5 Ways Corporate Power Increases Inequality

By Paul Buchheit, whose essays, videos and poems can be found at YouDeserveFacts.org. Originally published at Alternet

Corporations are viewed as untouchable by big business media giants like the Wall Street Journal, which blurts out inanities like “Income inequality is simply not a significant problem” and “Middle-class Americans have more buying power than ever before.”

In the real world, inequality is destroying the middle class. The following four issues, all part of the cancer of corporatocracy, have grown in intensity and destructiveness in just the last few years. They should be campaign issues, given more than just lip service from candidate Hillary Clinton, and given more than just passing reference in the news reports of the mainstream media.

1. Monopolies: Increasing prices, cutting jobs. The Busch/Miller merger is the latest attack on competition, joining the recent surge toward oligopolies in the banking industry, pharmaceuticals and hospitals, wireless companies, and airlines. Contrary to any condescending claims that mergers contribute to price-lowering efficiencies, they have actually led to price increases in 75 percent of examined cases, according to a Northeastern University study. The resulting corporate profits are often used for investor-enriching stock buybacks.

And jobs are cut. When Merck took over Cubist Pharmaceuticals, the latter’s research and development staff was eliminated, ending their studies of other promising medicines.

2. Finance: Now costing us more than the military. A Roosevelt Institute study estimates that “the financial system will impose an excess cost of as much as $22.7 trillion between 1990 and 2023. That comes to about $660 billion per year, more than the discretionary military budget. That’s over $5,000 per U.S. household in excess financial costs.

Banks once spent the majority of their money on business investments; now it’s just 15 percent. Rana Foroohar summarizes: “U.S. companies today make more than ever before by simply moving money around.”

3. Medicine: Pampering the rich more than ever before. A new Health Affairs study concluded that since 2004, our medical dollars have been “increasingly concentrated on the wealthy.” The cost of treatment for life-threatening or debilitating diseases is out of reach for most Americans:

  • Cancer: up to $183,000 per year
  • Hepatitis C: up to $95,000 per year
  • Multiple sclerosis: up to $74,000 per year
  • Rheumatoid arthritis: up to $42,000 per year

The pharmaceutical industry gouges us twice: 1) Our tax dollars go to Medicare and Medicaid, which have to pay up to 600 times the manufacturing cost of drugs, as with the notorious hepatitis drug Sovaldi, which costs $10 in Egypt and $1,000 in the U.S.; and 2) most Medicare patients still face out-of-pocket costs of $7,000 or more a year.

4. Corporate Taxes: Little change with Clinton, disastrous tax cuts with Trump. Corporations constantly gripe about their taxes, even though the corporate tax rate has dropped precipitously in recent decades, and even though they are reaping almost all the benefits of one of the most prosperous times in history. Pfizer CEO Ian Read moaned that U.S. taxes had his company fighting “with one hand tied behind our back.” Pfizer paid almost zero taxes in the U.S. last year, despite $9 billion in profits.

The complaints aren’t new, but a brand new president will soon be catering to the complainers. Hillary Clinton proposes cosmetic changes to the business tax code, while Donald Trump would let corporate taxes plunge to 15 percent.

Corporations vs. America

Progressives have long been fighting injustices like the corporate takeaways in free trade deals, and the declining corporate tax rate, and the massive amounts of corporate subsidies. But the battles are getting fiercer and more numerous. Corporations keep finding new ways to race unfettered toward the takeover of our democracy, and they have staunch allies in Congress and the business media.

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  1. MikeNY

    I wonder if the solution to the corporation taxation problem might not simply be to eliminate corporate taxes altogether, and tax dividends and cap gains as ordinary income, at progressive rates.

    It would certainly simplify the tax code, end inversions and tax-dodging ruses, and go after the oligarchs.

    What am I missing?

    1. inode_buddha

      Yep, basically bring back the 1986 tax reform. I’ve been saying that for years. What is needed even more, are politicians willing and able to do what is best for everyone and not just the few. That is why Sanders was so important to me.

      1. digi_owl

        Given that politicians have made themselves exempt from insider trading, good flippin luck with that…

    2. Benedict@Large

      The only “corporate taxation problem” is that the elites would rather bribe politicians to reduce their taxes than to simply pay those taxes.

      1. nurse

        Ha! good one, I love it. Also, we borrow money from them at high interest rates rather than tax them.

