainly is not the majority of its citizens. It is, then, critical for us to explore the true scale of good that could be done for the prosperity of the average American by our government under a strengthened system of corporate taxes.
To explain the advantageousness of corporate taxes, one must first define corporate taxes as they should be seen from an optimistic point of view. At their best, corporate taxes are a function of a government that allows large, successful companies the privilege of putting a percentage of their profits indirectly towards the benefit of the people via a process of democracy. This way, one company’s success is a win for everybody; scale this up to the level of an entire country, and one quickly realizes that any form of capital achievement becomes such for the country as a whole. More than anything else, this should inspire the consumer to consume—therefore supporting the companies around us and allowing them to concurrently manufacture better products and provide for the consumer via taxation—while simultaneously inspiring the corporations to grow, since corporate growth benefits the country and its people as a whole. Over time, this results in a monumental change in values as well as a system in which companies must work to sustain the loyalty of the people instead of cutting corners at every opportunity and brushing it off with shiny packaging and colorful advertisements. Unfortunately, we’ve only been seeing a greater and greater reduction in corporate taxes in recent years. According to The Economist, “Between 1985 and 2018 the average corporate-tax rate fell from 49% to 24%.” So, while the realm of corporate taxation provides an incredible amount of potential in how it may help working-class and middle-class people for generations to come, it’s not something that can happen overnight; instead, it is up to us to urge lawmakers towards this goal of benefiting the rich and the poor as equally as possible in terms of opportunity and basic necessity. More important than the finances of corporate taxation is the resulting culture that it inspires—one in which those who are powerful are perfectly happy to take on some of the responsibilities of those who are disadvantaged. Compare these ideas to the system that we have currently, in which the majority of federal revenues are still collected from wages. (Gale and Vignaux) This is a far cry from where America once was in the 1950s, during which we boasted a 52% corporate tax, meaning that corporations were paying nearly a third of all income taxes. (Zepezauer)
One must keep in mind that the effects of corporate taxation on the economy are, as a whole, a difficult thing to study. Rather, it has been found to be very likely that higher, stricter enforcement of corporate taxation will not lead to a “more prosperous” or “less prosperous” economy, but instead one that is entirely different from cultivation to crop. Many CEOs and politicians alike may argue that corporations having less money will lead to fewer jobs and equally to a worsened economic state, but there have been many studies done both on the U.S. economy and outwards that seem to prove this to be untrue. For instance, Gechert and Heimberger address this very idea in their study, citing that “corporate tax changes have, on average, no economically relevant or statistically significant effect on economic growth.” Additionally, corporate tax cuts often only result in higher pay for the CEOs, leaving their workers to continue to grind away at minimum wage. (Schafer) It’s no wonder, then, why so many company officers will argue and lobby for lower corporate taxes. All of this is without pointing out that the current system is still seeing plenty of qualified, experienced people without jobs that match their resume. The fact is that our current system is failing many of the country’s citizens and yet we stick to it like captains to a sinking ship, as though we have no opportunity to change direction and attempt something different for a change. One must recognize that the differences that would come about in an economy that relies on stronger corporate tax laws are much preferred from a utilitarian standpoint, and for that reason it should be desired. Unfortunately, as we’ve seen time and time again, the government still tends to pick-and-choose which corporations fall victim to taxes and which do not via breaks and subsidies, allowing so-called “leaders of capitalism” to make horrible mistakes with little-to-no consequences.
One of the major flaws within the current corporate tax system is its overly-generous distribution of tax breaks and bailouts to large companies that make economically-hazardous mistakes. This promotes to companies the idea that they don’t have to face repercussions for their actions, continuing the cycle of damage. This is an argument that is miraculously rejected by those who generally oppose much smaller-scale government “bailouts,” including the stimulus checks during the COVID-19 pandemic. This side of the political spectrum seems to succumb to arduous suffering when these distributions go to those who actually need them, yet they never seem to care when it comes to the gigantic scale of supplementing corporate involvement. This is still true as these so-called “wealthfare” handouts have been estimated to cost our government upwards of $815 billion dollars per year. (Zepezauer) Regardless, the same point applies: government loans, among other attempts to stimulate prosperity among corporations, will only result in the companies’ reliance on such assistance. This is doubly true when the loans in question are upwards of tens of millions of dollars, which is often the case. We cannot expect there to be no direct consequence of this special-treatment towards major companies that already have the means to drive themselves. Teaching them to over-rely on government funding would be downright suicidal for our economy, as successful companies are granted special leeway while new startups and small businesses perpetually struggle to compete. Perhaps an even larger issue with this is the fact that our government refuses to use this money for funding projects that benefit a considerably wider range of people. Those tens of millions of dollars could instead be put towards healthcare, education, public transit, environmental issues, and more, but we see them get wasted on borderline monopolies that need no such help. By encouraging the government to sway their spending of the people’s money towards these much more impactful issues, we can ensure that the government budget has an increased focus on its citizens instead of the rich minority.
