Corporate Profits Are Up. Their Tax Bill Should Be Too.

Summary

Optimist Economy Podcast
Episode: "Corporate Profits Are Up. Their Tax Bill Should Be Too."
Hosts: Kathryn Anne Edwards (Economist) & Robin Rauzi (Editor)
Date: March 24, 2026

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Episode Overview

This episode delves into the topic of the U.S. corporate income tax rate and the disconnect between rising corporate profits and their declining tax contributions. Hosts Kathryn Anne Edwards and Robin Rauzi unpack the history, rationale, and recent changes to the corporate tax structure, explore arguments for raising the tax rate, and challenge common economic narratives promoted by corporations. The discussion is rooted in accessible economic analysis, relatable metaphors, current data, and a characteristic blend of seriousness and humor.

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Key Discussion Points & Insights

1. Terms & Rhetoric: When "Tax" Isn’t a Tax

• (02:00) Listener confusion about economists’ use of “tax” for expenses not paid to government, e.g., “tax on childbirth.”
  • Kathryn (A): Explains economists sometimes use "tax" to highlight egregious, destructive costs that aren’t literally a tax, but function as social or economic barriers (e.g., high out-of-pocket costs for childbirth equated rhetorically to a tax).
    • “If you think a tax on childbirth would be ridiculous, then why do we have out of pocket costs that would function the same way?” (04:01, K. Edwards)
  • Robin (B): Adds that terms like “pink tax” (extra costs for products targeted at women) clarify this rhetorical device.

2. Capitalism & Corporate Tax: Defining Terms

• (06:00) Kathryn gives a primer on capitalism, the importance of private property, markets, and firms, setting up the logic for a corporate income tax as a “tax on capital.”
  • “The firm is really the necessary ingredient for capitalism... So when we talk about the corporate income tax, we’re essentially saying we would like to tax capital, which is tax the firm.” (07:18, K. Edwards)

3. The Changing Corporate Tax Landscape

• (09:11) Robin and Kathryn outline recent legislative changes:
  • Tax Cuts and Jobs Act of 2017: Slashed the corporate tax rate from 35% to 21%. The rate drop was permanent for corporations, while household tax cuts expired in 2026.
  • Statutory vs. Effective Tax Rate: Effective rates are far lower than the statutory rate due to deductions and loopholes.
    • In 2017: Statutory rate 35%, effective rate 17.2%
    • In 2018: Statutory rate 21%, effective rate 8.8%
    • Kathryn: “Corporations now have a lower effective tax rate than the average American household... around 14.5% for households.” (12:15)

4. Should Corporate Taxes Be Higher?

• Myth-busting Arguments Against Higher Corporate Taxes
  • Passing Costs to Consumers/Wages:
    • Kathryn explains “tax incidence,” distinguishing between taxes on inputs (e.g., tariffs) and taxes on profits. She refutes the idea that higher corporate taxes necessarily mean higher prices or lower wages, noting little wage growth from corporate tax cuts and most savings going to stock buybacks, not workers (17:52).
    • “If I cut your taxes, you make changes today…. A lot of companies said that they would pay out bonuses to workers. They didn’t… it was the single largest year in history for corporate stock buybacks.” (17:15–17:52, K. Edwards)
  • Capital Flight: The threat that corporations will relocate abroad if taxes rise is exaggerated. Cites research showing most companies that relocate would have done so regardless of tax incentives (19:45–20:50).
    • “Even the Mercatus Center, a very conservative economic think tank, says that using tax incentives to lure a company into your state or local is throwing money away.” (20:57, K. Edwards)
  • Corporate Tax Cuts Don’t Deliver Promised Jobs: High-profile case studies (Foxconn, Amazon HQ2): Promised jobs and investments rarely materialize despite hefty tax breaks (21:13–22:16).

5. The Stakes: What Are We Leaving on the Table?

• Revenue Loss from Lower Corporate Taxes

  • U.S. corporate tax receipts as a share of GDP have fallen from 3.5–4% (1950s–1960s) to about 1.8% today (27:16).
  • Kathryn: “$620 billion a year we don’t collect in corporate income taxes. That’s… universal paid family leave, a child tax credit to eradicate child poverty, universal preschool, daycare, afterschool, plus Medicaid for all kids—and you’d have billions left over just to deal with the debt.” (27:34–28:36)
  • Memorable rundown of what $620B could finance, underscoring policy impact of lost revenue.

• Rising Profits, Declining Labor Share

  • From 1929–recent: Corporate profits as a share of GDP have hit record highs (>9%), labor’s share has dropped to its lowest in 60 years, near Great Depression levels (<52%) (29:59–31:22).
    • “Corporate profits right now are higher than the peak of the stock bubble. Labor income is now close to where it was during the early 1930s. Something has to change.” (30:59, K. Edwards)
  • Concludes: this is not just ideological, but a conclusion drawn from a century’s worth of data.

6. Reframing the Narrative: Capitalism, Accountability, and Innovation

• (24:00–25:13) Kathryn identifies as a “capitalist at heart”:

  • “I do believe capitalism has done more for the eradication of poverty and destitution than almost anything else... It creates an incredible amount of wealth—it does not spread it around. Government can do that with really light touch policies. But we are just in a state where we have given too much deference.” (24:15)

• She dismisses fears of capital flight, noting that if corporations threaten to leave, others will replace them in America’s entrepreneurial environment (25:13–25:28).

