By Gordon Lafer & Greg LeRoy
When the term “Rustbelt” was coined in the 1980s and activists learned the early warning signs of a plant closing, one of those indicators was tax dodging. If a company knew it was planning to close a factory, it would often challenge its property tax assessment or seek other tax breaks. And why not? If it didn’t expect to be hiring locally in the future, why should an employer care about the quality of the schools?
The national trend today looks like the Rustbelt 1980s on steroids. President Trump’s budget proposal follows the playbook that corporate lobbyists have long pushed in state legislatures: tax cuts for companies and the rich, coupled with dramatic cuts to services that benefit everyone. The resulting permanent damage to those public services begs the question: is Corporate America intentionally disinvesting, abandoning our nation?
In recent years, states and localities across the country have made drastic cuts to essential public services. Texas eliminated over 10,000 teaching jobs, and ended full-day preschool for 100,000 low-income kids. The city of Muncie, Indiana eliminated so many firefighter positions that the area of the city that fire trucks can reach within eight minutes was cut in half. In Milwaukee, budget cuts left the public transit reaching 1,300 fewer employers in 2015 than in 2001.
Local health departments were forced to cut back everything from neonatal care to cancer screening to vision and hearing tests for school children to inspecting food safety in local restaurants. Officials reported that if the nation faces an outbreak similar to the H1N1 flu epidemic, many localities will be unable to vaccinate their residents. Budget cuts were particularly devastating in the country’s school systems. In 2010, the national student-teacher ratio increased for the first time since the Great Depression; and seven years after the onset of the Great Recession, most states had still not restored per-pupil spending to pre-recession levels.
Most striking about these cuts: the legislators who enacted them and the business lobbies that championed them treated them not as temporary tragedies to be repaired when revenues bounced back, but as long-desired permanent cuts to public services. Indeed, many legislatures locked in poorer tax bases by enacting new tax giveaways to corporations and the rich while slashing funding for schools, libraries, and health care. In the same year that Ohio ended full-day kindergarten, legislators phased out the state’s inheritance tax—which had only ever affected the wealthiest seven percent of families.
This agenda was driven by the country’s premier corporate lobbies: chambers of commerce, manufacturers associations, the Koch brothers’ Americans for Prosperity, and the Fortune 500 corporations that have participated in the American Legislative Exchange Council (ALEC). Which begs the question about their motives: why would leading corporations seek permanent cuts to education, libraries or public transit? Don’t they need full access to labor pools of educated workers and decently-paid consumers to buy their products and services? The behavior of the nation’s biggest corporate lobbies appears to be irrational, yet it has been repeated in state after state.
One answer appears to lie in the disturbing fact that the fortunes of “American” corporations have become increasingly divorced from those of American citizens. It may never have been entirely true that “what’s good for General Motors is what’s good for the country,” as the company’s president apocryphally suggested in 1953. But it was closer to true when companies relied on Americans both to make and to buy their products. Today, most GM employees and nearly two-thirds of the cars it sells are overseas; it already sells more cars in China than in the U.S. General Motors has been highly engaged in American politics, including as a member of ALEC.
GM is not exceptional. For the first time, many of the country’s most powerful political actors are companies that may be headquartered in America but don’t primarily depend for their profits upon the fortunes of American society. Foreign sales now account for 48 percent of the S&P 500’s total corporate revenues. Among recent ALEC member corporations, Exxon Mobil, Caterpillar, Procter & Gamble, Pfizer, Dow Chemical, and IBM all earn more than 60 percent of their revenue outside the U.S. Their political interests are increasingly disconnected from the fate of American workers and taxpayers.
The net effect of corporate tax dodging is that by every key measure—share of state revenue, share of GDP, or effective rate—state corporate income taxes have been steadily declining. This creates pressure to raise other taxes, disproportionately borne by working families, who grow to resent a government that costs them more yet delivers less.
Given this reality, we take this corporate-backed push for disinvestment of America’s public sector as a big, loud early warning signal. ALEC’s agenda is not that of employers committed to their surrounding communities. It more resembles that of a company planning to cut and run. For the rest of us who seek good jobs and future opportunity for ourselves and our children, what’s good for GM is good for GM, period.
Gordon Lafer is a professor at University of Oregon and author of The One Percent Solution: How Corporations are Remaking America One State at a Time. Greg LeRoy is Executive Director of Good Jobs First and author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation.