When a company weighs in on politics, look at its bottom line.
We’re living in an age of benevolent corporations, or at least corporations that want to be perceived as such.
In early April, outgoing Amazon CEO Jeff Bezos tossed off a curious parenthetical in his response to the White House’s proposed $2 trillion infrastructure plan. If you didn’t look closely, you might not have noticed it: “(we’re supportive of a rise in the corporate tax rate).”
Considering Amazon has often managed to avoid paying taxes, this is a big deal — or maybe a medium deal. The way Amazon and Bezos himself often get around big federal tax bills has little to do with the corporate rate, and if it were serious, Amazon could do more to push the issue than stick a few words into a statement. Still, Bezos is one of the richest, most powerful people in the world, running a $1.7 trillion company. It’s significant that he’s saying he favors an increase in corporate taxes, even if Bezos isn’t turning into Mother Teresa overnight. (See: Amazon’s approach to workers, a potential union, and even its Twitter account.)
It’s not just Bezos who’s singing a slightly friendlier tune, both on taxes and elsewhere. Lyft President John Zimmer has said he’s in favor of increasing the corporate tax rate from 21 percent to 28 percent, in line with President Joe Biden’s proposal. (Former President Donald Trump’s 2017 tax cuts slashed the corporate rate from 35 percent to 21 percent.) JPMorgan CEO Jamie Dimon says he’s okay with higher taxes for rich people (though not a wealth tax, and not in New York). These tax positions connect to other ways companies have been embracing benevolent-sounding ideas. A slew of brands weighed in on Georgia’s restrictive voting law upon its signing in March. And after the US Capitol riots on January 6, multiple companies at least temporarily withdrew support from Trump and others who incited the day’s events and cast doubt on the election outcome.
Has corporate America found its soul? Well, no — but many businesses are at least trying, or trying to look like they’re trying. Customers want to see change, and perhaps even more importantly, so do workers. With Democrats in charge in Washington, DC, businesses are also dealing with changing political tides and pressure from vocal progressive leaders such as Rep. Alexandria Ocasio-Cortez, and Sens. Bernie Sanders and Elizabeth Warren.
“Companies are facing constituencies that demand that they stand up and do the right thing,” said Jerry Davis, a professor of management at the University of Michigan’s Ross School of Business. Corporations aren’t seeing the light on voting rights or taxes because they’ve had a major change of heart; they’re doing it because it’s necessary and even lucrative.
“We should be skeptical of individual companies and their CEOs and shareholders talking about corporate tax rates or specific provisions that seem benevolent,” said Kitty Richards, a Roosevelt Institute fellow who focuses on tax and fiscal policy. “They are trying to shape policy in a way that will affect their bottom lines positively.”
But when businesses and their leaders come out in favor of a specific policy or issue, it’s crucial to not only understand their motivations but also to track whether they back up their words with real actions. A brand posting a black square on Instagram to draw attention to Black Lives Matter isn’t the same as them hiring, promoting, and paying Black workers a living wage. In reality, the tech companies that made statements in solidarity with BLM in the wake of George Floyd’s death had 20 percent fewer Black employees. Since 2015, corporations have given $50 million — including $22 million during the 2020 election cycle alone — to state legislators supporting voter suppression bills, according to a report from watchdog group Public Citizen.
Microsoft founder Bill Gates has long expressed openness to paying higher taxes, but with a series of proposals that would have him do just that on the table in his home state of Washington, he and other billionaires have gone conspicuously quiet on the matter. It’s good that Bezos says he’s okay with the corporate tax rate going up. It would be much better if he made a stink about it to Business Roundtable, the lobbying group to which Amazon belongs and that has come out in firm opposition of tax hikes.
“That would be one way to show that their position isn’t just a nice statement, but actually leveraging power to set an example for other corporations,” said Dana Bye, campaign director at the progressive grassroots group Tax March.
Vague gestures from corporations and executives are a way to smooth over real political and social issues, and to deflect deserved scrutiny. It’s often much more about image control than substantive change. And even if the corporate tax rate goes up — with Bezos’s seeming approval — it might not make much of a difference for his company.
