Plutocratic Insurgency Note 12: COVID-19 Fall Out—Revitalized Public Infrastructure or the Further Concentration of Private Wealth?

Plutocratic Insurgency Note 12: COVID-19 Fall Out—Revitalized Public Infrastructure or the Further Concentration of Private Wealth?

Robert J. Bunker

The COVID-19 pandemic has both exacerbated and accelerated the ‘hollowing out’ of the American liberal democratic state’s ability to provide public goods to its citizens while at the same time greatly benefiting its richest families and the multinational corporations under their ownership and control. With the pendulum shifting in the recent presidential and congressional elections from one major political party to another, US federal governmental (and the governed’s) economic interests are now in a direct collision course with plutocratic privilege and prerogative. While the state now seeks to revitalize the public infrastructure—for the American people—family dynastic and plutocratic interests seek to increasingly maximize their economic profits and, in the process, further defund and commoditize such public goods.  

Key Information: “The Backstory” [Corporate Taxes/Hollowing Out State Institutions]. Foreign Affairs. 11 April 2021, https://link.foreignaffairs.com/view/5a32939824c17c7381562620dzdig.ywb/7349d402:

Last week, the administration of President Joe Biden announced a plan to make corporations pay higher taxes. The proposal comes after years of growing concern that the clever accounting practices of big companies—including stashing profits in overseas tax havens—are denying states their fair share of taxes. Last year, the economists Joseph Stiglitz, Todd Tucker, and Gabriel Zucman noted the troubling implications of corporations evading national tax regimes. “Unchecked, these developments will concentrate wealth among a smaller and smaller number of people, while hollowing out the state institutions that provide public services to all,” they wrote.

Discussion of corporate tax rates and tax evasion came to the foreground after the shock of the Great Recession and the proliferation of movements such as Occupy Wall Street. Andrea Louise Campbell argued in 2012 that it was time for the United States to levy greater taxes on corporations. “The corporate tax has plunged as a source of federal revenues, from 30 percent in the 1950s to ten percent today,” she wrote.

Corporate taxation was not merely a national issue. “Companies and wealthy people have become increasingly able to shift capital to countries with low tax rates or to tax havens,” wrote François Bourguignon, “allowing them to avoid paying more redistributive taxes in their home countries.” That dynamic demanded an international response. Matt Mossman insisted that “fundamental reform will require the planet’s most powerful sovereigns to act as one—and that includes countries that now compete with each other to use tax incentives to attract foreign investment.”…

Key Information: Matthew Gardner and Steve Wamhoff, 55 Corporations Paid $0 in Federal Taxes on 2020 Profits. Washington, DC: Institute on Taxation and Economic Policy (ITEP). 2 April 2021, https://itep.org/55-profitable-corporations-zero-corporate-tax/:

At least 55 of the largest corporations in America paid no federal corporate income taxes in their most recent fiscal year despite enjoying substantial pretax profits in the United States. This continues a decades-long trend of corporate tax avoidance by the biggest U.S. corporations, and it appears to be the product of long-standing tax breaks preserved or expanded by the 2017 Tax Cuts and Jobs Act (TCJA) as well as the CARES Act tax breaks enacted in the spring of 2020.

The tax-avoiding companies represent various industries and collectively enjoyed almost $40.5 billion in U.S. pretax income in 2020, according to their annual financial reports. The statutory federal tax rate for corporate profits is 21 percent. The 55 corporations would have paid a collective total of $8.5 billion for the year had they paid that rate on their 2020 income. Instead, they received $3.5 billion in tax rebates.

Their total corporate tax breaks for 2020, including $8.5 billion in tax avoidance and $3.5 billion in rebates, comes to $12 billion.

This report is based on ITEP’s analysis of annual financial reports filed by the nation’s largest publicly traded U.S.-based corporations in their most recent fiscal year. All data presented here come directly from the income tax notes of these reports. Some companies with unusual fiscal years have not yet filed such reports. Some publicly traded corporations paid nothing on profits in their most recent fiscal year but are not included in this report because they are not part of the S&P 500 or Fortune 500…

Key Information: Jim Tankersley and Emily Cochrane, “Under Biden, Democrats Are Poised to Raise Taxes on Business and the Rich.” New York Times. 27 March 2021, https://www.nytimes.com/2021/03/27/business/biden-taxes-business-rich.html:

Democrats have spent the last several years clamoring to raise taxes on corporations and the rich, seeing that as a necessary antidote to widening economic inequality and a rebuke of President Donald J. Trump’s signature tax cuts.