• Corporate Concentration Inhibits Innovation

  • “Big businesses don’t innovate. Innovation comes from new businesses, not big businesses already in existence.” (33:52)

7. Policy Complexity & Political Challenges

• U.S. tax code is long and riddled with deductions, making reforms politically and technically complex.
• Everyone wants a simpler code—so long as it doesn’t take away their own “carrot” (deductions or incentives). (32:14–32:46)

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Notable Quotes & Memorable Moments

• On rhetorical use of “tax”:
  “Would you tax childbirth? No, that’s ridiculous. But…make women pay three to five grand if they’re lucky… It can be really powerful.” (04:01) —K. Edwards

• On the failed promise of tax cuts:
  “The largest year for corporate stock buybacks in U.S. history. It wasn’t even close. When companies get money…they have corporate stock buybacks.” (17:52) —K. Edwards

• On threats of companies leaving:
  “If I raise the corporate income tax rate so you have to pay 20% or you have to pay 30%, and you pack up and go—good riddance. I bet my life you’re a terrible employer, you pay awful wages, and make a suspect product. Sure, go to that low tax haven of Canada.” (23:40) —K. Edwards

• On people vs. corporations:
  “I would always put my money on people building new businesses, then old businesses staying in power because they are able to use their threat and their size in order to get more money from the government.” (33:52) —K. Edwards

• On the political status quo:
  “We’ve just passed this moment in US economic history that is an incredible reduction in the corporate income tax rate… I don’t think the corporate tax rate should be this low and I think it should be higher.” (22:38) —K. Edwards

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Timestamps for Key Segments

| Timestamp | Segment Description | |-------------|-------------------------------------------------------------------| | 01:57–05:43 | Rhetorical/economic uses of "tax," the “pink tax,” discussion | | 05:45–08:42 | What is capital/capitalism? Primer for broader tax discussion | | 09:11–12:17 | Corporate tax rate changes since 2017, statutory vs effective | | 14:26–17:10 | Arguments against higher taxes: cost pass-through, capital flight | | 17:15–18:12 | Evidence: tax cuts led to stock buybacks, not worker gains | | 19:45–22:22 | Corporate relocation myths; failed state/local tax incentives | | 24:01–25:41 | Kathryn's “capitalist at heart” stance, capital flight response | | 27:14–28:36 | Revenue left on table by low corporate taxes, policy possibilities| | 29:59–31:24 | Rising profits, declining wages: what the data show | | 32:14–32:46 | Policy complexity, deductible carrots and sticks | | 33:38–34:25 | Why entrenched corporations aren’t innovation engines |

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Executive Orders Segment (35:40–37:32)

Listeners and hosts propose fun, symbolic “executive orders” for a better future:

• Robin shares a listener suggestion: require signs announcing what’s being built at commercial sites.
• Kathryn proposes a massive "playground fund" for creative, widespread public play spaces—funded, naturally, by higher taxes on corporations.
  • “I want playgrounds. Like I want to be able to walk and trip over a playground facing any street in the US once. I want a massive playground fund. And I’d be willing to take it from people who own corporations.” (37:02)

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Spiritual Sponsors (Non-financial Inspirations) (37:42–41:43)

• Kathryn: Mutton busting at the Houston rodeo—a sweet, silly event where children ride sheep, as an example of quirky cultural joy.
• Robin: MacKenzie Scott’s philanthropy, notably her streamlined, non-bureaucratic approach to major giving, and the inspirational amounts she donates each year.
  • “...the quote from the Scott people was, ‘We do all the hard work on our end so they don’t have to.’” (41:17, K. Edwards)

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Summary

Theme:
Corporate profits have reached historic highs, yet their share of the national tax burden is at historic lows. The episode argues that raising the corporate tax rate is not only possible but necessary, debunks common counterarguments framed by conventional economic wisdom and corporate PR, and paints a picture—using data and wit—of the social and economic gains that could be achieved with a more assertive approach to taxing corporate profits.

Tone:
Conversational, data-driven, witty, progressive yet pragmatic. Both hosts blend serious economics with lively banter and personal anecdotes.

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For more, follow or support the show at optimisteconomy.com.

Transcript

[A]

You're used to hearing my voice on the world, bringing you interviews from around the globe. And you hear me reporting environment and climate news. I'm Carolyn Beeler. And I'm Marco Werman. We're now with you hosting the World Together. More global journalism with a fresh new sound. Listen to the world on your local public radio station and wherever you find your podcasts. Hello, and welcome to Optimist Economy. I'm Kathryn Ann Edwards, Economist.

[B]

I'm editor Robyn Rousey.

[A]

And on this show, we talk about. Wait, no. What do we do? Hold on. On this show, we believe the US Economy can be better, and we talk about how to get there one problem and solution at a time. I thought I could do it from memory, and I wasn't reading and, like, look what happened. The problem slash solution we're talking about today is the corporate income tax rate. And first we're going to do some announcements and other things, but more corporate income tax rate coming soon.

[B]

I can't seem to open the studio chat. Oh, well.

[A]

Oh, well.

[B]

If you guys wanted to. Studio chat, anything. Sorry, can't read it.

[A]

Announcements. First announcement is that we have recorded our Q and A episode, but we always take questions from the optimist, so. So, of course. Optimist.eacreymail.com we'll do another Q and A episode soon enough. And we'll always take questions.

[B]

You bet. I got a folder of them in our email.

[A]

Yeah. Okay. Next up is Retcon, which we might not have any. Knock on wood.

[B]

Yeah, I'm sure we'll have some once people hear the AI episode.

[A]

Yeah, it'll keep. That'll keep. Okay, let's move into terms and conditions. Did you look anything up this week or have a term for this week?