If you reduce your taxable income to zero, the tax rate doesn’t matter
Amazon, like a lot of big companies, is good at keeping its tax bill low. In some recent years, it’s paid zero federal income tax; it’s managed to pay very little in other years, even as its profits soared. According to the left-leaning Institute on Taxation and Economic Policy (ITEP), Amazon’s effective federal tax rate has been just 4.7 percent over the past 10 years. By comparison, the average individual tax rate for all US taxpayers in 2018 was 13.3 percent, more than double that of Amazon.
In 2019, Matt Yglesias explained for Vox how Amazon paid no federal taxes at the time: It took advantage of a number of mechanisms, including spending heavily on research and development to claim related tax credits, taking deductions on investing in equipment, and deducting the cost of stock-based compensation to executives from its taxable earnings. The long and short of it is that Amazon is able to use a litany of tax credits and deductions, all of which are legal, to pay little in federal taxes — even though it makes a ton of money.
“These are things that are allowed to take place because Congress loves them in a bipartisan way. This Congress, the last Congress, every Congress, and every president for the last 20 years has given their blessing to these tax breaks,” said Matt Gardner, a senior fellow at ITEP.
As long as companies can still use these tax breaks and a variety of loopholes — both domestic and foreign — to drive down their taxable income, the base corporate tax rate won’t matter for many of them. “Twenty-one percent of zero and 25 percent of zero and 35 percent of zero are all zero,” Richards said.
According to ITEP, at least 55 major US corporations paid no federal income taxes last year despite raking in huge profits, including FedEx, Nike, and Salesforce. They used many of the same tactics employed by Amazon described above.
“What keeps them up at night are proposals that would expand the tax base, that would get rid of the loopholes, that would put in place the minimum tax idea that Biden has also talked about,” Gardner said. In 2019, Biden proposed a minimum “book tax” that would put a 15 percent tax on the income corporations publicly report to shareholders, though it’s unclear how likely the idea will become a reality.
When reached for comment, an Amazon spokesperson pointed Recode to a February press release outlining the company’s 2020 investments and tax contributions. They also noted Amazon was not in ITEP’s latest list of companies that didn’t pay any federal income taxes.
Corporations don’t like their tax practices getting scrutiny because what’s under the surface often does not look particularly fair to the average American. The same goes for corporate executives including Bezos, whose wealth is often subject to tax benefits that workers’ wages are not.
For Bezos’s personal fortune, the tax threat has nothing to do with the corporate rate. As it stands right now, as long as he doesn’t sell his Amazon shares — the primary source of his net worth — he’s not taxed on them. And when he does sell, he’s taxed at a lower capital gains rate than the individual income rate.
While Bezos may say he’s at least open to a higher corporate tax rate, much of the rest of the business community is not with him. The US Chamber of Commerce has warned that Biden’s plan to pay for infrastructure is “dangerously misguided.” Business Roundtable, the lobbying group that represents CEOs from major corporations, said it “strongly opposes” higher corporate taxes that would create “new barriers to job creation and economic growth.” (In 2019, the group revised its “statement on the purpose of a corporation” to say its companies would seek to benefit all of their stakeholders, not just shareholders. Nowhere in the statement were the words “tax” or “government” mentioned.)
In a speech to the Chamber of Commerce in May, Treasury Secretary Janet Yellen nudged businesses on corporate tax hikes to pay for infrastructure investments, arguing that such investments would “enhance the net profitability of our corporations and improve their global competitiveness.” The chamber responded that it does want infrastructure spending but believes there are other ways to fund it.
Corporations and the Republican Party are in something of a dustup
Bezos’s newfound openness to higher corporate tax rates fits into a broader trend: Companies are adopting more public stances on the political issues their customers and employees care about. Part of the reason why is that they’re stuck between a bit of a rock and a hard place, politically speaking. They don’t love the Democrats’ business-unfriendly policies, including tougher regulations and a clampdown on taxes, but they don’t love what’s coming out of the Republican Party either — which has traditionally been more the party of business, favoring fewer regulations and lower taxes.
A strain of at least semiserious anti-corporate populism has taken hold among the GOP, spearheaded by figures such as Fox News host Tucker Carlson and Missouri Sen. Josh Hawley. And some in the GOP have bristled at the idea of what they call “woke” corporations. (To be sure, the GOP still isn’t trying to hike corporate taxes, and Democrats are hardly the enemy of Wall Street.) Simultaneously, corporations are under increasing pressure from customers and workers to take a stand against the GOP’s anti-democratic views on issues such as voting rights and unfounded allegations of election fraud.