Now, under President Biden, they have a shot at ushering in the largest federal tax increase since 1942. It could help pay for a host of spending programs that liberal economists predict would bolster the economy’s performance and repair a tax code that Democrats say encourages wealthy people to hoard assets and big companies to ship jobs and book profits overseas.

The question is whether congressional Democrats and the White House can agree on how sharply taxes should rise and who, exactly, should pay the bill. They widely share the goal of reversing many of Mr. Trump’s tax cuts from 2017, and of making the wealthy and big businesses pay more. But they do not yet agree on the details — and because Republicans are unlikely to support their efforts, they have no room for error in a closely divided Senate.

For Mr. Biden, the need to find consensus is urgent. The president is set to travel to Pittsburgh on Wednesday to unveil the next phase of his economic agenda — a sprawling collection of programs that would invest in infrastructure, education, carbon-reduction and working mothers and cost $3 trillion to $4 trillion.

The package, which follows on the heels of Mr. Biden’s $1.9 trillion economic aid bill, is central to the president’s long-term plan to revitalize American workers and industry by funding bridges and roads, universal pre-K, emerging industries like advanced batteries and efforts to invigorate the fight against climate change…

Key Information: Jeff Stein and Tony Romm, “White House eyes tax increases on companies and the wealthy to fund infrastructure, setting up clash with GOP.” Washington Post. 23 March 2021, https://www.washingtonpost.com/us-policy/2021/03/23/biden-taxes-rich-companies/:

White House officials are exploring tax increases on businesses, investors and rich Americans to fund the president’s multitrillion-dollar infrastructure and jobs package, according to two people briefed on internal conversations.

The centerpiece of the tax increases would probably be a higher corporate tax rate — reversing part of President Donald Trump’s steep corporate tax cut in 2017 — as well as higher levies on investment income and a higher top marginal tax rate.

President Biden’s tax increases may prove among the most controversial elements of the administration’s coming “Build Back Better” agenda, setting up a major confrontation with business groups and congressional Republicans.

The president has said his tax increases will not affect people earning less than $400,000 per year. He and his advisers have called for funding the next major domestic priority with higher levies on wealthy Americans, citing the relative success enjoyed by the affluent during a pandemic that has pummeled the economic fortunes of the working class. Almost all of the president’s $1.9 trillion stimulus plan was financed by adding to the federal debt.

“Folks at the top who’ve been able to benefit from this economy and haven’t been this hard-hit, there’s a lot of room there to think about what kinds of revenue we can raise,” White House economist Heather Boushey told Bloomberg News this month…

Key Information: Samuel Stebbins and Grant Suneson, “Jeff Bezos, Elon Musk among US billionaires getting richer during coronavirus pandemic.” USA Today. 20 December 2020, https://www.usatoday.com/story/money/2020/12/01/american-billionaires-that-got-richer-during-covid/43205617/:

The COVID-19 pandemic has triggered an economic crisis of a magnitude not seen since the Great Depression. In the early months of the pandemic, as local businesses across the country closed, tens of millions of Americans lost their job. Now, more than half a year later, more than 11 million Americans remain unemployed and many shops and restaurants will never reopen. Here is a look at American businesses that might not survive coronavirus. 

The recession ushered in by the novel coronavirus has not meant economic catastrophe for everyone, however. In fact, in the months since the virus reached the United States, many of the nation’s wealthiest citizens have actually profited handsomely. Over a roughly seven-month period starting in mid-March – a week after President Donald Trump declared a national emergency – America’s 614 billionaires grew their net worth by a collective $931 billion.

Using data from Forbes, 24/7 Wall St. identified the American billionaires who got richer during COVID-19. We ranked the 30 billionaires whose monetary wealth grew the most from March 18, 2020 to Oct. 13, 2020. We only reviewed changes in net worth for American citizens who were considered billionaires as of April 7, 2020… 

Who: The US federal government, representing the interests of the majority of its citizens (lower through upper middle classes), and the privileged upper (plutocratic) class, who control an increasingly greater share of societal wealth by means of stock ownership of national and multinational corporations.

What: The Biden administration tax plan seeks to rebalance the nation’s public and private economic interests. The plan would help to finance the rebuilding of America’s infrastructure at the expense of the plutocratic class. 

When: Near term—likely some months out. Said to be a follow-on to the signing of the $1.9 trillion COVID-19 relief bill (H.R. 1319; “American Rescue Plan Act of 2021”) which took place on 11 March 2021.[1]

Where: Throughout the individual states and territories of the United States and globally where multinational corporate operate and turn a profit.