[B]

I had a term. That was a question, actually, that came from a listener, I think over the summer I've been holding on to. The question was about the way that economists sometimes use the word tax, which seemed confusing to him about where they're not actually referring to a government tax, but they're referring to what would seem just to be a cost or an expense. Can you clarify why tax gets used in that way?

[A]

I think there's like, an economic reason and then there's a rhetorical reason. So the context I hear this a lot is the US Has a tax on childbirth. We don't have a tax on childbirth. A tax on childbirth would mean every woman you know in the labor and delivery room would then have to pay some type of fee or levy after they gave birth.

[B]

And specifically to the government.

[A]

Specifically to the government.

[B]

That's how we think of tax. Normal humans think of taxes as going to a local, state, or federal government.

[A]

You know, sometimes when you say normal humans, I get terrible fomo, but we can talk about that later. Okay, so, yeah, it would be like some government tax agent comes in and collects money, or like it's recorded that you had a birth and you owe some state, local, federal government money. And that is the tax on childbirth. We don't have that, but we do have private health insurance that has out of pocket costs for almost all labor and delivery from a private health insurer in the U.S. if you have to pay 3,000 to $5,000 out of pocket, even if you have a large group health plan that is functionally a tax on childbirth, because it's the same as, like the IRS agent in the room asking for $5,000. Instead, it's someone from your health insurer. So we use it to say, I

[B]

guess I don't understand how that is functionally the equivalent of that. Because some people are paying it and some people aren't.

[A]

No, I think because it looks like a tax even though it's not one. Okay, well, so this is where, like, the rhetorical equivalent would be. This is just a way to highlight an egregious cost, a cost that shouldn't be there. We're like, I'm paying for a service for something like childbirth. Like, that's not a cost that we should be charging people for. Or you could just think of it as a way to illustrate how destructive a cost can be, because we tend to think of taxes as quite destructive to and manipulative of behavior.

[B]

Yeah, that's what I was wondering if it had to do with the incentives and manipulation of behavior that we associate with taxes. But I don't know if that's. I don't feel like when I hear it used. It's always suggestive of that.

[A]

Yeah, I mean, I think it has more of a rhetorical point than an economic one. I think it's more helpful, rhetorically to say it's a way to express that there is an added cost that's maybe not necessarily related to the price that you're paying, but I think it is a very, like, rhetorically, I think it is really helpful of, like, would you tax childbirth? No, that's ridiculous. But, like, you make women pay three to five grand if they're lucky, three to five grand out of pocket. If you think a tax on childbirth would be ridiculous, then why do we have out of Pocket costs that would function the same way. I think rhetorically, it can be really powerful.

[B]

You know, Sophie's pointing out that, you know, she hears things like the pink tax. She's referring to the things that women have to buy that men don't have to buy and that make it more expensive in our society. Society to be a woman. And I think that maybe makes it clearer than attacks on it on a very specific, narrow thing like labor and delivery.

[A]

I think it's. I think, for the record, I think labor and delivery is part of the pink tax calculation.

[B]

Yeah, yeah, sure.

[A]

But, yeah, okay, so I do realize that I was, like, rhetorically, it's pretty good. But again, I am not an editor, famously not an editor. So that's just me, economists being like, yeah, that's word good. Taking from the word one, that's good word.

[B]

All right, what's your term and condition?

[A]

Capitalism.

[B]

Oh, capitalism.

[A]

Well, capital capitalism.

[B]

Okay.

[A]

But because we're talking about the corporate income tax rate today, I thought it would be helpful to do a little bit of capital backstory of what is capital? What is capitalism?

[B]

What is capitalism?

[A]

Yeah. Well, this is again, the Batman quote of, like, we were born in the dark. Capitalism is what we all grew up with. And I think that you kind of accept the system as they experience it and live in it, but don't necessarily know the definition of it. You need three basic ingredients for capitalism. The first thing you need is private property. So you can have a system of private property. That's not capitalism. That would be like feudalism. So private property is the first thing you need. The second thing you need are markets where you can sell your wares or goods or services that also existed before capitalism. You can think of a market and a. Even like a dark ages, like, Middle English, trying to think of some historical period for capitalism. I'm struggling, but, like, people will be like, okay, I make shoes, and I take them to a market, and I sell the shoes that I make, and I use that money to buy other things. Like, you have a market economy that operates with private property, but that is still not capitalism. Capitalism is the introduction of firms who own their inputs, their capital goods, like the storefront, the tools, the manufacturing facility, and they employ people. And the firm is really kind of like the necessary ingredient for capitalism, because firms can specialize in a good. They can specialize in the production of that good, meaning that, like, they make one thing, and then they also specialize in how workers are used to make that thing. So when we talk about the corporate income tax we're essentially saying we would like to tax capital, which is tax the firm, but now we refer to these firms as corporations for the most part.

[B]

Great.

[A]

So this is already going to be a tough one. So here's the thing. The short version is we want to tax those a lot more.

[B]

Do we? Is that what we want?

[A]

I think there's an argument to be made.

[B]

There's always an argument to be made.

[A]

Okay, Argument to be made. I get the sense sometimes from our listeners that we have a set of relatively conservative people who like hearing about the economy. And this is a interesting way to hear about it. And I. Then I get a distinct sense that some of our listener base is like to the left of Lenin and he's like, waiting for like some type of communist revolution slash socialist revolution to burn capitalism to the ground. And I'm. I'm going to do. This is not an in defensive capitalism episode, but maybe a like consider. Consider capitalism

[B]

before you throw the baby

[A]

out with the bathwater. Consider capitalism.

[B]

Yeah, yeah, yeah. Okay, so we're going to take a quick break and then we'll be right back. And we're going to talk about corporate income tax capitalism and capitalism.

