No new taxes?

In the US, the Republicans currently seem willing to shut down the government in order to avoid any increase in taxation.  If we look at the last 20 years (see figure), we see dramatic rise in corporate profits after tax and a stagnation of taxes paid by companies.  In relative terms, US corporations paid around 35% of their profits in tax during 1990, but pay only around 22% today.   Meanwhile, profits have increased relative to wages paid to working people.

A further question is how corporations used these increased  profits?  Looking at the evidence suggests that corporations distributed these profits to shareholders through increased dividend payments and share buy-backs.  Notably, they did not invest the money into their companies as going concerns through fixed capital investment. Whereas the total amount spent by corporations on cash dividend payments and share buy-backs totalled about 60% of fixed capital investment in the 1990s, these payments to shareholders equalled over 100% of total investment in the mid and late 2000s. 

 

 In sum, corporations earned more over the last three decades.  They have paid fewer taxes and wages in relative terms.  The increased funds have been spent about half and half between new investment and restributing wealth away from wage earners and government to shareholders. (These payments to shareholders and the rise in stock market prices relative to GDP are a major factor fueling income inequality in the USA...but more on this another day).  

As an order of magniture, corporate profits totalled USD 1.7 trillion in 2010, whereas dividends and share buy-backs totalled about USD 1 trillion.  These figures are relative to the government budget deficit of USD 1.4 trillion.  Surely one cause of the current fiscal crisis concerns the redistribution of income to corporations and their shareholders.

CSR and institutions

A good day working on the issue of how institutions influence CSR practices. If the responsible company behaves in ways that meets or even exceeds our ethical expectations, where then do these expectations come from? Are they based on a view of the company as something essentially private, but which voluntarily reaches out to stakeholders based on various relational or instrumental motives? Or is our expectation based on a more public view of the company as a political creation, sharing societal responsibilities in exchange for its right to limited liability?  Dirk Matten nicely explained this (citing Habermas) in terms of a difference between feudal benevolence or entitlements based on citizenship.