Why: Plutocratic interests seek to have their corporate revenue streams become extra-sovereign with regard to US federal and state taxation so as to maximize their ongoing profits. The intent is to increase (+) dynastic family wealth holdings which de facto takes place at the expense (-) of liberal democratic state revenues. This process serves to defund the state and its ability to provide public goods such as a functioning infrastructure. Plutocrats then gain public (and political) favor by providing big philanthropy which serves to privatize public giving.

The crabbed millionaire’s puzzle / J.S. Pughe / Puck, 1901

Illustration shows an old man labeled “Millionaire” sitting in a chair atop a pile of moneybags, bemoaning the fact that he now has little time to give away his money in a satisfactory manner; on the left are the church and the university looking for contributions and on the right are the hated “Relatives” looking to inherit new found wealth. Source: US Library of Congress

Analysis: The US federal government is taking on additional national debt in order to provide ongoing goods and services to its citizens although, at times, the increase in such debt is representative of plutocratic economic raids on public monies (i.e., public looting for private gain).[2] Currently, the national debt stands at $28 trillion[3], which will continue to increase because of ongoing deficits which have become more pronounced due to COVID-19 revenue losses and relief programs. Akin to strategic economic SASO (stability and support operations), these COVID-19 relief programs are meant to stabilize and support the US economy, whose lower economic class tiers and other specific sectors have been eviscerated. The new $1.9 trillion COVID-19 relief bill will, however, further increase the national debt. The Biden administration’s expected US infrastructure renewal plan—which may be in the $2-$4 trillion range—will add even higher levels of deficit spending and eventual servicing requirements as a component of the more encompassing $7 trillion three-part ‘Build Back Better’ plan.[4]

The proposed infrastructure renewal plan goes well beyond physical infrastructure development—which was the focus of the Roosevelt administration program and well suited to a 1930s industrial economy—with the addition of 21^st century concerns such as supporting working mothers, leveling out the economic playing field, and addressing environmental impact considerations. To pay for depression era economic stimulus projects and World War II wartime spending, the plutocratic class was subordinated to liberal democratic sovereign authority, with high levels of taxation being levied upon high wealth individuals and the corporations under their ownership and control. This was embodied in the Revenue Act of 1935—which critics called the “Soak the Rich” tax[5]—and follow-on legislation. From a ‘societal conflict’ perspective the plutocratic class was fully broken by the state; the culmination of a multi-decade offensive waged as a response to Gilded Age and later Roaring Twenties excesses that concentrated wealth in the plutocratic class. In 1929, before the stock market crash, the 0.1%’s wealth accumulation was almost 25% of total societal wealth.[6]

Elisha Roosevelt sicketh the bears upon the bad boys of Wall Street / Keppler / Puck, 1907

Illustration shows Theodore Roosevelt standing on a hill in the background as two large bears labeled “Interstate Commerce Commission” and “Federal Court”" break-up a crowd of Wall Street capitalists and stock market manipulators, causing them to scatter in all directions. Source: US Library of Congress

Shifting to our contemporary era, the underlying philosophical debate once again raging concerns the competing interests of the sovereign state—with its provision of public goods to its citizens—and a plutocratic class that since the 1980s has waged a concerted and highly successful ‘bloodless insurgency’ to throw off the taxation (i.e., structural anti-private wealth accumulation) shackles enacted by the US government.[7] This has resulted in the plutocratic classes (0.1%) amassing greater and greater levels of societal wealth, for example from 7% in 1978 to 23% in 2013.[8] Even during the current COVID-19 pandemic, this class has become far richer—with billionaires seeing a 54% spike in wealth— while many other segments of the US population have literally gone broke.[9]

A structural flaw in the global capitalist economy has long been that capital attracts capital—like a powerful magnate attracting riches—which over time concentrates wealth within the hands of the highly successful few and their families who ultimately have the potential to become economic dynasties. From a Monopoly game perspective, a select few players (and their progeny) eventually own the board, with everyone else forced to play in a ‘rigged game’ that never ends. 

The magnet / Keppler / Puck, 1911

Illustration shows a J.P. Morgan lying at the edge of America, with an American flag in his top hat, holding a large magnet in the shape of a dollar sign with which he is attracting precious objects of historical and/or monetary value to himself. Source: US Library of Congress

To raise the stakes even higher, we now exist in a historical era that contextually is far different than the 1930s. The last era that the plutocrats remained unfettered in was a period part way through the Great Depression. Falling at the eve of World War II and the Cold War, it can be rightly be viewed as a historical nexus point for our nation. Those periods were dominated by competing coalitions of Westphalian-states—initially fascist, communist, and democratic and then post World War II only the two latter forms of social and political organization, with liberal democracy eventually prevailing.

