It’s nye onto a month before your income tax forms for 2018 are due. Already the early filers, who no doubt expecting a refund, have found that their refunds are short of what they expected. Oops.
That possibility doesn’t worry the very rich since their tax burden, you will remember, has been significantly lifted by the Trump welfare for the rich tax legislation. This especially accrues to corporate America.
A recent article in USA Today explained how it is that General Motors and Ford Motor Co. have been spared the nasty taste of federal income taxation. GM has not paid federal taxes for the last 10 years and Ford only three of the last 10 years.
In fact, they have gotten $450 million in tax refunds since 2009 the article states. So, they file early. Noted economist Robert Reich calls this “more socialism for the rich.” Remember who owns stock in large numbers in these corporations.
Last year, that USA Today article notes, U.S. corporations paid taxes at a rate of 21 percent, down from 35 percent. Corporate income taxes generated outside the U.S. is now zero, down from that 35 percent last year.
And you wonder why corporations are sending jobs and investments overseas. Why generate income at home when generating income abroad costs less in taxes; even given the local taxes they pay.
Remember what happened in 2008? GM basically went bankrupt until the U.S. bailed them out at a cost to U.S. taxpayers of $10 billion. Yes, jobs were saved and cities were saved from that unemployment, but the point is that there is no gratitude in the hearts of corporations.
But, you say, the economy is doing well. The Stock Market is booming. All is well. It is true there has been a steady increase in employment since 2009 as well as steady growth of the economy (I like to call it the Obama economy — remember he was president in the foundation years of the present economy).
Economists say that the Trump tax cuts gave a boost to the economy too. But we will yet pay for that boost since all economists say that it will result in huge debt increases that the federal government will be paying for for decades. That means you and me. Well you, since I won’t have decades left.
So how are the corporations spending all that new money they are getting from federal tax policies? They are buying back their own stock. In fact, economists admit that this is the major force behind the increase in the stock market’s value lately.
By buying back their own stock, corporations can pay the income to investors (disproportionately the rich).
In addition, there are fewer of their stock on the market, thus the value from that stock is higher per each share. The corporations are bumping up the value of their own stock. 2018 was a record year for corporate buy-backs of their own stock; and 2019 is on track to break that record.
Armchair investors, a New York Times article notes, “have been selling their stock.” So have institutional investors like retirement funds. So, the upward trend of the markets lately is driven by profit taking by corporations.
So, the Trump tax cuts have given corporations billions to buy back their own stock, leaving much less for investment in their own productivity or in salaries for their employees. The cuts will cost us all down the road dearly when we have to pay the interest on the loans the government must take to pay for those tax cuts.
We hear so much these days about the evils of socialism for the everyday American, but so very little about government policies that create socialism for the rich. So, happy tax day, your money seems to be increasingly going towards a good cause: offsetting the non-taxes paid by the very rich.
Richard Fulton is an emeritus professor of political science.