Several corporate practices, particularly those of large, multi-national corporations, are major contributors to income and wealth inequality. One is their avoidance of taxes, which means other taxpayers must make up the difference. Another is their employee compensation practices.
The huge and growing differential between the compensation for corporate executives and workers needs to be reduced. Increasing the minimum wage is one step. However, taxing or limiting compensation for executives should also occur.
Wall Street gave out $24 billion in bonuses last year to 177,000 workers who got an average of $138,200 each. The average Wall Street bonus has increased 900% since 1985, while the minimum wage has increased a little over 100%. This $24 billion in bonuses for 177,000 workers is over one and a half times the total pay for the year for all 1,000,000 (1 million), full-time, minimum wage workers. 
This excessive Wall Street compensation not only contributes to overall inequality, it contributes to gender and racial income disparities. Roughly 85% of Wall Street executives and senior managers are white and over two-thirds are male. By contrast, 56% of minimum wage workers are non-white and almost two-thirds of them are female.
Huge Wall Street bonuses and “performance pay” provide incentives to Wall Street to engage in the kind of high risk, high return financial strategies that led to the 2008 financial collapse. The Dodd-Frank financial reform law called for regulation of these bonuses but these regulations have been blocked and delayed. Furthermore, the 20 largest US banks gave out over $2 billion in so-called performance pay to their top executives between 2012 and 2015. Not only do these huge amounts provide incentives for risky behavior, they are also tax deductible for the corporations, saving them $725 million in taxes.
A recent study of corporate taxes showed that many large, profitable corporations frequently pay no federal taxes. The analysis found that 258 large corporations that were consistently profitable from 2008 to 2015 and had $3.8 trillion in profits rarely paid the 35% tax rate that they, President Trump, and Republicans in Congress say needs to be cut. On average, the study found they paid only 21% of their profits in taxes – a lower rate than many individuals pay on their incomes.
In fact, 18 of these large, consistently profitable corporations paid no federal tax over the study’s 8-year period. And 100 of them paid no taxes in at least one year of the 2008 and 2015 period studied, despite reporting a profit. They did this by using tax loopholes and avoidance strategies such as shifting profits to overseas entities, depreciating assets very quickly, deducting the cost of huge stock options given to executives, and using special industry-specific tax breaks they’ve gotten slipped into our tax laws.
These tax breaks are highly concentrated with most of them going to a few, very large, multi-national corporations. Just 25 corporations received over half of the tax subsidies of all 258 corporations in the study. The study reported that the corporations with the biggest tax subsidies over the 8-year period were AT&T ($38 billion), Wells Fargo ($31 billion), JPMorganChase ($22 billion), and Verizon ($21 billion). 
The study refutes the argument that the US’s corporate tax rate is higher than that of foreign countries and that it makes the US an unfavorable location for doing business. The tax rates paid over the 8-year period by certain industries were quite low: gas and electric utilities – 3%, industrial machinery – 11%, telecommunications – 12%, oil, gas, and pipelines – 12%, and Internet services and retailing – 16%. The industry-specific tax breaks that lead to these low tax rates are unfair and unnecessary.
The study’s report recommends five changes to US tax laws to remedy these problems:
- Repeal the tax exemption for overseas profits,
- Limit the deduction for the phantom costs of executive stock options,
- Eliminate tax provisions that allow for rapid, let alone immediate, depreciation of assets,
- Reinstate a strong corporate Alternative Minimum Tax, and
- Increase transparency by requiring full, country-by-country disclosure of corporate financial information. 
I urge you to contact your members of Congress and ask them to support these changes to our tax laws so that large, multi-national corporations pay their fair share of taxes. Please also ask them to support increasing the minimum wage and implementing regulations on Wall Street compensation to reduce incentives for risky behavior that could lead to another financial disaster.
 Anderson, S., 3/15/17, “Off the deep end: The Wall Street bonus pool and low-wage workers,” Moyers & Company (http://billmoyers.com/story/wall-street-bonus-pool-2017/)
 Cohen, P., 3/9/17, “Profitable companies, no taxes: Here’s how they did it,” The New York Times https://www.nytimes.com/2017/03/09/business/economy/corporate-tax-report.html?_r=0
 Institute on Taxation and Economic Policy, 3/9/17, “The 35 percent corporate tax myth: Corporate tax avoidance by Fortune 500 companies, 2008 to 2015” http://itep.org/itep_reports/2017/03/the-35-percent-corporate-tax-myth.php#.WM6CaYWcHIU
2 thoughts on “CORPORATE BEHAVIOR DRIVES INEQUALITY”
Carolyn, thanks for the kind words and your call to your MoC. I hope you’re enjoying FL! I’m at Sebago. Eagle appears to be guarding the nest. Maybe there’s an egg or 2. Hope to see you soon!
Hi John, great article. I always laud your findings. I will call my MoC’s on this. I’m also going to forward an article about the AHCA that clearly parses how we would fair if it passes in it’s present form. Hi to Alice. We are still in FL., returning Saturday. Carolyn Sent from my iPad