At the same time that North Carolina is experiencing the most dramatic economic downturn since the Great Depression and unemployment benefits are getting cut for jobless workers, massive corporations are enjoying record profits and tax breaks.
A recent report by Oxfam titled “Pandemic Profiteers Exposed,” found that 17 out of the top 25 most profitable U.S. corporations expect to make about $85 billion more in 2020 than in previous years.
If the $85 billion that the most profitable U.S. corporations expect this year were taxed at the federal statutory rate of 21 percent, it would generate about $18 billion. This revenue could be used to finance another round of $1200 payments for about 15 million people or $600 a week in unemployment insurance through the end of 2020 for about 1.5 million people.
Unfortunately, the average effective tax rate – the rate that corporations actually pay – is closer to 11 percent. That means that corporate welfare in the form of tax breaks will result in about $8.5 billion less in the way of federal revenue than would be collected if 17 of the top 25 most profitable corporations paid the statutory corporate tax rate. This is money that could be used to help develop a vaccine and finance the economic recovery.
The vast majority of corporate profits are distributed to shareholders – who are mostly white and male. Although Black people are twice as likely to die from COVID-19 and twice as likely to face unemployment as would be expected based on their share of the population, nine out of every 10 dollars of excess pandemic profits will go to white people, while only 32 cents will end up in Black and Latinx communities.
Super-profitable corporations benefit from tax breaks and loopholes that give them privileges unavailable to the average person. A study by the Institute on Taxation and Economic Policy found that at least 91 Fortune 500 companies paid $0 in federal income taxes in 2018. Regulatory changes since 2017 have given certain industries and companies tax privileges that go beyond what should be allowed by law. More recently, the CARES Act ushered in a $135 billion giveaway for millionaires and the latest Senate plan proposes even more tax breaks for the uber-wealthy.
COVID-19 is putting increasing pressure on state and local budgets. As Main Street businesses struggle to stay afloat, mega-corporations like Facebook, Apple and Google have seen their profit margins increase by 20-30% and many billionaires have seen their net worth double. We need wealthy corporations and households to contribute their fair share if we want to recover faster and stronger.
Wealth was unevenly distributed before the pandemic, and economic inequality has gotten dramatically worse since the beginning of 2020. While billionaires and super-profitable corporations are better off than ever, joblessness and budget cuts are threatening the lives and livelihoods of everyday people.
Leila Pedersen is a Policy Analyst with the NC Budget & Tax Center