The first and most important responsibility of any corporation is to be economically viable while being good stewards which means more than optimizing the traditional goal of increased shareholder wealth. Climate change, water shortages, decreasing biodiversity, unequal distribution of wealth and economic opportunity, social unrest, and cyber-attacks are among the acknowledged threats to the sustainability of businesses around the globe.
Sometimes unions and employees have to cooperate and agree to wage and benefit reductions and sometimes there is a need to increase the pay of managers who are the difference between failure and success. Sometimes workers will have to increase productivity without receiving a pay increase. All this is especially true when all are included in profit sharing and the alternative is closing a factory or shifting employment to low-wage sites abroad.
That works for large big ticket companies like General Motors or Caterpillar but not for manufacturers of small lower cost products. Labor intensive, repetitive, low skill jobs will continue to move off shore and won’t come back. In their place should be large scale infrastructure jobs. The exception should be those repetitive jobs that could be performed in American prisons.
America got the cart before the horse when repetitive jobs were either sent off-shore or mechanized. It blew a hole in the middle class before investments were made in infrastructure. America’s infrastructure was crumbling as fast as wages were dropping or disappearing and wealth was shifting to fewer and fewer.
In America’s earlier years, the wealthiest like Andrew Carnegie, John D. Rockefeller, Henry Ford and others introduced the principal of charity. Hundreds of millions of dollars were donated without the benefit of a tax write-off to help the needy. At that time there was no Social Security system, no Medicare for the elderly, no unemployment pay for the jobless. There was no help for battered women and children or the physically handicapped.
Those charities couldn’t keep up with the needs of Americans and in the 1920’s there was a shift from individual philanthropy to corporate philanthropy. Business leaders established pension plans, employee stock ownership and life insurance programs, limitations of working hours, and higher wages. They built houses, churches, schools, and libraries.
There was a depression and a World War.
Then, during the following 30 years, the largest middle class in the history of the world was created. CEOs during that time earned about 20 times what the typical worker made and both the economy and worker wages doubled. That 1:1 ratio of income growth to growth of the overall economy was why we had a great middle class.
The next 30 years was different. The economy doubled again but the incomes of the typical American worker did not increase. CEO compensation did though. During the last 30 years CEO pay has gone from 20 times to 200 times that of their typical worker.
The richest 1% used to have incomes that represented about 10% of a corporation’s compensation costs and now it is 20%.
The rising income inequality has resulted in less money being collected for Social Security. That’s because the Federal Insurance Contribution Act (FICA) collects taxes on wages that are less than $118,500 (the max). People that are out of work or have jobs that pay less than those they used to have, pay less into Social Security. Those whose incomes rose stop paying into FICA after their wages on wages over the max.
Get rid of the max and install a FICA tax on all income whether reported on a W2 or Form 1099 and Social Security is solvent and eliminates the need to increase the retirement age or reduce monthly payments, or squeeze Cost of Living increases. That is not part of any tax plan being considered in Congress. Why?
America’s tax laws are complicated. Corporate tax rates are high but because of loopholes, the amount of tax they pay is reasonable. Lowering the rates and eliminating the loopholes makes sense and take away a myth that corporations in America are taxed higher than elsewhere. America’s GNP doesn’t seem to have a direct correlation to the tax rate.
The wealthiest today, unlike Rockefeller and Carnegie, are less interested in philanthropy and more interested in maximizing wealth. Huge donations have been given to politicians and in return, they want tax laws that benefit them.
It’s not only FICA that people with large incomes are not fully contributing to; they also pay a lower tax rate on income that is reported on 1099 forms than what most of America to pay on incomes reported on W2s. Interest income, dividends, bonuses, etc are reported on 1099s. Why in a fair world would anybody accept that elites should pay a lower tax rate than the majority of Americans? It takes a closed and gullible mind to think that that benefits anybody but someone that doesn’t need that kind of subsidy.
What America needs is for Congress to pass a huge infrastructure bill that is designed to replace all the jobs that have moved off-shore or become mechanized?
The need for an estate tax is greater now than ever before. The gap between the wealthiest 2% and everybody else has widened. The upper middle class is shrinking and the lower middle class is growing.
Get the tax issue right and we could balance the budget and have a sustainable Social Security and Medicare for all.