The Washington PostDemocracy Dies in Darkness

Opinion The galling hypocrisy of corporate America

A sign for Wall Street is carved into the side of a building in New York. (Mark Lennihan/AP)

Corporate America has become accustomed to receiving more and more federal benefits and paying less and less in taxes. And it has bamboozled politicians and the media into thinking this imbalance is somehow normal or acceptable.

Consider corporations’ track record in the past four years. The Brookings Institution’s William G. Gale in 2020 wrote about the implications of the 2017 tax cuts: “The act reduced the top corporate tax rate from 35% to 21% — a 40% reduction. Actual corporate income tax revenue in FY2018 was $135 billion lower than CBO’s projection from 2017 — almost exactly a 40% decline.” The cuts have been projected to amount to an astounding corporate savings of $1.35 trillion over 10 years. After they were implemented, more than twice as many major corporations paid zero taxes.

Those savings came with no strings attached. The hope was that this money would be used for investment, hiring and other purposes that would inure to workers, customers, suppliers and shareholders. The reality was different. As the Wall Street Journal reported in 2018: “U.S. companies are buying back their shares at an aggressive pace, stirring questions in Washington and on Wall Street about the way that the new corporate tax cuts are being used. Share buybacks announced by large U.S. companies have exceeded $200 billion in the past three months, more than double the prior year, according to a Wall Street Journal analysis of data for S&P 500 companies.” In sum, taxpayers at large did not reap the benefits of increased growth, greater capital investment, revived manufacturing or really any other tangible benefit.

Then came the pandemic and massive corporate bailouts. Many government loans intended to benefit small businesses went to big restaurant chains. The Congressional Research Service also reports: "As of the end of 2020, Treasury had approved over $21.1 billion in loans to 24 air carriers, repair station operators, and ticket agents and almost $736 million in loans to companies deemed critical to national security, including a $700 million loan to a trucking company.” Corporations did very well in the past four years; taxpayers assumed the risk, and corporations were rewarded.

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Meanwhile, the Business Roundtable, an association of CEOs from the largest companies representing “20 million employees and more than $9 trillion in annual revenues,” had been talking a good game. In August 2019, it put out a statement declaring that corporations had obligations beyond creating value for shareholders.

“Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance. Each version of the document issued since 1997 has endorsed principles of shareholder primacy — that corporations exist principally to serve shareholders,” the statement explained. “With today’s announcement, the new Statement supersedes previous statements and outlines a modern standard for corporate responsibility.” Corporations, the Business Roundtable argued, were supposed to deliver value to customers, invest in employees, deal fairly with suppliers, support their communities and create long-term value for shareholders by investing, growing and innovating. Sounds good, right?

Oddly, that did not seem to influence their conduct after the 2017 tax cuts. To the contrary, they engaged in massive stock buybacks. Rather than pursuing long-term value, they did what they had been criticized for doing for years: They sought short-term gains at the expense of those other priorities.

Now comes President Biden’s infrastructure plan, for which the Business Roundtable and other business groups have been pleading for years. They would benefit mightily from improved roads, ports, bridges, power grid upgrades and the rest. But they want no part in having to pay for the infrastructure through an increase in corporate taxes.

The Business Roundtable argued on Wednesday: “By significantly increasing taxes on corporations, the proposal would be counterproductive to the goal of increasing economic growth and job creation. Such tax increases would make the United States uncompetitive as a place to do business and make U.S. companies uncompetitive globally, slowing recovery and hurting American job creators and employees.” Shouldn’t they have used the tax savings from the 2017 tax cuts to enhance investment, increase hiring and fulfill their promise to serve all stakeholders?

They have another idea: Pay for it through user fees. Those are, in their traditional form, somewhat regressive taxes absorbed in large part by people far less able to pay than businesses. Oh, and the Business Roundtable wants deregulation, too (elegantly named “measures to streamline the permitting process”).

I count myself among the strong defenders of capitalism, but when the benefits to corporate America flow only one way (e.g., tax cuts, loans, grants, deregulation), we do not have capitalism. We have corporatism. Perhaps we need a different sort of balance sheet in which taxpayers see the allocation of benefits from big policy changes between corporations and individuals.

Unchecked greed, coupled with hypocrisy, is a bad look for the Business Roundtable and other corporate groups. If they want to live up to their lofty ideals of serving more than short-term interests, they might consider tuning down their outrage over the prospect of moving their tax rate a bit closer to the 35 percent tax rate in effect since World War II (save for the past few years). Perhaps it is time they start paying back the enormous financial benefits bestowed upon them by taxpayers.

Read more:

Henry Olsen: Republicans are right to oppose Biden’s infrastructure plan. But they must offer an alternative.

The Post’s View: Biden’s infrastructure plan is a big bet on big government

Greg Sargent: Biden’s big bet is that he’s found the kryptonite that will defeat Trumpism

Leana S. Wen: I got the placebo in the Johnson & Johnson vaccine trial. Here’s my full journey.

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