From the Progressive Era through the postwar period, tax policy, in tandem with antitrust legislation, aimed to check corporate concentration and ensure fair competition. In ProMarket, ILSR’s Susan Holmberg and Niko Lusiani at the Roosevelt Institute argue that, today, tax policy is designed to have a near reverse effect.
The U.S. tax system incentivizes market concentration by fueling merger deals, giving multinational corporations low-to-no effective corporate income tax, and enabling large corporations to collect the bulk of state and local economic development subsidies. Meanwhile, small business owners continue to pay their fair share of the tax bill. Holmberg and Lusiani detail how multinational corporations take advantage of these tax breaks and undermine smaller competitors. They also offer solutions for reshaping our tax system to enable competition and ignite a more equitable economy.
“It was no historical coincidence that between 1890 and 1914, when the first two major pieces of U.S. antitrust legislation were enacted, Congress also authorized the first corporate income tax. Like the antitrust laws themselves, the 1909 tax was an explicit check on the power of the trusts. Tax policy as an antitrust measure remained a consistent feature of fiscal debates throughout much of the post-war era. During the Great Depression and post-War period, preventing excess market power and ensuring fair competition continued to be critical aims of tax policy. In speaking to Congress in 1935 about tax reform, President Franklin D. Roosevelt proclaimed, “The smaller corporations should not carry burdens beyond their powers; the vast concentrations of capital should be ready to carry burdens commensurate with their powers and their advantages.
Fast-forward to today, and it’s not hard to see a tax system designed to accomplish the reverse: incentivize market concentration and the growth of corporate oligopolies while undermining the ability of smaller businesses to compete. We now typically think of tax policy as a way to raise revenue to spend on government programs and, depending on one’s perspective, to redistribute unequal economic returns. These specific goals are absolutely essential. Yet, this narrow view on what role taxation can play in our economy limits our understanding of how the U.S. tax code exacerbates excess market power. As a result, even as we’ve seen a revitalized antitrust movement in recent years, the capacity of tax policy to fix some of the country’s deepest problems that stem from the dominance of corporate oligopolies has continued to be overlooked.”
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