Who Benefits?

MetLife chairman Steven Kandarian’s op-ed at the Wall Street Journal is mostly benign. In it he urges other large company CEO’s not to defend the various tax breaks their companies have been using:

To achieve meaningful tax reform, America’s business leaders need to do our part, as our predecessors did 30 years ago. If Congress is to succeed, we must be willing to put the national interest ahead of our narrow self-interest.

It will not be easy. The lobbyists and special interests have been busy since 1986. The tax code is again stuffed with loopholes, credits and deductions. Every provision benefits some company or industry, my own included.

The lobbyists hired to protect such preferences always predict doom if they are stripped away. But if our businesses cannot survive without tax subsidies, we should ask ourselves how much value we are truly creating for customers and shareholders.

It’s the last sentence that caught my eye and that’s a theme he repeated in the op-ed:

The argument for high corporate tax rates is that companies ought to pay their fair share. But businesses merely pass on the value they create to real people—owners, customers or employees.

As the late Mayor Daley used to say, let’s look at the record. Over the period of the last thirty years real wages have been practically flat and large company payrolls have been slashed. Today’s largest companies have far fewer employees than the giants of yesteryear. Consequently, it doesn’t seem reasonable to say that employees have captured much of the value added by today’s large companies.

Let’s look at the second leg of that tripod—customers. Consumer prices have not been falling. They’ve been rising slowly.

Over that period of the last 30 years the DJIA has risen more than 10-fold. Over the last 10 years it has quadrupled. It is obvious that owners have captured almost all of the economic surplus that has been generated over the period of the last 30 years. You can see it when you look at the ratio of CEO compensation to ordinary employee inflation in most companies and the proportion of income and wealth held by the top .1% of individuals.

We need tax reform because we need greater efficiency. The corporate income tax is a prime target for reform because it’s inefficient. But we shouldn’t stop there. We need to reconsider the entire list of neoliberal policies that have driven our society and economy for the last half century and, increasingly, for the last 25 years. They aren’t working for most people. They aren’t working for consumers or employees.