What’s it gonna take?

October 9, 2017 Posted by Maria Martinez

It is time for corporations to use their influence to ensure a fairer tax system, not just for business but for the people and places impacted by their work.

Now that the GOP’s tax reform plan, (the “Unified Framework for Fixing our Broken Tax Code”) has been released, are CEOs going to be as vocal about their opposition to it as they have been with other issues that also affect their employee and consumer base such as DACA and non-discrimination?

It has been encouraging to see prominent businesses and their leaders take a stand against some of the decisions President Trump has taken with respect to issues affecting climate, health, and human rights. The strongest and most vocal criticism by business leaders to date has been in the wake of President Trump’s lack of explicit condemnation of white supremacist groups after the tragic events in Charlottesville, VA. This criticism resulted in the dismantling of two of the President’s business advisory councils after a rash of CEO resignations. In addition, opposition to other measures taken by the current administration including the so-called Muslim ban, the US’s withdrawal from the Paris Climate Accord, and the significant reduction in the 2018 budget to fund the State Department and USAID, have also sparked formal calls to action by CEOs of US corporations such as Amazon, Apple, Coca-Cola, GE, Goldman Sachs, Marriott, Netflix, Nike, and Starbucks.

The most recent source of public opposition from the US business community came from the Trump administration’s proposal to end the DACA program. In an August 31 letter to Congress leaders signed by over 300 business executives, including Tim Cook of Apple, Mary Barra of General Motors, and Alfred Kelly of Visa, recognized the essential role that people who have benefitted from DACA play in the US economy. Specifically they noted, if DACA ends, the US economy will lose almost 1 million young workers, $460.3 billion in national GDP, and $24.6 billion in Social Security and Medicare tax contributions.

In a recent blog post, Brad Smith, Microsoft’s President and Chief Legal Officer urged Congress to ensure that the Dreamers, who “add to the competitiveness and economic success of our company and the entire nation’s business community,” are protected. Smith’s post went further calling on legislators to reprioritize their fall agenda to adopt legislation on DACA before addressing a tax reform bill because “DACA legislation is both an economic imperative and a humanitarian necessity.” Importantly, Smith pledged to exercise all legal recourse within Microsoft’s reach if Congress failed to act in this respect.

As it stands, the Administration and Congress have decided to ignore Smith’s plea and have moved to take on tax reform with the release of their Framework, thus following the timeline laid out by GOP Congressional leaders.

From what the Republican tax plan includes, Trump and GOP leaders are considering several measures such as lowering the corporate tax rate from 35 to 20 percent and limiting the rate to 25 percent for pass-through income, both of which will undoubtedly result in huge tax breaks to wealthy corporations and individuals, at the cost of cutting programs that will disproportionately affect people living in poverty in the United States and abroad.

Executives in the 50 largest US companies are well aware of what is at stake. These corporations spend billions of dollars lobbying members of Congress to ensure that the rules enable them to lower their tax expenses. But if the Trump and GOP tax plan passes, the lower tax for corporations will come at the cost of programs that benefit low-income and middle class Americans such as job training, assistance for the homeless, and revitalization efforts in neighborhoods hardest hit by foreclosures.

Proposed changes to international taxation rules such as switching from a worldwide to a territorial tax system or the repatriation tax holiday, would have ripple effects by incentivizing US companies to stash more profits offshore (likely in tax havens) further straining budgets in poor countries. Corporate tax is an important source of revenue in developing countries, helping to support critical infrastructure, health services, education, and more. Ultimately these changes in the US tax system would not only harm millions of people employed by the corporations and their consumers, but millions more around the world. Is this not a business case for caution in supporting reforms like those proposed, which threaten to drive even greater economic inequality?

The US tax system is in urgent need of reforms that make it fairer and more capable of ensuring that companies are paying taxes where they do business. But these tax system reforms should not further entrench the inequality crisis or increase the gap between the rich and the poor. Some business leaders have demonstrated that maximizing profits for its owners or shareholders is not at odds with strong corporate social responsibility. Paying taxes is generally considered a socially responsible behavior, with companies contributing to the public good by helping to finance the functions of government, which they also benefit from. The ways companies are avoiding taxes may not be illegal, but the ethics are questionable. Even more questionable are their lobbying efforts to change the rules in their favor. Some companies, in fact, seem to believe that lobbying for lower taxes is their corporate social responsibility.

It is time for companies to treat their positions on tax policy the same way they do issues like DACA and non-discrimination.

Business leaders: A tax overhaul will affect all of us. Use your power and influence to speak out and to help shape the US tax system into one that not only fosters growth and innovation, but provides the resources for an educated, healthy, and safe workforce and consumer base. Will you take true corporate social responsibility seriously? Are you willing to act to ensure Congress does not fail to do so? What’s it gonna take?

Politics of Poverty