The post-Cold War era has been an increasing boon to plutocrats, who have escaped their ‘state shackles,’ and a steady economic downward decline for America’s other social classes. Contemporary events are taking place out of paradigm from the earlier modern epoch dominated by Westphalian-states. Rather, we currently exist in a post-modern transitional era in which armed non-state actors directly challenge states and those authoritarian states rising out of ideologically bankrupt communist ones, such as Russia and China, are actively reasserting themselves against liberal democracy.[10] On the eve of what may become intensifying 21^st century conflicts with such threats, we are likely now standing at another historical nexus point. It is one in which an increasingly empowered plutocratic class is actively conspiring to move beyond the burdens of citizenship and achieve a form of ‘taxation impunity’ as a special privilege only for America’s most wealthy. If allowed to occur, such a plutocratic economic victory would not only serve to further defund US federal state revenues derived from equitable principles of taxation but would facilitate plutocratic acquisition of a percentage of societal wealth never before achieved in American history.

This is juxtaposed with the reality that America’s public infrastructure is crumbling, the nation and most of its citizenry have greatly suffered economically from the COVID-19 pandemic (in addition to the individual and family tragedies of well over 550,000 deaths), and national debt levels that are being ratcheting up by the trillions of dollars. The only viable Federal strategy that exists—and one with 20^th century historical precedent—is to once again subordinate and fetter the plutocratic class to the economic needs and requirements of the liberal democratic state. As Warren Buffet has stated on a number of occasions, class warfare has been taking place within the US for decades and the rich class is winning.[11] From a public policy perspective, it is imperative that the US federal state rise out of its slumber and once again follow the precepts and policies of ‘plutocracy bound.’ The new administration’s infrastructure renewal plan will hopefully be a purposeful step in this regard.    

Sources

Matthew Gardner and Steve Wamhoff, 55 Corporations Paid $0 in Federal Taxes on 2020 Profits. Washington, DC: Institute on Taxation and Economic Policy (ITEP). 2 April 2021, https://itep.org/55-profitable-corporations-zero-corporate-tax/.

Samuel Stebbins and Grant Suneson, “Jeff Bezos, Elon Musk among US billionaires getting richer during coronavirus pandemic.” USA Today. 20 December 2020, https://www.usatoday.com/story/money/2020/12/01/american-billionaires-that-got-richer-during-covid/43205617/.

Jeff Stein and Tony Romm, “White House eyes tax increases on companies and the wealthy to fund infrastructure, setting up clash with GOP.” Washington Post. 23 March 2021, https://www.washingtonpost.com/us-policy/2021/03/23/biden-taxes-rich-companies/:

Jim Tankersley and Emily Cochrane, “Under Biden, Democrats Are Poised to Raise Taxes on Business and the Rich.” New York Times. 27 March 2021, https://www.nytimes.com/2021/03/27/business/biden-taxes-business-rich.html.

“The Backstory” [Corporate Taxes/Hollowing Out State Institutions]. Foreign Affairs. 11 April 2021, https://link.foreignaffairs.com/view/5a32939824c17c7381562620dzdig.ywb/7349d402.

Endnotes

[1] Nancy Cook and Laura Davison, “Biden Eyes First Major Tax Hike Since 1993 in Next Economic Plan.” Bloomberg. 15 March 2021, https://www.bloomberg.com/news/articles/2021-03-15/biden-eyes-first-major-tax-hike-since-1993-in-next-economic-plan.

[2] For the latest incident of such a large scale ‘economic raid,’ see Robert J. Bunker, Nils Gilman, John P. Sullivan, and Pamela Ligouri Bunker, “Plutocratic Insurgency Note No. 9: Tax Cuts and Jobs Act—Class Warfare ‘Red Line’ Crossed.” Small Wars Journal. 11 January 2018. See also, Robert J. Bunker, “Public looting for private gain: predatory capitalism, MNCs and global elites, and plutocratic insurgency.” Robert J. Bunker and Pamela Ligouri Bunker, Eds., Global Criminal and Sovereign Free Economies and the Demise of the Western Democracies: Dark Renaissance. London: Routledge, 2014: pp. 134-162.

