In the debate on whether to end the Bush Tax Cuts, the nominal (or statue) tax rates were salient. Much less was said of the effective rates, which are calculated by dividing the actual tax paid by total income (individuals) or net income (corporations). According to the New York Times in 2011, although “the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.” The name of the game in all too many corporate tax departments is to minimize the tax due as much as possible. No countervailing notion of “corporate citizenship” or even “fair share” exists in that world of single-minded minimization. Put another way, responsibility does not compute in the operative business calculus. Lest it be concluded that that calculus itself is the reason for the tax avoidance (which is legal, unlike tax evasion), the financial power of business to essentially bring government “in house” ought to be recognized as part of the larger problem of plutocracy.
In 2010, General Electric (G.E.) reported global profits of $14.2 billion, $5.1 billion of which came from operations in the United States. Rather than owing any federal income tax, however, the company claimed a tax benefit of $3.2 billion. Behind the “fierce lobbying for tax breaks and innovative accounting that enables [the company] to concentrate its profits offshore,” the company’s tax department was led at the time by a former U.S. Treasury official, John Samuels. Moreover, the Times reports that the department included “formal officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.” G.E. had essentially brought the tax-writing and enforcement skill of the U.S. Government “in house.” As paid employees of G.E., the formerly government expertise was then put under the aims of the private company, which are not necessarily in line with the public weal.
Put another way, U.S. companies of such financial wherewithal as to have annual profits of billions and billions of dollars can appropriate and harness governmental machinery at the expense of the republics and the General Government. The issue is not simply too much tax avoidance, which shirks any sense of responsibility or fairness; rather, the problem is whether such large and powerful private enterprises are compatible with a democratic form of government. Lest this question be interjected into public discourse, vested powerful interests keep us preoccupied with secondary issues, such as nominal individual tax rates, off-shore factories, and NAFTA. That the mainstream media in the U.S. consists of large companies that are owned by even larger conglomerates (e.g., NBC was owned by G.E. before being bought by Comcast) only makes it easier for corporate America to control the public discourse through interlocking directorates. Meanwhile, companies like G.E. and Exxon continue to gain wealth and power.
The question may be whether the American people writ large would object to the threat—or even come to view the mammoth companies as threats to the American republics—were the extent of corporate power over the governments transparent. The mantra of many Americans in the 1950s, for example, could be said to be, “What is good for GM is good for America.” Put another way, economic growth is in everyone’s interest. But is prosperity so wide-open? That corporations increase their stock prices by shedding jobs suggests that what is good for the Dow is not necessarily in the public interest. Abstractly speaking, the good of a part is not necessarily the good of the whole. In political economy, the salience of the parts can be rather subtle, or even subterranean, while the public good can suffer for want of committed defenders. The result is that the parts come to dominate the whole and even define it in their own terms or image.
David Kocieniewski, “G.E.’s Strategies Let It Avoid Taxes Altogether,” The New York Times, March 24, 2011.
Bonnie Kavoussi, “General Electric Avoids Taxes By Keeping $108 Billion Overseas,” The Huffington Post, March 11, 2013.