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

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.

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)

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

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 |

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)

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)

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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