Arguments for corporate taxation often and inevitably come from corporations themselves. Along with other points that I’ve already addressed, they will communicate that companies already have the consumer’s best interest in mind, so there should be no difference in having this money go to the government as opposed to it staying in the hands of the rich. They will say that demolition of corporate taxes will “spark growth.” (Barro) They will say that the money will “trickle down” to the working class. They will say that corporate taxation hurts their investors. (Judd) They will lie that their benefit is your benefit, no matter how much more they make, no matter how little they pay towards their country, no matter how many people call them out for their selfish greed. They say these things even though we should know better after decades upon decades of seeing little improvement in the condition of the working class while the rich get richer, so at what point does all of these promises magically become fulfilled? The truth is that the wealthy have conned us for so long that we fail to recognize how much of a dent it has made in the prospects of our economy, and the only way to break out of this is to put our foot down and prove that the consumer—the majority—holds the power, once and for all. A company that benefits only itself is a company that does not belong in our country, and the standard for corporate loyalty among Americans has been drowned so deep that we fail to realize just how much more prosperous we could be given an organized political attack on corporate inefficiency and selfishness. Though, yes, lowering corporate taxes would result in higher returns for investors—unfortunately, most Americans do not have the means to invest. In fact, Americans in the 0%-80% AGI percentile get less than 3% of their income from investments outside of retirement. (Gale and Vignaux) Investing is for the rich, leading us once again to the conclusion that lower corporate taxes are for the rich as well. This isn’t to say that all opposition to corporate taxes is bad, though. For example, some believe that our corporate taxation system should be abolished only on the state level, leaving the federal government to implement an equal tax on corporations nationwide. (Barro) This would prevent corporations from making business decisions (such as where to keep a headquarters) based solely on that state’s tax benefits.
One need not declare war against our current economy to make a difference, though it should be clear that the average American citizen must wake up to the injustices that are pressed against our wellbeing by corporations on a daily basis and fight against them via our democracy. Holding all of the money does not equate to holding all of the power, and we will find that the power of our voices, with the proper structure and diligence, can make vast changes in how our economy is operated, who benefits the most from it, and what it inspires among our culture as a whole in terms of success. We are lucky to be living in a time where corporate taxation is a known issue that is in the forefront of legislative efforts as we speak. As recently as August did we see our President put forward a federal-level corporate income tax, only to be struck down by moderates. (Romm) It is our burden to make sure such failures do not recur, and to vote for people who will hold businesses to exceptional standards. Successful companies can and should be both ethical and selfless, and in fact they owe it to those who purchase their products to fulfill exactly those terms. The amount of carelessness that comes with being a flourishing company within the United States of America is outright perverse, and it is up to us to build towards a system that is innovative, efficient, and for the people.
Works Cited
Barro, Josh. “The US Government Should Eliminate State Corporate Income Taxes.” Should the Federal Income Tax Be Eliminated?, edited by David Haugen, Greenhaven Press, 2014. At Issue. Gale In Context: Opposing Viewpoints. Originally published as “It’s Time to Abolish State Corporate Income Taxes,” RealClearMarkets.com, Feb. 2011.
Gale, William G., and Vignaux, Semra. “The Difference in How the Wealthy Make Money–and Pay Taxes.” Brookings.com. Sept. 2023. Accessed Oct. 23 2023.
Gechert, Sebastian, and Heimberger, Philipp. “Do Corporate Tax Cuts Boost Economic Growth?” European Economic Review, vol. 147, no. 104157, Aug. 2022. Accessed 25 Oct. 2023.
Judd, Kenneth L. “Time to End the Corporate Income Tax.” Reason, vol. 32, no. 4, Aug. 2000, p. 75. Gale In Context: Opposing Viewpoints.
Romm, Tony. “Biden Wants Rich Companies to Pay Higher Taxes. Some are Fighting Back.” Washingtonpost.com, 14 Aug. 2023, p. NA. Gale In Context: Opposing Viewpoints.
Schafer, Lee. “CEOs Doing Fine, Thanks to Corporate Tax Cuts: Top Executives are Doing just Fine, Thanks to Corporate Tax Cuts.” Star Tribune, Jul. 2018. ProQuest.
“To Tax or Not to Tax; Corporate Taxes.” The Economist, 15 Jan. 2022, p. 0.11(US). Gale In Context: Opposing Viewpoints.Zepezauer, Mark. “The American Tax System Gives the Wealthy Too Much Power.” Are America’s Wealthy Too Powerful?, edited by Stuart A. Kallen, Greenhaven Press, 2006. At Issue. Gale In Context: Opposing Viewpoints. Originally published in Take the Rich Off Welfare, South End Press, 2004.