[A]

Capitalism. All right, we're back for a tight five on capitalism before I go back to my family vacation in New York. So taxes on capitalism, should we have them?

[B]

Okay, let's talk a little bit about the context of this. We. We meaning the United States, not we, you and me. Well, we changed the corporate tax rate in the Tax Cut and jobs act of 2017, and a lot of those changes got made permanent and some other changes were added in the Oba Oba Oba. So the corporate tax rate in the United States was In the. Was 35%, and now it's 21%. Is that right?

[A]

Something like that. Just like, really quick. The Tax Cut and Jobs act had two types of tax cuts. One for the corporate income tax rate. The other was for a set of household tax breaks. The corporate income tax rate was permanent. The household tax cuts expired. And in fact, they expired this year in 2026.

[B]

Yeah.

[A]

Which is why the one big beautiful bill was passed in 2025, and it made all of the tax cuts that were temporary in that bill permanent. I can say that the tax cut in Jobs act was the single largest reduction in the corporate income tax rates in U.S. history. The corporate income tax is quite old. It goes back to the teens. And yeah, it was a 40% reduction in the rate. And the corporate income tax rate has a statutory rate on paper. The tax on profits is X percent. That X percent is set by Congress. But they also have a ton of deductions and write offs and ways of reducing their taxes. So we have an effective rate of how much they are actually paying in taxes given their profits and what they report. And the effective rate, even when it was 35% statutory, was still quite low. I wouldn't want anyone to be under the illusion that we just made the tax code simpler and that we reduce the statutory rate so that we wouldn't have quite so many deductions. We reduce the effective rate too.

[B]

I do think maybe just for listeners, we should be clear about a couple of terms that have already come up. One is statutory, meaning that that is what's written in the language of the law. The other being that corporate taxes are a tax on profit. So corporate profits are the amount of money that is left over after a company has taken in all the money from its customers and paid out all its expenses. The profits are what's left over. So you only. They only pay taxes on that. They don't pay it on all the money they bring in, which would be their gross revenues.

[A]

Yes. So, so to give you the numbers, in 2017, the last year before the Tax Cut and Jobs act went into effect, the statutory corporate tax rate was 35%.

[B]

Right.

[A]

But the effective tax rate was 17.2. So they were able to reduce almost in half.

[B]

More than half.

[A]

Yeah. In 2018, the statutory corporate tax rate was 21% and the effective rate fell to 8.8%. More than half. Corporations now have a lower effective tax rate than the average American household.

[B]

Oh, by a long shot.

[A]

Like if you were to add up all of the income earned by households in the United States and then all of the taxes paid and just put that as an average, it's around 14 and a half percent and it has been around 14 and a half percent for a long time. That's how much we pay in taxes. So I, I wanted to talk about the corporate tax rate for a couple reasons which I'm going to prime and give you even more numbers in quick succession. I'll say them faster to help our listeners make sure I get them. I'll go through them as fast like I am.

[B]

Ye. Okay.

[A]

I'll just go through each number as fast as humanly possible. Talking this quickly. Okay. There is, I think, two questions for the corporate income tax rate. One is do we think it should be higher? Why or why not? Which is what I wanted to talk about this episode. Then there's the question of how you actually do it, which we don't have time or space to put into this episode because it gets really complicated, especially with global corporate income tax rates and how effective tax corporations are at hiding taxes in low tax countries. I think that some people would hand wave and say like, oh, but like we, we can't because of like global taxes. And like, wave to the air of like, no, it's not possible to effectively tax corporations. No, I assure you it is. If we wanted to tax a company as profitable as Amazon with a higher corporate income tax rate, I promise you we could do it. If there's a will, there's a way. When it comes to taxes. And I think one of the more effective, not even propaganda, but just effective rhetorical tools that very wealthy people, including corporations, have put forward over the last 15 years, is that you can't tax the wealthy even if you try. And maybe Europe tried and it didn't go well. So you can't tax them here, y'. All. Not true. We don't, we don't quit before we play the game. And honestly, I'd like a few at bats when it comes to designing wealth taxes. So same thing applies to corporate income tax rate. You've probably heard we can't have it high. It's too complicated and it wouldn't work anywhere way. I'm going to try and convince you of why the corporate tax rate can be higher and then you'll just have to trust me and we'll do a later episode how we can get it higher. How's that?

[B]

That sounds fun. So you obviously think it should be higher. I mean, a lot of the arguments about why it shouldn't be higher is that it comes out in either higher prices to customers or lower wages to workers.

[A]

Yeah, right.

[B]

That the money's going to come from somewhere and it's going to come from one or both of those sources.

[A]

Yes. We would call this the tax incidence. This has come up a ton with tariffs. If I have an import tariff on something that I use in my firm's production, I'm going to pass on the cost of that tariff to customers. So even though I pay the tax, customers actually bear the tax incidence. The first big key thing to keep in mind is that a corporate income tax is a tax on profits, not a specific input. In theory, it's the money left over at the end of the day.

[B]

Like a tariff is a tax on

[A]

an input, tariff is a tax on an input or something that you sell. Right. Like if I need a very Specific, you know, widget. Widget from China. And now I have to pay a tax on it. But I can't make any product or sell anything without this widget. I will pay that tax, then I will pass it on in the form of the higher price of my big widget for corporate profits. It's different because I can still have efficiently produced goods and not pay a tariff on whatever good. And the tax comes at the end when I report my profit for the year. So those arguments are. Wait, what was the first one you said? Because the second one you said was they're just going to pass it on to consumers.

[B]

The other one is it comes out of wages.

