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<\/p>\nMany of the smart policies that could fix this are not as viable as we\u2019d prefer in the altered legislative, regulatory, and judicial environment we now face. The next pro-tax administration needs innovative ideas that will reduce wealth inequality, tax corporate profits that enrich billionaires, and begin to rescue democracy in the United States.<\/p>\n
The Institute on Taxation and Economic Policy (ITEP) and our sister organization Citizens for Tax Justice have a proud tradition of helping to reform the tax code. Historically, we\u2019ve maintained a commitment to adequacy and progressivity, which we define as raising more revenue from those most able to pay.<\/p>\n
Today, more adequacy and progressivity are still needed, but they are insufficient. We also need to think about resilience\u2014that is, the ability of a reform to withstand attempted sabotage by the Supreme Court or a future President or Congress. President Donald Trump regularly breaks the law and violates the Constitution in myriad ways, including on tax policy. He has directed his administration to ignore tax provisions enacted by Congress, in the process reducing federal revenue and rewarding billionaires and extremely profitable corporations.<\/p>\n
Justices on the Supreme Court have hinted that they could overturn certain progressive tax reforms, including a wealth tax or a tax on unrealized capital gains. And, of course, progressive tax legislation can always be repealed or modified by a future Congress. This means that new tax law must be written in ways that can survive ideological hostility or even corruption from the Supreme Court, future presidents, or future Congresses.<\/p>\n
In such a grim context, corporate tax reforms could be more resilient than proposals to tax wealth or unrealized capital gains while achieving the same goal of more adequately taxing the income of billionaires. Tax reforms are less likely to be struck down by the Supreme Court if they are embedded in the corporate income tax because its constitutionality has been generally uncontroversial and rarely challenged. Corporate taxes can be structured to resist hostile or corrupt moves to ignore or reverse them.<\/p>\n
The Case for Corporate Tax Reform<\/strong><\/p>\n Americans are rightly outraged by corporate tax avoidance. A full 70 percent<\/a> of Americans in a recent Gallup survey said that corporations pay too little in taxes\u2014and that was before Trump\u2019s 2025 tax bill further slashed taxes of rich people and corporations.<\/p>\n Many large corporations pay little or no corporate income tax. As of this writing, the ITEP corporate tax avoidance tracker<\/a> found that more than 300 companies had avoided over $140 billion in taxes on 2025 profits of over a trillion dollars. A whopping 88 profitable corporations paid no taxes<\/a> in 2025.<\/p>\n Existing breaks and loopholes plus new changes enacted under President Trump dramatically reduced taxes for the four enormous tech corporations\u2014Meta, Amazon, Alphabet, and Tesla\u2014whose CEOs or founders flanked Trump at his inauguration. These corporations paid just 4.9 percent of their profits in federal income taxes in 2025 because of several special breaks and loopholes that were either created or preserved by legislation signed by President Trump. This saved them $51 billion compared to what they would have paid at the full 21 percent rate that officially applies to corporations. These companies saved an additional $44 billion compared to what they would have paid at the 35 percent corporate rate that applied before Trump’s first tax law slashed it to 21 percent.<\/p>\n The weakness of our federal corporate income tax is one reason why the United States collects so little revenue. In 2022, only three<\/a> other Organisation for Economic Co-operation and Development (OECD) member countries (out of 38) collected less corporate revenue as a share of their gross domestic product than the United States: Latvia, Estonia, and Slovakia. On average, OECD countries collect more than twice as much corporate tax revenue as a share of GDP than the United States does.<\/p>\n This contributes to the U.S. government\u2018s low spending<\/a> and lack of investment in our communities. It is a major reason why basics that are a routine part of the social contract in other countries\u2014like universal health care<\/a>, low-cost child care<\/a>, and affordable college<\/a>\u2014are absent here.<\/p>\n The weakness in the U.S. corporate income tax also supercharges inequality. Corporate tax avoidance doesn\u2019t help workers, families, or communities. Instead, it goes to the wealthiest Americans and foreign investors who own corporate stock. Foreign investors and the richest 5 percent of Americans together receive 75 percent of the benefits<\/a> of corporate tax cuts, while poor and middle-income Americans together get just 5 percent of the cuts. Corporate tax breaks and corporate tax avoidance worsen racial inequality too: Black and Latino Americans combined see just 2 percent of any corporate tax cut.<\/p>\n Most income of extremely wealthy individuals is generated by corporations and other businesses and could be taxed before it reaches them. A strong corporate income tax would tackle this income at its source. The answer, clearly, is corporate tax reform, but crafted to avoid sabotage from the Trumps of tomorrow.