President Biden's Budget Proposal Targets Corporate Tax Rates and Executive Compensation Inequality

President Biden's Budget Proposal Aims to Address Corporate Tax Rates and Executive Compensation Disparities President Biden recently unveiled a budget proposal that includes a significant increase in the corporate tax rate, aiming to boost it to 28% from the current 21% set under the 2017 Tax Cuts and Jobs Act (TCJA). This move comes in response to growing concerns about income and wealth inequality, particularly highlighted by a recent analysis conducted by the Institute for Policy Studies (IPS) and Americans for Tax Fairness (ATF). The IPS and ATF analysis revealed troubling findings regarding the compensation packages of top executives at major U.S. companies compared to their federal tax payments from 2018 to 2022. The report found that many of these companies paid their executives more than they did in federal taxes during this period, raising questions about the fairness of corporate tax practices and executive compensation. One striking observation from the report is the steep increase in CEO pay over the past decades. In 2022, CEOs are earning approximately 344 times more than the average worker, a stark contrast to the 21-to-1 ratio observed in 1965. Companies such as Tesla, Ford Motor, and AIG were singled out in the analysis for paying their top executives more than they contributed in U.S. taxes over the five-year period under scrutiny. For instance, Tesla paid its executives a total of $2.5 billion while simultaneously benefiting from a $1 million tax credit between 2018 and 2022, underscoring the imbalance between executive compensation and tax contributions. The analysis focused on profitable corporations and delved into regulatory filings to extract tax data and executive compensation information. Many of these profitable companies managed to lower their effective tax rates below the statutory 21% through various loopholes and breaks, with the average effective tax rate for U.S. corporations in 2022 standing at 22.4%. The lingering effects of the TCJA's tax cuts have contributed to the nation's increasing debt, which now stands at a staggering $33 trillion. President Biden and Democratic lawmakers have been vocal about their concerns regarding the disproportionate benefits reaped by corporations and their executives through tax cuts, without commensurate investments in workers and the economy, thereby exacerbating income and wealth inequality. The IPS and ATF emphasize that while taking advantage of tax breaks is legal, it does not necessarily equate to fairness. The report underscores the urgent need for corporations to pay their fair share towards funding public services and infrastructure to ensure a thriving economy. Moreover, the analysis points out that some U.S. corporations are paying a lower share of revenue from corporate taxes compared to their counterparts in other developed nations, further highlighting the disparity in tax contributions. Analysts concur that for meaningful progress to be made towards addressing income and wealth inequality, corporations need to prioritize investments in their workforce and the broader economy, rather than solely focusing on enriching top executives. The ongoing debate surrounding corporate tax rates and executive compensation disparities underscores the complex interplay between fiscal policies, corporate practices, and socioeconomic challenges, prompting a reevaluation of priorities and values in the realm of economic governance.