    3. johnnygl

      Corporate taxes are the price that needs to be paid to society for allowing the benefits of creating a corporation to accrue their owners and execs. Why would you like to allow limited liability to be given away for free?

      Also, there’s so many deductions and loopholes that most large multinational corps already pay nothing.

      1. MikeNY

        so many deductions and loopholes that most large multinational corps already pay nothing

        ITA. So why keep playing the game? Money is fungible; what difference does it make whether we get it from the corporation itself or from its owners (shareholders). The complication I see is ensuring that private shareholders don’t evade US taxes, say, by claiming primary residence abroad. But there’s go to be some way to try and solve that.

        1. inode_buddha

          Dunno, maybe in the alternativ efind some way to eliminate limited liability for corporate officers. Sure, do away with taxes altogether on them, but then they lose their limited liability AKA no more hiding behind the corporate veil.

    4. James Kroeger

      I wonder if the solution to the corporation taxation problem might not simply be to eliminate corporate taxes altogether, and tax dividends and cap gains as ordinary income, at progressive rates.

      Theoretically, if corporations were not taxed on their excess profits, they would supposedly spend much of this money that they wouldn’t be handing over to the government on worthy investments. Better that then plowing it all into higher dividends for shareholders, which would be taxed at high marginal rates, eh?

      The only problem with this reasoning is that most of the corporations that have a lot of excess profits to tax typically spend all of the money that they want to spend on real economic investments. If they were to simply take that money and spend it on financial investments (paper assets) or on lobbying efforts, it would provide very little benefit to society as a whole.

      And we must consider the fact that when the excess profits of corporations are taxed at a standard rate, the government is then in a position to provide an incentive to corporations to make specific economic investments, by offering targeted tax credits for particular kinds of investments that would clearly benefit society as a whole.

      Those are really the only kind of ‘tax breaks’ that rich people ought to be offered as a way to encourage an increase in real economic investments. 100% of the revenue that the government gives up to the tax payer ends up being used for real economic investment.

      Compare that the the insane idea of reducing the tax obligations of the 1% in the hope that some small fraction of the money the government gives up might end up being used for real economic investments…

    5. Creigh Gordon

      You’re missing nothing. Google Beardsley Ruml Taxes For Revenue Are Obsolete, a 1946 paper from a former New York Federal Reserve Bank chairman, on why taxes are imposed and why business taxes should be abolished. He does mention one objection, retained earnings as a tax dodge. I don’t think that’s a legitimate concern, because, as he points out in the first part of the paper taxes don’t fund the government; the government doesn’t need the money. Basically, money held, whether it’s as retained earnings or in a mattress doesn’t affect the economy, it’s a don’t-care.

  2. twisted

    The problem MikeNY is that France (just as an example) wants a share of the profits that Ford makes in France. If the shareholders are all American, under your scheme, France wouldn’t get a cent.

    Some might be fine with such a state of affairs but there’s little to stop France from banning Ford cars from being sold in France. After all, they wouldn’t lose a cent.

    1. MikeNY

      Understand, see my reply above to johnnygl. But it seems we are in a ‘race to the bottom’ on corp tax rates. So maybe there is another way to skin the cat?

  3. Cocomaan

    This post has good information in it, some that I’ve never seen before.

    But I’m already convinced. It won’t convince others. What are we going to do now that it’s Clinton Trump and the status quo is enduring? I have met nobody that likes where the country is going, I’ve had several conversations over the last few days with angry people.

    The Internet is filled with paid shills. I think we need to start in our communities before it’s too late.

    1. j84ustin

      I’m 32. I was in my first job when the Great Recession hit, and I was born at the tail end of Reagan’s first term, so the status quo is all I have known. I know for me and many of my friends, the Great Recession really changed our outlook on our economy and society. However, I have noticed two distinct reactions: those who double down and hope things will get better, and those that have become locally active in different ways. I’m not so sure this is any different than previous generations, though the urgency to change things is probably much greater and clearer to us than before.

  4. JimTan

    Well said Yves.