<\/p>\n One way to increase corporate tax resilience is to ensure that someone has legal recourse when the executive branch, in violation of the law, issues regulations cutting corporate taxes. Federal courts have sometimes suggested that no individual or entity is sufficiently harmed by corporate tax cuts, which means no one has standing to sue over them. A novel solution would be to dedicate a portion of corporate income tax revenue to specific parties who would then have standing if corporate income taxes were illegally cut by the executive branch. Congress could, for example, earmark a share of corporate tax revenue to states for infrastructure, giving states standing. This would make corporate tax reform more bulletproof if a future President is as willing to break the law and ignore the Constitution as the current one.<\/p>\n Corporate taxes should be made less vulnerable to a future corrupt Congress as well. A key defense is to reinstate the global minimum tax agreement with governments around the world in its original, stronger form, without the special provisions that the Trump Administration demanded to weaken it.<\/p>\n Multinational corporations currently hide their profits in tax havens that charge very low or no corporate income tax. In the most recent available numbers (2022), U.S. corporations reported total profits in Barbados and the British Virgin Islands that exceeded<\/a> the entire economic outputs of these jurisdictions. Similar outrageous anecdotes can be cited for a dozen other tax havens like the Bahamas, Ireland, and Singapore. This enables these multinational companies to pay paltry taxes\u2014or even no taxes\u2014on billions of dollars in profits.<\/p>\n The global minimum tax would go a long way toward solving this. It essentially requires that large multinational corporations pay taxes equal to at least 15 percent<\/a> of the profits they earn (or claim to earn) in each country where they do business. Every participating country ensures that its own corporations pay a 15 percent rate in each jurisdiction where they do business and, if necessary, imposes an additional tax to ensure that result.<\/p>\n If a country fails to ensure that its corporations pay at least 15 percent, other governments collect additional taxes on those corporations\u2019 operations within their own borders, likely neutralizing whatever tax cuts the companies hoped to obtain. Sixty-five of the world\u2019s largest economies have already started implementing this policy.<\/p>\n The Biden Administration negotiated the global minimum tax with the international community, but Congress never enacted the legislation required to implement it. When Trump returned to the White House, he pressured other governments to accept a \u201cside-by-side\u201d system<\/a> that weakens the tax and allows continued tax avoidance by American multinational companies.<\/p>\n This gives our next President a chance to fix tax avoidance for the whole world. If a President works to re-establish the original, stronger standards, America will collect more corporate taxes, and so will nations across the globe. If a later President reneges on the deal, not only will the American people be outraged by the plunge in revenue, corporations will find that they still have to pay the 15 percent, and that German, Japanese, and Brazilian citizens get the resulting investments in their schools, roads, and hospitals, while American infrastructure and services continue to crumble.<\/p>\n While most businesses that generate income for billionaires are subject to the corporate income tax, some, called \u201cpass-through businesses,\u201d are not. This creates a major gap in corporate taxation.<\/p>\n It used to be that business owners who wanted to limit their personal legal liability for actions of their business or to trade their company on a public exchange were required to create a corporation and pay a corporate income tax. Much smaller businesses, say, an independent coffeeshop or local restaurant, were typically structured as \u201cpass-through\u201d entities, meaning their profits were \u201cpassed through\u201d to the owners, taxed as part of their personal income, and not subject to the corporate income tax.<\/p>\n Over time, federal and state policies allowed business owners to have the best of both worlds, letting them structure their enterprises as pass-through companies (so that the corporate income tax did not apply) while also having limited liability and sometimes even the ability to trade on a public exchange. Eventually larger and larger businesses<\/a> got permission to use this structure.<\/p>\n Large pass-through entities are nearly impossible for the IRS to audit and are notoriously adept at letting their owners avoid taxes. Experts think that underreported pass-through income is the single biggest contributor<\/a> to illegal tax avoidance. One example is the Trump Organization, a web of more than 500 entities that are mostly pass-throughs. The IRS doesn\u2019t seem to understand how the Trump Organization functions even in times when the agency has sufficient resources<\/a> and isn\u2019t controlled by Trump. To effectively tax the income of the wealthy, we need to make the corporate income tax apply to pass-through entities like these.<\/p>\n Since the individual income tax rate was slashed in 1986, making pass-throughs more advantageous, the share of U.S. businesses structured as C-corporations plunged from 51 percent in 1985 to just 16 percent in 2015<\/a>, with pass-throughs accounting for much of the flip. Only one other OECD advanced economy<\/a> has a higher share of its businesses organized as pass-throughs.<\/p>\n It\u2019s gone much too far. Congress should require businesses that have the essential attributes of large corporations to be taxed as corporations. For example, Congress could apply the corporate income tax to any business that has limited liability or is publicly traded and has revenue exceeding a generous threshold.