The real corporate heyday, when companies did long-term planning, showed provable pride in their employees, paid CEO's at only 8 times the average employee salary, (vs 350+ times today), and researched for quality (durability) of product, was during the 50’s to the 70’s. Corporations were in it for the long haul, not just this quarter's profits.
During the 50's corporations were taxed at between 50% and 75% (once surtax was included) of their net profits after verifiable and legal business expenses.
Today the average corporation pays less than 9%, if they pay any income taxes at all. 350 major corporations pay zero income tax, because of loopholes that allow them to stash cash overseas, making it not taxable under current law.
And they could care less about the quality and durability of their product, future planning or their customers, (ever try calling tech support?).
See the pattern here?
A reform of the corporate tax code is badly needed.
Raising the corporate tax rate back to or near that of the fifties would go a long way toward reconciling the wealth imbalance in our nation. It also would provide the self-discipline within corporations that has been lost and replaced with foolhardiness, risky ventures and bad customer service. Investors would be encouraged to hold Boards of Directors and CEO’s to a higher standard.
Also, the high corporate tax rate made it profitable for corporations to pay their workers fairly. Since salaries are a verifiable and legal business expense, and therefor deductible from their taxable profits, the incentive to cut workers’ salaries and wages, as well as benefits is largely removed.
That fifties through the seventies period, before Ronald Reagan came in with the argument that government was evil and needed to be strangled by limiting taxes and income, was the golden period for the middle class worker. Remember the “starve the beast” campaign slogan?
Those were the days when a person could make enough to send the children to college, ensuring them a better life than their parents. It also was the time when a person could assume, pretty safely, that a good job would last until retirement age. People spoke of getting a ‘position’ as much as they spoke of getting a ‘job.’ They spoke of ‘benefits’ as much as they spoke of salary.
There was a level of worker security that has evaporated since the eighties.
Our corporations have slacked off on research, seeing it almost as an unnecessary expense, but the argument that applies to salaries and wages also applies to research. It is a verifiable and legal expense, and therefore a deduction from taxable income. A high tax rate encourages research and creativity in the corporate sector.
The same arguments hold when discussing taxing the investor class. A high income tax rate for millionaires would reduce the wealth imbalance, increase government income and help erase the national debt. A millionaire during that period would also be taxed at a near 90% tax rate, even on his investment income.The inequality of wealth would melt away over time.
That is, if we can successfully counter the silly argument that the GOP always uses when a government budget shows a surplus that is available to pay down the debt.
You’ve all heard the refrain, “It’s your money and you deserve it back.” This argument, appealing to individual greed, is used to prevent governments from paying down the national or state debts.
There is a businesslike reason for the GOP to forward such a silly, (from a strictly financial point of view), yet effective, argument.
Paying down the debt means the investor class, who use much of their excess cash to invest, like to hold a significant percentage of it in bonds in their portfolios. The interest paid on that debt is a major part of their most dependable and largely risk-free income. They can just sit back and watch the dollars flow in without having to work a minute for it.
Pay the debt off and the one dependable and safe investment in the portfolios of the investor class disappears. The GOP sees this possibility as a fatal threat to the investor class.
So the investor has a monetary reason to not allow the national debt to be paid down.
Couple that reason with the fact that tax cuts give them more to invest in bonds, and you have the reason the GOP touts tax cuts over government service to citizens.
You might note that over 90% of tax cuts the GOP implements or proposes benefit the investor class and not salary and wage earners. Safe investment in T-bonds and state and municipal bonds is major reason why they have forced all GOP administrations to cut taxes on the investor class as well on corporations.
The effect of paying off the national, state and local debts on major investors’ portfolios is also the sole reason the GOP has a thing about NOT paying down the national debt. It has nothing at all, monetarily, to do with workers keeping more of their income.
It is also why the GOP resists mightily any increase in corporate or personal income taxes.