    An additional data point on “the notorious hepatitis drug Sovaldi, which costs $10 in Egypt and $1,000 in the U.S.”. It’s maker, Gilead Sciences, was just ranked the 5th most profitable company in the U.S. from this years Fortune 500 list:


    According to the article, “Sales for the two (Hepatitis) treatments alone amounted to $19.1 billion last year, comprising nearly two-thirds of the company’s annual revenue.”. 2015 profits for this biotech company surpassed Exxon Mobil, Alphabet (Google), and Verizon Communications. It’s commonly argued that high drug prices are necessary to recover the cost of investment in research and development. For Gilead Sciences this does not seem to be the case according to GAAP profits.

  5. rich


    JPMorgan Pays Prison Inmates Who Couldn’t Get Out of Jail Free

    JPMorgan agreed to pay a total of $446,822 to thousands of former inmates to reimburse them for fees they were charged, according to a filing on Monday in federal court in Philadelphia. The bank also agreed to pay as much as $250,000 in plaintiffs’ attorneys’ fees and costs, the filing said.

    The bank charged exorbitant fees that are inconsistent with the fees they charge other customers, former inmate Jesse Krimes, the lead plaintiff in the case, said in the complaint.

    The fees included inactivity charges, a $10 toll for withdrawing money from a bank-teller window and $2 for non-network ATM transactions, according to the suit.

    The complaint, filed in September 2015, said inmates released from all U.S. federal prisons since at least 2008 were required to get Chase debit cards to receive the balance in their inmate account, under the bank’s no-bid contract with the Bureau of Prisons.

    The inmates weren’t allowed to review or approve the terms and conditions, the plaintiffs’ group said. The group called JPMorgan’s contract a fraudulent scheme

    “to exploit one of the most vulnerable groups imaginable — releasees from federal corrections facilities.”


    no wonder…………….

    Warren Buffett says Jamie Dimon best person to lead U.S. Treasury Department


    Get ready America…they’re with her and you’ll be without.

    1. diptherio

      I just found out about the Angola Prison Rodeo (and Prisoner Craft-fair) this weekend….


      WTF is wrong with us, as a nation, that we allow this to go on? We need to seek help, immediately…we are very, very, very sick.

      1. pretzelattack

        the guy that used to run it, some prison official, allegedly profited handsomely from it.

      2. low integer

        I’ve seen a documentary on that prison and the annual rodeo I think. Higher than average percentage of people in for life without any chance for parole in that state iirc, and lots of younger guys inside who had made a mistake or two, compounded by having easy access to handguns. Guys were breaking themselves, trying to send $100 bucks to their young son or daughter by winning the rodeo, and having Black prisoners economically persuaded to embrace rodeo culture just seemed sick to me. I remember one guy lamenting that he didn’t really exist, as he knew he would spend the rest of his days inside prison walls. Agree totally that it is a sign of serious multi-institutional scale dysfunction.

  6. Rob Lewis

    A few years ago Markos Moulitsas, of DailyKos fame, wrote an article about a concept he called “Democratic Libertarianism”. The premise was that in today’s America, it’s not an intrusive, overweening government that’s the primary threat to our liberty, but rather the giant corporations that control most aspects of our lives.

    One of the prime functions of government then becomes protecting and defending citizens from this corporate dominance.

  7. Harry Cording

    Somewhere along the line after the time that the US Chamber of Commerce declared war on labor (Powell Memo/doctrine) the Chamber realized that the US labor force could be colonized in the same fashion as any 3rd world country. The only requirement for colonizing the US was to never state the plan out loud.
    The plan succeeded beyond possibly even their own wildest dreams.

    Reference1: https://en.wikipedia.org/wiki/To_Serve_Man_(The_Twilight_Zone)

  8. two beers

    Contrary to any condescending claims that mergers contribute to price-lowering efficiencies, they have actually led to price increases

    One of the (few) things neo-classical econ gets right is the micro analysis of oligopolistic and monopolistic competition. The models show — and empirical data overwhelmingly show — that not only aren’t savings from economies of scale passed on to the consumer, but unregulated oligopolistic and monopolistic pricing is always higher than competitive pricing.

    Curiously, discussion of these neo-classical models of oligopolistic and monopolistic competition is missing from many intro texts. I wonder why?

  9. Barry

    I like Scottsmith2016.com idea. A settlements tax of .1% would give you a 500b surplus even after eliminating payroll,corporate,excise taxes. Do a debt /equity swap with banks and have a coupon stripping mechanism to get rid of debt. BIS red book shows were taxing the wrong things. Check it out!

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