Congress recently passed a $2 trillion stimulus package to put money in the pockets of households who are hard hit by the economic effects of the pandemic. In addition to direct payments to people, it included $500 billion in aid for businesses, to be overseen by a congressional commission.
No surprise, the rush for this massive and urgent stimulus bill attracted a throng of lobbyists. The 880-page legislation has lots of fine print full of special-interest provisions, some related and some unrelated to the coronavirus crisis. A few examples: expanded eligibility for small-business loans to include franchise hotels; a retroactive change to the tax code allowing accelerated depreciation for renovations at hotels, restaurants and retailers (worth about $15 billion per year); permitting wealthy investors to use real estate losses to minimize their taxes (worth $170 billion over 10 years); and allowing small banks to have lower requirements for capital reserves (the buffer that financial institutions are required to keep on hand to ensure they remain solvent if they run into trouble). Many of these proposals have been around for more than a year, but until now were rejected.
Crafting good policy requires good information, and sometimes industry lobbyists are the only sources with the right expertise. Sometimes in a crisis we have to make decisions without full information or deliberation, and we have to make compromises: We can’t let the perfect be the enemy of the good. Our concern here is that our current political system biases policy away from the interests of ordinary citizens and toward the interests of the wealthy and well-connected, including mega-corporations.
The Tax Cut and Jobs Act of 2017 was rushed through in seven weeks, despite not being burdened with unprecedented urgency. It was similarly lengthy and riddled with special-interest provisions. The tax cut was sold as benefiting households. Proponents claimed the massive corporate tax cuts would stimulate economic investment, employment and growth, such that total federal tax revenues would increase, not decrease.
Overall, high-income households received the biggest tax benefit. Analysis by the Tax Policy Center showed that although 90% of households with incomes above $100,000 got a tax cut, 70% of households with incomes in the $30,000-$50,000 range got a tax cut, and among households with incomes below $30,000, only 30% benefited. The Brookings Institute found that despite economic growth, income tax revenues for 2018 decreased 5.4 percent. Corporate tax revenues decreased 40 percent.
The Institute of Tax and Economic Policy found that among 379 of the Fortune 500 companies for which there was data and that were profitable, 91 corporations — including Amazon, Chevron, Haliburton and IBM — paid zero taxes for 2018. Another 56 paid an effective tax rate of less than 5% of their income. The overall average effective tax rate for these 379 corporations was 11.3%. The tax breaks are highly concentrated: just 25 companies — including Bank of America, J.P Morgan Chase, Well Fargo and Verizon — claimed $37.1 billion in tax breaks, about half of the total for all the corporations in the sample.
What did these corporations do with this money? Forbes magazine reports, “The dominant company response to the TCJA was stock buybacks. For the first three quarters of 2018, buybacks were $583.4 billion (up 52.6% from 2017). In contrast, aggregate capital investment increased (only) 8.8% over 2017.” They didn’t increase worker compensation, either: The Economic Policy Institute found that average hourly wages and bonuses were lower in March 2019 than for 2017, the year before the tax bill passed.
Is this the outcome that we the people wanted?
Big corporations have a lot of money to spend on lobbyists, making them the loudest voices in the room; we must strengthen our support for NGOs to rebalance the information ecosystem in which our policymakers are immersed. But the bigger problem is our elections are biased by Big Money in politics. “Our” elected officials are beholden to, and influenced by, monied interests who make out-sized contributions to their campaigns and dominate the airwaves with disinformation. The solution? Strong campaign finance laws.
Once upon a time, Republicans and Democrats in Congress agreed that strong campaign finance laws are a good idea and passed the Bipartisan Campaign Reform Act of 2002. Republicans and Democrats in Alaska enacted a strong campaign finance law in 1996, and 73% of the Alaskan electorate reaffirmed those strong limits in 2003. But a narrow majority of the US Supreme Court has decided that portions of these laws should be deemed unconstitutional.
Now it is up to us to step up and tell them that corporate-drafted law is not what the founding fathers intended, and the First Amendment is about protecting our equal voices as equal citizens, not allowing our elections to be sold to the highest bidder. Furthermore, corporations should not have Constitutional rights; their powers, privileges and protections all derive from the statutory laws under which they are organized. If corporations want to be “people”, let them take the same $1,200 pandemic relief checks the rest of us get and call it good.
Sharman Haley is a retired Professor of Public Policy and active in Alaska Move to Amend.
Gershon Cohen, Ph.D., is the Alaska Director of Ultimate Civics, and a co-founder of Move to Amend.
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