Corporations Destroying US Economy

The proven ability of the nation’s wealthiest individuals and corporations to collude with the federal government in order to avoid paying massive amounts in federal taxes, says economist and Nobel laureate Joseph Stiglitz, is not simply unfair and unprecedented but is actually destroying the broader economy and the nation’s once-heralded prosperity.

In an interview with journalist Bill Moyers that airs Friday in which they discuss his new white paper(pdf) on the same topic written for the Roosevelt Institute, Stiglitz describes how the current tax code actually encourages large multinational corporations to invest abroad, hire people abroad, and keep their earnings abroad.

And because these multinationals use their outsized political influence to literally write the tax code and bend financial regulations to fit their interests, says Stiglitz, it has created a nearly complete distortion of the nation’s real economic possibilities. As he explains to Moyers:

You know, there’s a lot discussion going on about we have a budget of deficit. And we have to slash this, and slash that, and cut back education, and cut back research, things that will make our economy stronger, cut back infrastructure.
And I think that’s counterproductive. It’s weakening our economy. But the point I make in this paper is it would be easy for us to raise the requisite revenue. This is not a problem. This is not as if it’s going to oppress our economy. We could actually raise the money and make our economy stronger. For instance, we’re talking about the taxation of capital. If we just tax capital in the same way we tax ordinary Americans, people who work for a job, who pay taxes we pay on wages.

If we eliminate the special provisions of capital gains, if we eliminated the special provisions for dividends we could get, over the next ten years, over, you know, approximately $2 trillion. And those are numbers according to the CBO. And so, we’re talking about lots of money.

Watch the Moyers’ interview with Stiglitz:

And it’s not like there’s nothing to be done with that $2 trillion or more in revenue that Stiglitz says could be generated if the top one percent simply paid what the average American pays in terms of income tax and if corporations were stripped of their preferential “subsidies” and “incentives” which he has long argued should be called what they really are: corporate welfare.
“Our country needs, faces a lot of challenges,” argues Stiglizt. “Twenty million Americans would like a full-time job and can’t get one. We have growing inequality. We have environmental problems that threaten the future of our planet. I think we can use our tax system to create a better society, to be an expression of our true values.”
In the white paper, titled Reforming Taxation to Promote Growth and Equity (pdf), Stiglitz’s argument is that even before the financial crisis that took hold in 2008, it’s not as though the average American or the economy overall was being particularly well-served by the increasing slant of the tax code to favor large corporations and the wealthy.
Though not a new idea, Stiglitz says that it’s imperative people realize the economy has long been run by perverse incentives and that the rules fueling these incentives are not natural laws of the economy or that thing called “the free market” but the direct result of corporate control of the political and legislative process.
What many tax-dodging corporations do might well be “legal,” admits Stiglitz, but the reality is that they “use their lobbyists to make sure that the law gives them the scope to avoid taxes. So, this argument, ‘Oh, we’re only doing what the law allows,’ is disingenuous. The fact is … their lobbying helped create this law that allows them to escape taxes, pushing the burden of taxation on ordinary Americans.”
And the result, of course, the reason that the rest of the economy is burdened by this behavior and these systems of perverse incentives, he continued, is because “somebody has to make up the difference. I mean, we can’t survive as a society without roads, infrastructure, education, police, firemen. Somebody’s going to have to pay these costs.”
And that “somebody,” as is known all too well by low-income and working-class America, is the rest of the population–sometimes now referred to as the 99%.
In his newly published paper that addresses these issues and calls for a new progressive tax code and end to preferential ‘corporate welfare,’ Stiglitz concludes:

We can reform our tax system in ways that will strengthen the economy today, address current economic and social problems, and strengthen our economy for the future. The economic agenda is clear. The question is, will the vested interests which have played such a large role in creating the current distorted system continue to prevail? Do we have the political will to create a tax system that is fair and serves the interests of all Americans?

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