“The GOP is becoming such an inscrutable, unserious thing that it makes it difficult for business to just pledge allegiance to the Republican Party,” Davis, from the University of Michigan, said.
After Georgia passed a restrictive voting law in March, many businesses condemned it, and Major League Baseball pulled the 2021 All-Star Game and the MLB draft from Atlanta. One hundred business leaders held a call about how to show opposition to the law and others like it, including stopping donations to politicians supporting those types of bills and putting a pause on investments in states where they’re in place.
Major corporations signed on to a letter opposing legislation that makes it harder to vote. And after January 6’s deadly attack on the US Capitol by rioters who falsely believed the 2020 presidential election was stolen, dozens of companies stopped donations to lawmakers who voted against certifying the election results (others said they were pausing political giving altogether). Certain companies also took swift action against Trump: Deutsche Bank said it was done dealing with him, the PGA pulled a tournament from his golf course, and Twitter and Facebook finally kicked him off their platforms.
It’s been increasingly difficult for companies to stay on the sidelines when it comes to issues such as race, voting rights, and outright lies from politicians, especially as the government fails to act. “Companies always tried to avoid taking any political stand that could potentially alienate consumers,” Davis said. Part of the issue now is that not taking a stand can further alienate their consumers and workers.
The perpetual question is whether there’s actually sustained action behind those statements and words, inclusion advocate April Reign told Vox’s Terry Nguyen last year as corporations came out in support of Black Lives Matter. “I’m heartened that for whatever reason, they’re now stepping up with public statements, but unless corporations are putting their money where their mouth is … it goes in one ear and out the other,” she said.
It’s easy to do the easy thing
Corporate interests in America are very powerful, and sometimes those interests are used for what many people would consider to be good. Companies tried to pressure Trump on issues such as climate and immigration, and many executives cut ties with the White House, at least for a while, after the former president’s comments about the 2017 “Unite the Right” rally in Charlottesville. Businesses helped put pressure on North Carolina to overhaul its controversial transgender bathroom bill. As part of union negotiations in 2000 — more than 20 years ago — the Big Three automakers extended health benefits to same-sex domestic partners, some 15 years before the Supreme Court legalized same-sex marriage.
But corporations often act in ways that undermine their workers and communities, too.
Plenty of companies celebrated the 2017 tax cuts and put out splashy announcements saying they’d hire workers and create jobs; now, many are saying they’ll have to cut jobs if tax rates go up. But in the short term, shareholders benefit from tax decreases and lose out because of tax increases faster and more noticeably than do workers, for whom it takes years for tax changes to get baked in, with regard to job losses or wage gains. Most businesses said they didn’t accelerate hiring as a result of the 2017 law. Some companies, such as Harley Davidson, took the tax cuts, rewarded shareholders, and cut jobs anyway.
The government taxes businesses to pay for services and activities that benefit society overall. So if companies want to do good, they could just pay. “[Incredibly], there still is very little direct acknowledgment by business leaders, even the ones who profess to be socially aware, of the fundamental role of business in just paying their damn taxes,” Gardner said.
As companies come out against voting rights restrictions, it’s important to remember that a lot of the policies Republicans are now trying to codify into law are things they’ve been saying for years. They were making false claims about voting and elections long before corporations decided to act — and it’s not like they were whispering. Corporate PACs eagerly donated to them all the while.
There’s also the uncomfortable truth that neither unelected shareholder-oriented corporations nor corporate executives should be able to dictate politics, whatever side they’re on. It’s important for the public to have a sense of their interests because ultimately, they’re lobbying lawmakers and regulators about it. But to a certain extent, who cares what Jeff Bezos thinks the corporate tax rate should be?
“We just shouldn’t look to him for advice on what kind of tax policy to enact, even if he’s saying something we might agree with. He’s not an expert on tax policy, he’s an expert on squeezing his workers and his suppliers to make himself and his shareholders rich,” the Roosevelt Institute’s Richards said. “It’s a moment where we should really be asking why we are looking to the rich and powerful to tell us how our economy should work.”