[A]

Oh, yeah, y', all. Not much left in wages to come out of is all I'm gonna say.

[B]

Right.

[A]

For decades, the argument about the corporate income tax rate has been that capital is mobile.

[B]

Right.

[A]

And if you have too high of a tax on corporations in the US they will pack up and move elsewhere. Right?

[B]

They'll go to Ireland or they'll go to Ireland.

[A]

They'll go Bahamas or something. Barbados, like, they'll go somewhere else. And so you have to keep the corporate income tax rate low in order to keep corporations here. And when economists talk about the corporate income tax rate, that is what they're talking about. They almost are entirely talking about the mobility of capital, capital, as I said, in terms and condition of like the big C capital. The actual year in which the taxes fell. The motivations behind the tax cut were obviously not like, hey, these really large corporations are basically practicing extortion. And they've told us if we don't lower the tax rate, they'll pack up and leave. So we have to respond to that because apparently when you're in Congress, you do negotiate with terrorists. They didn't say that at all. What they said was, this is going to be good for the American worker. This is going to be good for the American family. We're going to have more jobs here and those jobs are going to pay more.

[B]

And so that's the jobs part of the Jobs Act.

[A]

It was the jobs part of the Jobs act is that we're going to cut corporate taxes and keep jobs here and they'll pay more.

[B]

Right?

[A]

Well, the way that a tax cut is absorbed is right away, like, if I cut your taxes, you make changes today.

[B]

So the difference between you in that sense, like if I'm a. If I have a company, yeah, you

[A]

person benefited by the corporate income tax rate or you household who benefited from a lower income tax rate, okay, that year 2018. Yeah, it was mid lean. Wage growth wasn't low, but it wasn't high. A lot of companies said that they would pay out bonuses to workers. They didn't. If they did pay bonuses, the most generous estimate is that it was less than 2% of the corporate tax cut. More importantly, it was the single largest year in history for a corporate stock buybacks.

[B]

Okay, explain, explain that. How does that lead to corporate stock buybacks?

[A]

Effectively, what happened to corporations is that they got a much lower tax rate. They had excess cash in 2018. What did they do with it? They spent it on corporate stock buybacks, which is where you basically invest in your own share price in order to make it higher.

[B]

That's because you, as your corporation buys a bunch of its own stock, you're just driving the price up. Or is it because there's then less stock on the market?

[A]

I think it's both. Yeah. So, I mean, the intellectual argument is like, y', all, we can't tax corporations. They won't stay in America. And they're saying if you give us a lower corporate tax rate, we'll have more money to pay workers wages.

[B]

And none of that is playing out.

[A]

I mean, but the absolutely paid out is that the workers didn't get anything. And they absolutely had, I mean, the largest year for corporate stock buybacks in US History. It wasn't even close. So when companies get money in the US they have corporate stock buybacks. What they would say is getting the value of their company higher allows them to make capital investments and expansions. And that the stock price, since that's how they could issue debt, and since that's how they're valued, that affects what they can borrow, what rate they can borrow at. That that is a way to bring innovation and expansion. And that it's working through a higher stock price, certainly not working through workers. I'm sure they would deny that too. I guess. My, my. Here's a way to think of why I think the corporate tax rate. Like, if I had to make like, what is your most succinct argument for why the corporate tax rate needs to go up? It's because nobody, no locality in the country is advised now that they should do this for a company within the

[B]

U.S. okay, I'm gonna say I feel like actually, as a Californian, that states all around the country to steal California businesses with lower tax rates.

[A]

So Texas had a specific corporate tax rate that was meant to entice companies to move and relocate their headquarters to Texas. And what a set of researchers Found when they looked at people who actually claimed that tax rate was that almost all of them were going to move anyway. The tax didn't influence their decision was the key part. It just made it more lucrative for them. You think of a company like a big relocation was Exxon moved from California to Texas. They didn't do that. Like waiting for the Texas legislator, the biggest clown car in North America to come up with some kind of package they approved of because there's a trustworthy set of people like no, they had had plans for years, right. That they were going to relocate. They wanted to move to cheaper cost of living or whatever their reasonings were. And the paper was, I thought was really interesting. But it's basically like once they decide to go, then they tell the location like, you know, will come if you can get a business friendly environment and make sure our taxes are lower here. And it's unemployment taxes, it's property taxes and not just state level corporate income taxes, business taxes.

[B]

But you're saying that nobody advises states to do that anymore because of that, that finding?

[A]

Well, so even the Mercatus center, which is a very conservative economic think tank, they say that using tax incentives to lure a company into your state or local is throwing money away.

[B]

Yeah.

[A]

The advisement now is do not do this because they will make you promise the moon. And they mostly don't deliver. So you know, great example is Foxconn

[B]

in Wisconsin, the big Chinese manufacturer of iPhones and other electronic devices.

[A]

Yes. They were going to make a Silicon Prairie in Wisconsin and they said, here's the number of jobs we're going to have, here's how much they're going to pay. We're going to make this much billion in capital investment and we need a package that's friendly. You know, the governor goes down to the state house, tells the legislature, hey, if we approve this, we're going to get all these jobs and this is going to be good. The legislature approves the tax package and then yeah, they don't come. In some ways Amazon HQ2 might be more familiar, but you know, definitely less egregious. But it was similar. Like they promised 50,000 jobs that were making $100,000 on average with some billions of capital investments. Nine years later, they've got 8,000 jobs and they've built two of their buildings, but not the second half of capital investment. I mean they just, they didn't deliver as promised.