<\/p>\n With loopholes for tax havens and pass-through entities blocked, businesses would have a much harder time dodging taxes. This would give Congress and the president the chance to raise corporate income tax rates with less concern over how the resulting tax increases might be avoided. An innovative approach is to raise rates in a graduated fashion.<\/p>\n Tax professor and former Treasury Department official Kimberly Clausing suggests keeping the current 21 percent corporate income tax rate for companies with less than $100 million in taxable income, while making the rate 25 percent<\/a> on corporate income between $100 million and $1 billion, 30 percent on income between $1 billion and $10 billion, and 35 percent on income beyond $10 billion. This would leave the vast majority of companies at the current historically low 21 percent rate. Clausing estimates that around 99 percent of corporate taxpayers fall below the $100 million taxable income thresholds, but that 69 percent of tax collected comes from companies whose rates would bump up under the proposal. This reform would also push back against increasing consolidation of economic power in the hands of a few very large companies.<\/p>\n Other changes<\/a> could be made in the future after the initial reforms described above. This includes closing loopholes on interest and reforming \u201cexpensing,\u201d which allows companies to write off the entire cost of equipment in the year it is purchased. But the changes above are a solid start.<\/p>\n Policymakers need to focus on resilient tax policy. The corporate income tax is already more protected from attacks by the Supreme Court than other forms of high-end taxation. Some innovative changes could also make it more durable in the face of attacks by the executive branch or Congress. The reforms suggested here\u2014ensuring someone has standing to sue about corporate tax cuts, enacting the global minimum tax, subjecting certain pass-through businesses to the corporate income tax, and raising the corporate tax rate in a graduated fashion\u2014are a solid start in restoring corporate tax collections. This would begin to reverse the brutal cycle of low revenue, high inequality, and low public faith in government. And it would meaningfully get at income streaming into billionaire portfolios.<\/p>\n President Trump was elected in 2024 largely because he promised to do something about voters\u2019 fear and fury over rising prices<\/a> in the wake of the COVID-19 pandemic. Once in office he cut taxes for the richest, raised tariffs<\/a> that fall more heavily on working people, and cut spending on the health care<\/a> that is an enormous source of financial anxiety<\/a>. Anger over this fake-out, along with inflation, anti-democratic actions, and war, are surely responsible for a significant share of the dismal poll numbers<\/a> the President now faces.<\/p>\n It is incumbent upon the next set of leaders to break this pattern and deliver tangible benefits that can reduce costs for the American people by making childcare, health care, college, and housing more affordable and by addressing the skyrocketing inequality that cheapens our claim that we are a nation of equals. This starts with taxing the rich. The most durable, practical way of doing that is by reforming corporate taxation. The count is on to see if elected officials can deliver.<\/p>\r\nPrevent Executive Sabotage: Standing to Sue <\/strong><\/h5>\n
Prevent Congressional Sabotage: Global Minimum Tax <\/strong><\/h5>\n
Other Corporate Corrections <\/strong><\/h5>\n
Raise the Corporate Income Tax Rate<\/strong><\/h5>\n
Reversing the Brutal Cycle<\/strong><\/h5>\n
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Source link democracyjournal.org<\/a>\r\n
The U.S. collects less revenue relative to its economy compared to other wealthy nations, exacerbating wealth inequality as a few wealthy Americans benefit from under-taxed corporate profits. Current tax policies are insufficient in addressing this issue, and strategies must ensure resilience against potential sabotage by future administrations or Congress. Proposed reforms include implementing a global minimum tax, taxing pass-through entities as corporations, and raising corporate tax rates progressively. The focus is on creating a more robust corporate tax system to reduce inequality, enhance public services, and restore trust in government by ensuring fair tax contributions from the wealthiest individuals and corporations.","protected":false},"excerpt":{"rendered":"The United States collects much less revenue as a share of our economy than most other wealthy nations. Meanwhile, a handful of extremely wealthy Americans are consolidating their grip on an increasing share of the nation’s wealth, partly because the income generated by businesses these Americans own is not adequately taxed. This is at the root of the staggering inequality…","protected":false},"author":159,"featured_media":2817,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_analytify_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2816","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/posts\/2816","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/users\/159"}],"replies":[{"embeddable":true,"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/comments?post=2816"}],"version-history":[{"count":0,"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/posts\/2816\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/media\/2817"}],"wp:attachment":[{"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/media?parent=2816"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/categories?post=2816"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wokeantifa.org\/topics\/wp-json\/wp\/v2\/tags?post=2816"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}