Corporations are Supercharging Inequality

We always knew that corporations and their C-suite executives were hoarding profits and driving inequality through the roof, and now our friends at Oxfam, the Institute for Policy Studies, and Americans for Tax Fairness have fresh data to prove it.

This week, Oxfam published its analysis of the largest 200 public companies’ contributions to inequality in the US, aptly called the Corporate Inequality Footprint. In short, they found that power and money are concentrated in the hands of wealthy corporate executives and shareholders by way of record profits, massive stock buyback programs, low worker wages, exorbitant CEO pay, tax avoidance schemes, and formidable lobbying campaigns. A similar report released jointly last week by Americans for Tax Fairness and the Institute for Policy Studies – More for Them, Less for Us – offers specific support to the corporate tax avoidance and excessive executive pay elements of Oxfam’s analysis. 

For this week’s Closer Look, we want to give you a rundown of some of the top findings from these two bombshell reports and also share some of the policy recommendations that our allies offer to rein in corporate excess and, in turn, runaway inequality in America.

Let’s start with Oxfam, which looked at the years 2018 to 2022. Some of the top-line findings from their analysis of the largest 200 US public companies include:

  • The largest 200 US public companies are more profitable than ever, but shareholders are hoarding the vast majority of corporate earnings. Their net profits soared to $1.25 trillion in 2022 – a 63% increase since 2018 – and a whopping 90% of that was paid out to shareholders. $448 billion came in the form of dividends, while a record $681 billion were stock buybacks.
  • Companies’ stock buyback programs have reached a fever pitch, even in low-wage industries. Between 2018 and 2022, the top four highest stock buyback spenders were Lowe’s ($39.5 billion), Home Depot ($39.2 billion), Walmart ($35.5 billion), and Starbucks ($21.7 billion). Over that same period, FedEx reduced its median salary by 22% but still spent close to $6 billion in stock buybacks.
  • Only 10 of the 200 companies analyzed have made public statements in support of paying a living wage to their employees. Of the 30 companies that disclose their minimum starting wage, the average is $11.06 an hour, which is nearly half the estimated national living wage.
  • In 2022, the CEOs of the 200 companies analyzed were paid a combined $4.1 billion, a nearly 33% increase over what they were paid in 2018. Six companies – Alphabet, Amazon, Intel, Oracle, Blackstone, and KKR – paid their CEOs over $100 million in at least one year between 2018 and 2022. Several companies – like McDonald’s and The Coca-Cola Company – also had CEO-to-worker-pay ratios that exceeded 1,500.
  • Of the 200 companies analyzed, those in the pharmaceutical and technology industries paid the lowest effective tax rates; in 2022, companies in those sectors respectively paid 11.6% and 14.9% effective tax rates. IBM, Intel, and Nvidia actually managed to pay nothing in corporate income taxes in 2022, and instead received millions in tax breaks.
  • 82% of companies had a presence in at least one tax haven.
  • The 200 companies analyzed spent a total of $746 million on lobbying in 2022. Technology companies spent the most ($114 million), with Amazon alone spending $21.4 million.

Meanwhile, Americans for Tax Fairness and the Institute for Policy Studies analyzed the same period (2018 – 2022, i.e. the first five years after the 2017 Trump tax bill went into effect) and found:

  • In at least two years out of the five studied, 64 companies paid more to their top five executives than they paid in federal income taxes.
  • Between 2018 and 2022, those 64 companies made $657 billion in profits and paid their top executives over $15 billion, but paid an average effective federal income tax rate of just 2.8%. (For context, the statutory rate is 21%.)
  • 35 companies – including household names like Ford, Netflix, and Tesla – paid their top five executives more than they paid in federal income taxes over the whole five-year period. All 35 of those companies were profitable over the period studied.
  • Among those 35 corporations, top executives were paid a total of $9.5 billion over the five-year span. Meanwhile, the companies’ combined federal income tax bills came out to negative $1.8 billion – which means they received more in refunds than they actually paid in taxes.
  • Over the five-year period, 18 corporations paid $0 in federal income taxes but managed to pay their top brass a combined $5.3 billion. In all but one case, they actually paid less than $0 in taxes because they received refunds.
  • Tesla paid its top five executives the most over the five-year period – a whopping $2.5 billion, which is over half the $4.4 billion the company posted in profits – but managed to pay negative $1 million in taxes.

Here are some of the solutions that the organizations offer to policymakers to ensure corporations pay what they owe in taxes, rein in excessive executive pay, and stop corporations from supercharging inequality:

  • Congress should increase the corporate tax rate to at least 28%, which is halfway back to the 35% rate that we had during the Clinton, Bush, and Obama years.
  • Congress should close loopholes, eliminate wasteful tax breaks, and crack down on tax havens.
  • Use tax incentives to curb excessive executive pay and institute stronger regulations on stock buybacks.
  • Promote alternative business models and corporate forms that better serve stakeholders like workers, customers, communities, and the environment – and not just shareholders and executives.

The Patriotic Millionaires have no objection to corporations making money. But when corporations hoard the profits resulting from workers’ increased productivity, it becomes a dangerous problem for the economy and our democracy. Bear in mind, the reports described above only tackle a handful of shady corporate practices. As we’ve discussed before, wage theft, union-busting, greedflation, skimpflation, and shrinkflation are just a few of the other profit-boosting tactics that corporations employ that undermine our economy, and by extension, our democratic institutions.

There is no reason to believe corporations will spontaneously grow a conscience and voluntarily change their ways. To the contrary, corporate profit incentives are so extreme that we should brace for these tactics to get more aggressive, and inequality to worsen, unless lawmakers take steps to fundamentally challenge the rise of corporate power. If lawmakers are serious about revitalizing the American economy to benefit working people, they need to roll up their sleeves and get their hands dirty in the fight to hold corporations accountable.

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