[B]

So these, these bids, are they specific to the one company? It's like a, it's like a negotiation with Amazon, it's not. We're changing the tax code for all the companies which you could imagine per your study would be. I mean, of course you're going to wind up behind.

[A]

I don't even necessarily think Amazon acted in bad faith with HQ2. I think they make decisions that are irrespective of the corporate income tax rate. Like they're making a business decision. It has its own motivations. It's not because they're necessarily like a mean, spiteful. Just wanted to see how much localities could bend over backward. I think that their business changed. And I think that we have just passed this moment in US economic history that is an incredible reduction in the corporate income tax rate. People are gonna write in and tell me what a stupid economist I am, that I don't know how economics works, that this is Econ101. Like she's a bad economist, she's not a real economist or whatever you wanna hear. Because I don't think the corporate tax rate should be this low and I think it should be higher. And I understand perfectly that there is a risk that if you raised the corporate income tax rate in the United States, a company would leave. And I think in my mind I'm like, okay, goodbye, bye bye. If I raise the corporate income tax rate so you have to pay 20% or you have to pay 30% and you pack up and go, good riddance. I would bet my life that you are a terrible employer, that you pay awful wages and I bet you make a suspect product. But sure, go to that low tax haven of Canada. Well, you know, I just didn't have

[B]

businesses in 2017 when the taxes were higher.

[A]

No, no. And I, I think that this goes back to why I wanted to talk about capitalism and the terms and conditions. Like I am a capitalist. Like at heart I am truly a capitalist.

[B]

I know it's surprising sometimes when that

[A]

guy called me a garbage communist, Lefty, I felt like he didn't know why he was insulting me. But I'm not really a communist. I do believe capitalism has done more for the eradication of, of poverty and destitution than almost anything else we could point to. I mean, it creates an incredible amount of wealth. It does not spread it around. Government can do that with like really light touch policies. But we are just in a state where we have given too much deference. And I, if, if there was, if Amazon was like, yeah, well we're gonna pack up and we're gonna leave North America and Amazon will pull out, I would be like, yeah, man, sounds great. Take, yeah, you, you would leave jobs behind. But we have an entrepreneurial capitalist society. Someone replace you because you didn't exist 30 years ago. I mean, same thing with, you know, if Starbucks was said, if we unionize, Starbucks will shut down. Sounds great. People will still drink coffee.

[B]

We got plenty of coffee.

[A]

I mean, I don't like, I don't champion people losing their jobs. I don't like the idea of there being layoffs. But our economy will pick itself up by the pieces of a Starbucks less America and move on. We live in the largest, most dynamic economy in the world. It would be hard. There would be people who genuinely suffer. But we can ease the suffering and help people invest in new things. I'm sure someone's like, you're a naive little girl. Yes, I'm sure doesn't know what you're talking about.

[B]

A job. Can somebody say that to you?

[A]

Someone said that to me. I was testifying in front of Congress, in front of the Republican led House Ways and Means Committee that was putting together the one big beautiful bill. I was saying that we need to have an effective tax structure in the US and this guy, I don't know, some Gibron said, you know, don't you always notice how it's the people that have never created a job in their life that are the ones telling us what to do? And y', all, that was the closest I got to like rage crying during that hearing was when that guy said I wasn't a job creator. And I was like, you, man, I made my own job. And it is not a corporate income tax rate that is preventing me from expanding. It's the lack of reliable childcare. I was so mad.

[B]

So I didn't mean, I didn't mean to trigger you with that memory.

[A]

I'm okay. But I do need to call my counselor after this.

[B]

Can I ask one other question before maybe, maybe you're going to get to this, but how much are we talking about in terms of corporate taxes? Like how much, how much of that is? I mean, it's nearly.

[A]

It's a lot of money.

[B]

It's a lot of money, right? It's a lot of money in tax dollars that, that we don't have to do anything else with.

[A]

Okay, so how should we think about how much money is left on the table by having a much lower corporate income tax rate? It's hard because companies are always growing, the economy is always growing, and so on. So you can look at the difference in tax collection from the corporate income tax expressed as A share of gdp.

[B]

Okay.

[A]

Which is the size of our economy.

[B]

Sure.

[A]

So as a share of GDP, it used to be, think in like the 50s, 60s, hung at around between 3 and a half and 4%, and now it's around 1.8. So if you were to just take two points of U.S. gDP, the difference in tax collection.

[B]

Yeah.

[A]