[3] Total public debt outstanding; “TABLE I -- SUMMARY OF TREASURY SECURITIES OUTSTANDING, MARCH 31, 2021,” https://www.treasurydirect.gov/govt/reports/pd/mspd/2021/opds032021.pdf.

[4] Jim Tankersley and Emily Cochrane, “Under Biden, Democrats Are Poised to Raise Taxes on Business and the Rich.” New York Times. 27 March 2021, https://www.nytimes.com/2021/03/27/business/biden-taxes-business-rich.html. Also see, “Build Back Better.” Washington, DC: The White House. Accessed 13 April 2021, https://www.whitehouse.gov/build-back-better/.

[5] “‘Soak the Rich’ to Benefit Masses—is F.D.’s Plan.” Pathfinder. 6 July 1935: pp. 1-4, http://www.oldmagazinearticles.com/article-summary/1935-soak-the-rich-tax-law#.YHX83i1h1Bw.

[6] Jesse Columbo, “America’s Wealth Inequality Is At Roaring Twenties Levels.” Forbes. 28 February 2019, https://www.forbes.com/sites/jessecolombo/2019/02/28/americas-wealth-inequality-is-at-roaring-twenties-levels/.

[7] Maneuvering has been taking place for some time, with Blue and Red states taking very different philosophical positions on taxation policies and even the Trump administration punishing Blue states for taking such a position in his 2017 taxation policies. See Sarah Hansen and Janet Novack, “The New Civil War: Blue States Soak The Rich; Red States Sue To Cut Taxes.” Forbes. 10 April 2021, https://www.forbes.com/sites/sarahhansen/2021/04/10/the-new-civil-war-blue-states-soak-the-rich-red-states-sue-to-cut-taxes/?sh=41699331488c.

[8] Angela Monaghan, “US wealth inequality - top 0.1% worth as much as the bottom 90%.” Forbes. 13 November 2014, https://www.theguardian.com/business/2014/nov/13/us-wealth-inequality-top-01-worth-as-much-as-the-bottom-90. See, also Juliana Menasce Horowitz, Ruth Igielnik, and Rakesh Kochhar, “1. Trends in income and wealth inequality.” Washington, DC: Pew Research Center. 9 January 2020, https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/.

[9]. Aimee Picchi, “Billionaires got 54% richer during pandemic, sparking calls for wealth tax.’” CBS News. 31 March 2021, https://www.cbsnews.com/news/billionaire-wealth-covid-pandemic-12-trillion-jeff-bezos-wealth-tax/.

[10] See Robert J. Bunker, “Epochal Change: War Over Social and Political Organization.” Parameters. Summer 1997: pp. 15-25, https://scholarship.claremont.edu/cgi/viewcontent.cgi?article=1134&context=cgu_fac_pub and Robert J. Bunker and Pamela Ligouri Bunker, “The Modern State in Epochal Transition: The Significance of Irregular Warfare, State Deconstruction, and the Rise of New Warfighting Entities beyond Neo-Medievalism.” Small Wars & Insurgencies. Vol. 27, Issue 2, 2016: pp. 325-344.

[11] Ben Stein, “In Class Warfare, Guess Which Class Is Winning.” New York Times. 26 November 2006, http://www.nytimes.com/2006/11/26/business/yourmoney/26every.html and Greg Sargent, “‘There’s been class warfare for the last 20 years, and my class has won.’” Washington Post. 30 September 2011, https://www.washingtonpost.com/blogs/plum-line/post/theres-been-class-warfare-for-the-last-20-years-and-my-class-has-won/2011/03/03/gIQApaFbAL_blog.html?utm_term=.d05003b35141.

Further Reading

Robert J. Bunker, Nils Gilman, John P. Sullivan, and Pamela Ligouri Bunker, “Plutocratic Insurgency Note No. 9: Tax Cuts and Jobs Act—Class Warfare ‘Red Line’ Crossed.” Small Wars Journal. 11 January 2018.

Chuck Collins, The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions. Cambridge, UK: Polity Press, 2021.

Chuck Collins, Omar Ocampo, and Sophia Paslaski, Billionaire Bonanza 2020: Wealth Windfalls, Tumbling Taxes, and Pandemic Profiteers. Washington, DC: Institute for Policy Studies. 23 April 2020.

Joseph E. Stiglitz, Todd N. Tucker, and Gabriel Zucman, “The Starving State: Why Capitalism’s Salvation Depends on Taxation.” Foreign Affairs. January/February 2020.