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America is now living in what might be called the Age of the Corporation. Corporate profits, after having reached 8% of GDP only once in the previous 94 years, have averaged 9% since 2021. The statutory corporate income tax rate, meanwhile, is now just 21% - down from 52% in 1960 - as federal tax revenue from corporations has fallen from 4% of GDP to just 1.8% in that same period.
That's how it should be, conservative economists would argue. Corporate taxes are among the most distortionary because capital is mobile. If the federal government taxes a company too much, it can move abroad - leaving the US with fewer jobs, less growth and slower innovation.
It's unassailable logic, but incomplete: Huge profits among the largest and least-taxed businesses in the country carry their own risks. Maybe the argument can't be summed up as neatly as "Have capital, will travel," but the consequences add up.
As corporate profits soar, the labor share of income in the US has cratered. The last two years saw wages and compensation fall to the lowest levels since 1941. And these two developments - workers get less money, corporations get more - are absolutely related. Meanwhile, CEO compensation has skyrocketed over the past six decades, rising from 21 times that of the average worker to 281 times.
I could go on - and I have! - about income inequality, but let's consider corporate tax cuts as a kind of investment. Rather than collect 4% of GDP directly from corporations, as the US did until the middle of the last century, the government now gives more than half that money back for those corporations to invest. Two points of a $31 trillion economy is $620 billion. What return has America gotten on that investment?
It can't be employee benefits. Just ask the 28% of private sector workers who do not get retirement benefits from their employer, the 28% who do not get health insurance, the 73% who do not have paid family leave, the 87% without child-care benefits, or the 20% who do not have paid sick leave.
All those benefits could be universally provided or mandated in a federal plan - for much less than $620 billion a year.
It can't be wages, either. Just ask the median US worker, who has seen half the wage growth that the top 10% has seen over the past 46 years.
The 2017 Tax Cut and Jobs Act illustrates the point. Many advocates for lower corporate tax rates claimed that the result would be higher wages - as much as $4,000 per year in the long run. The bill's provisions lowered the statutory corporate tax rate by 40%, but workers' paychecks didn't budge: The Congressional Research Service's assessment of the legislation found that wage growth was slower than average afterwards. Instead, 2018 set the record for the most stock buybacks in a single year.
Corporations and their defenders would no doubt reject the notion that they are skimping on taxes and wages just to enrich their coffers. But Americans do not need to be convinced: They can see it happening in their own backyards. Corporations routinely make promises to invest, to bring jobs that pay high wages - if and only if the locale proves "business friendly," which inevitably means lowering taxes. The city or state bends over backward, only to have the company fail to deliver.
That's essentially what happened in Wisconsin with Foxconn, or in Northern Virginia with Amazon. And these aren't isolated cases. As even the conservative Mercatus Center notes, years of evidence shows that "cities and states are throwing their money away" when they try to lure corporations with tax subsidies.
More broadly, public perceptions of big business are at rock bottom. In 2010, Gallup reported that 49% of Americans held a positive view of big business, and 49% negative. By 2025, those figures were 37% and 62%, respectively. Gallup also asks Americans what they perceive as "the biggest threat to the country in the future - big business, big labor or big government." Since 2013, as the share of Americans who see government or labor as threatening has fallen, while those who view business as a threat has risen from 21% to 37%.
It's all too easy for the theoretical argument - capital is mobile - to morph into a practical threat: Give us a tax break or we'll go elsewhere. Maybe that line would feel less like extortion if the past four years of corporate profits weren't the best in a century. And maybe US businesses would enjoy better reputations among the public if they were more willing to share some of their profit with the workers who make it possible.
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Kathryn Anne Edwards is a labor economist, independent policy consultant and co-host of the Optimist Economy podcast.