This is $620 billion a year. We don't collect in corporate income taxes. So let's go back and do my favorite math. So $620 billion a year. Yeah, 20 billion is how much it would cost to have a universal paid family leave system. And we'd still have 600 left over. 100 of that you could put into a child tax credit that goes to every kid and is generous and basically eradicates child poverty. You know, another hundred you could spend on universal preschool, universal daycare, and then I think you could, you know, what the hell, as long as you've got the money, add another hundred to have universal after school and universal summer programs. Honestly, universal Medicaid for all kids. That wouldn't cost that much because we insure most of them, at least half of them on Medicaid anyway, and they're quite cheap. And then we would still have one to $200 billion left over just to deal with the debt. And that's just from corporate income tax rates. This is a lot of money to leave on the table for jobs, Robin. Jobs. They're job creators. Not like you and me, stupid women who don't know what we're talking about when it comes to the big man's corporations. I mean, I would feel so differently about this. I want to make some things very clear. I would feel incredibly different about the corporate income tax rate if we had universal paid sick days, if the minimum wage wasn't 725, if 100% of people had paid family leave, or if they ever got bereavement leave or if we made more income. I would feel really, really different about the corporate income tax rate if they had ever proved that they spent it on workers cake eating it. I don't know how that phrase works. That's corporate income taxes. I'm so. Well, no. And if you're like, I don't know. I don't know, Catherine. Even after shrinkflation, I still think I'm on big corporations side. I want to explain why I think corporate profits are too high and labor income is too low. I'm going to start technical and I promise I will get to a human place. We measured the size of the economy through gross domestic product. It has a sister statistic called gross domestic income. And you can use gross domestic income to understand how much money goes to corporations after profits as a size of the economy. How much money goes to the wages, compensation and non wage benefits of workers. Well, this series starts in 1929. And in 1929, corporate profits as a share of the economy was 8.9%. And you would have had economists in the almost century since tell you there's no way we'd ever get that high again. The last four years, corporate profits as a share of the economy have been over 9%, the highest four years on record in almost a century. Of how much money corporations make in profit are the prior four. They have never been so profitable. They're even more profitable now than they were just before the Great Depression wrecked the economy. A similar measure is, you know, kind of same shares. How much goes to workers? That number has been falling for 60 years and is now at a low just under 52%, which puts it on par with how much workers made during the Great Depression right in the 1930s. So corporate profits right now are higher than the peak of the stock bubble. Labor income right now close to where it was during the early 1930s of the great Depression. Something has to change. When I say corporations are making too much money and people aren't making enough money, like, yes, I'm a liberal progressive economist and I want nice things, but I have a hundred years of data behind me. When I say corporations are making too much money and workers are not making

[B]

enough, I feel like, yeah, I feel like we, it's weird. I feel like we have the same conversation in like 15 different ways. Like people are not being paid enough.

[A]

I think some things are really complicated and they require an economist like me to explain. And some things are not that complicated. One has too much money, the other has too little. Like womp, womp, like here, government, you've got a job to do. It's not that hard. We're out of balance. Yeah, we are a lot of the way there. But now we have to deal with incredible complications and how businesses are taxed that they can then use to reduce their tax rates.

[B]

Right, right. What corporations can deduct and how they deduct them and how soon they deduct them and whether they deduct them over those expenses over time. And we've made it way easier for people to lower their tax bill by claiming expenses immediately in year one.

[A]

And I should say that like moving to a simpler tax rate is Easy. Legally, you have a tax code that, that's thousands of pages long and you replace it with one that's much shorter. It's that we have turned our tax system into a complex bonus and reward mechanism. And there's almost no way to change the tax code without creating some kind of loser. And this is how we've gotten to where we are of like, oh, yeah, make taxes simpler, but not on my thing.

[B]

Yeah, the carrots and sticks are very. And everybody knows where the carrots are and where the sticks are.

[A]

Yeah. And no one wants to lose their carrot.

[B]

Yeah, exactly.

[A]

Corporations, the same. So I, I think much like our estate tax episode, like, there are still some, like, very complicated questions related to the estate tax, but like, Bezos Jr. I'm coming for you. You know what, Bezos Sr. I'm coming for you, too. Did I get people mad enough about how much profit corporations have relative to how much money they have and all the nice things we could buy?

[B]

I mean, I don't know. Do you want to go back to your capitalist at heart?

[A]

I am a capitalist at heart because I don't think that this incredible economy that's 31 trillion in size, that employs 170 million people should be held hostage by a corporation that wants lower taxes.

[B]

Yeah.

[A]

Like, I would bet on 170 million people. People who have access to a loan to family money to put it all together on a credit card and they put their life on some dream business. I would put my money on them over Amazon any day.

[B]

Yeah.

[A]

I would always put my money on people building new businesses, then old businesses staying in power because they are able to use the. Their threat and their size in order to get more money from the government and get more protection. I also don't think it's good for the economy to have such concentrated wealth amongst businesses because big businesses don't innovate. Innovation comes from new businesses, not big businesses already in existence.

[B]

Yeah, no. Big businesses just bully everybody around them. Witness Ticketmaster. And what they just.

[A]

Yes, yes. It's like, yeah, all right, well, eradicate Ticketmaster. Y' all still have concert tickets?

[B]

Have concerts.

[A]

It's funny, like, we're afraid to talk about the pain that comes from making a big corporation mad. But we're okay with the pain that comes from staggering income inequality on perpetuity or the pain that comes from not being able to afford childcare. The pain that comes from not being able to afford health care. The pain that comes from not being able to afford elder care as your parents are dying and all these terrible decisions and all that pain's okay. But if, like, Bezos feels the squeeze and he cuts jobs, we can't allow that.

[B]

Well, there's nothing stopping Bezos from cutting jobs now. I mean, they're gonna cut 10,000 jobs, I don't know, in the next few months, you know?

[A]

Yeah, I mean, corporate income taxes don't give you. They don't like recession proof the economy. They don't create wages or income. Like you're rewarding people who are already winners. Like, I just don't like that. I don't feel like that's very American or capitalist.

[B]

Right. It's certainly not getting us subsidized childcare.

[A]

All right. Okay, we need to wrap.

[B]

Take a quick break.

[A]

Yeah, quick break.

[B]

We'll be right back. Okay, we're back with executive orders. Katherine, do you have an executive order?

[A]

Come back to me. Okay.

[B]

I'm going to share an executive order from Valerie Worth in Raleigh, North Carolina. She wants all commercial construction sites to have a sign that tells you what's being built. She wants to know whether she could be excited that she's getting a yummy new restaurant versus a boring bank. Like, this would be very. This would be very easy. I'm also down with this. I'm very curious. What is going in that hole? This is similar to the, Am I moving in or moving out on the moving trucks?

[A]

Yeah, I want some like idiot proof in here. Like, I want like a little picture of what it's going to be.

[B]

They do that sometimes. They do that sometimes too.

[A]

They do it sometimes. I want more. My executive order. I am currently in the greatest city in the world, New York City, and it has some of the most incredible playgrounds my children have ever or will ever go to. And we need like a massive playground fund just to build playgrounds everywhere. Like we. Every airport needs one, every library needs one. Most public spaces need one. I mean, I want playgrounds. Like, I want to be able to walk and trip over a playground facing any street in the US Once. I want a massive playground fund. And I'd be willing to take it from people who own corporations.

[B]

I think we've got two to $300 billion left.

[A]

Yeah, we've got two to $300bn. But yeah, my executive order is we need more playgrounds. They need to be built, like with art students. I mean, I'm thinking like big government liberal stuff from here to high heaven. But I want some like public funded art student to be working on playgrounds all over and every airport and train Station need them. So more playgrounds. Spiritual sponsors.

[B]

All right, we end our show talking about our spiritual sponsors, which are the non financial things that get us through the week. Katherine, what's your spiritual sponsor?

[A]

My spiritual sponsor is mutton busting.

[B]

What is this?

[A]

Okay, okay. Imagine a rodeo where like, a cowboy gets on like a bucking bronco horse and he has like eight seconds to try and stay on, and the horse, like, tries to kick him off. Okay, now imagine instead of a man on a horse, it is a kindergartner on a sheep. This is mutton bustin.

[B]

I'm sorry, this is an actual activity.

[A]

This is. Oh, okay, hold on.

[B]

Some respect. Wait, wait, is this a cartoon? What is this?

[A]

No, no, mutton busting is real. It happens at the Houston rodeo. I just. I just watched it. Mutton busting. They put these little kids on sheep and they wear like helmets and they have like a pad on their chest. And basically they put the kid on. They have them, like wrap their arms around the sheep and they hold onto the wool as tightly as they can. And the sheep just runs from one side of the rodeo to the other. Yeah, they are at a pen that's like 50ft long. And the sheep is trained to just run from one side to the other. And then you just see how long the little kid can stay on before he falls off. This is mutton busting. They'll like, feature it on the local news during the rodeo. It's so precious. A lot of times the kids are really traumatized and crying, and other times they think it's hilarious, but it's just. It's adorable. So the sheep that I saw this year were Woolly Nelson.

[B]

These are the names of the sheep.

[A]

The sheep, yeah. Woolly Nelson, Merrill Sheep, Fleecewood Mac, Lamborghini, and then of course, my favorite, the Toddler Tosser. But the sheep are so. I mean, they're so mild and dumb. Like, they just jog over. They just stand in one corner of the pen. Like they don't do anything. They just. They all know to stand in one group. And so it ends up being like 20 sheep are just watching the other ones run up, being like. Like, you had a kid on you. You don't anymore? Anyway, Mutton Bustin is my spiritual sponsor.

[B]

Excellent.

[A]

You can see videos of Mutton Bustin online.

[B]

Okay, well, my spiritual sponsor, before I knew you were gonna talk about Jeff Bezos and Amazon so much, was I just read that Mackenzie Scott, famously his ex wife, but also the most prolific philanthropist this country has ever seen, gave away $7.17 billion in charitable giving last year. And just so you know, the giving rate among the ultra wealthy is generally 1.2% of their net worth. Anyway, she funds, you know, college scholarships and programs that connect low income communities with union jobs and all sorts of really amazing things that I think also pay, that she believes anyway will pay dividends. And every time I read a story about what she's done and who she's funded, it's just totally inspiring.

[A]

But did you read about her process? Yeah. Listeners, this is crazy. She basically, they do an incredible amount of research on their side. Then Scott gets in touch with the people that they want to fund and is like, yeah, we like what you do. So here's $20 million. Like, they don't make them fill out like applications for days.

[B]

They send, they just send an email and it's like, can we schedule a call? And I read this story I just read recently. There was a person who just kept throwing it to junk. It was like, until finally she sent it to her, you know, the development team. And the development team replied and then called back and was like, they want to give us $20 million. She was like, wait, what? And it was a historically black college in Maryland. So she gets on the call and is ready to make this big pitch. And they're like, oh, no, no, no, we already know. We already know.

[A]

Yeah, we're done. It's 20. You're great.

[B]

Yeah, yeah, it's amazing. It's amazing.

[A]

I appreciate philanthropy like that because I feel like a lot of philanthropy is formalized, labor intensive begging. And I like that. I mean, the quote from the Scott people was, we do all the hard work on our end so they don't have to. And I was like, wow, that is not how most people who do philanthropy feel about it.

[B]

It's like, please spend a week on this application so we can give you $3,000.

[A]

Yeah, not that. Not that you and I would know anything about that. Anyway, we gotta go.

[B]

Okay.

[A]

The Optimist Economy podcast is edited by Sophie Lalonde. Our video production for social media is by Andy Robinson. Thank you very much. You can share video clips from the show on TikTok, Instagram, YouTube or LinkedIn. You're going to want to see the episodes from this show. Since I'm not in my typical office and I'm in a another location that has a glass wall behind me with people walking by or just stopping right over my shoulder and talking throughout the episode.

[B]

If you're on Substack, you can follow us there, too. We have an optimist chat going where you can talk with fellow optimists. Optimist economy is supported at this point solely by listeners like you, not by Mackenzie Scott. So if you have the means to contribute, you can do [e-mail] and we'll also happily sell you a T shirt, a hat, and have I mentioned we have stickers?

[A]

Yeah. Yes. I don't know if you have, but we do. Thank you, Optimus, and see you next week.

[B]

Okay.