Corporate Profits Are Up. Their Tax Bill Should Be Too.

The corporate income tax rate got hacked nearly in half by the 2017 Tax Cut and Jobs Act. So nine years later, how’s that working out? Corporations’ effective tax rate (about 9%) is lower than what the average American household pays (about 14.5%). After-tax corporate profits have hit record highs for the last four years — about 9% of GDP, a figure not hit since 1929. Workers' share of total national income, by contrast, is at a 70-year low. If corporate taxes go back up, some companies may threaten to reincorporate somewhere cheaper. Call that bluff. Someone else will deliver the toilet paper and make the coffee. Donate to keep Optimist Economy going: https://optimisteconomy.com Video clips are on the Optimist Economy YouTube channel⁠⁠ https://www.youtube.com/@optimist_economy. Consume leisure with us on Instagram at ⁠⁠@optimist_economy https://www.instagram.com/optimist_economy or TikTok at ⁠⁠@optimist_economy https://www.tiktok.com/@optimist_economy. Or meet other Optimists on our Substack https://optimisteconomy.substack.com/ chat https://substack.com/chat/4604257?utm_source=pub-nav-bar. Feel like dis-saving? Our merch: https://merch.ambientinks.com/collections/optimisteconomy Got economic questions, concerns, or executive orders? Send them to [email protected] mailto:[email protected]

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• 0:35Speaker 02

  Hello and welcome to Optimist Economy. I'm Catherine Ann Edwards, economist.

• 0:38Robin Rauzi?

  I'm editor Robyn Rousey.

• 0:40Speaker 02

  And on this show, we talk about, wait, no, what do we do? Hold on. On this show, we believe the US economy can be better, and we talk about how to get there, one problem and solution at a time. I thought I could do it from memory, and I wasn't reading, and like, look what happened. The problem slash solution we're talking about today is the corporate income tax rate. And first, we're going to do some announcements and other things, but more corporate income tax rate coming soon.

• 1:08Robin Rauzi?

  I can't seem to open the studio chat.

• 1:10Speaker 02

  Oh, well. Oh, well.

• 1:12Robin Rauzi?

  If you guys wanted to studio chat anything, sorry, can't read it.

• 1:15Speaker 02

  Announcements. First announcement is that we have recorded our Q and A episode, but we always take questions from the optimist. So of course, [email protected]. We'll do another Q and A episode soon enough, and we'll always take questions.

• 1:32Robin Rauzi?

  You bet. I got a folder of them in our email.

• 1:35Speaker 02

  Yeah. Okay, next up is retcon, which we might not have any, knock on wood.

• 1:41Robin Rauzi?

  Yeah. I'm sure we'll have some once people hear the AI episode.

• 1:47Speaker 02

  Yeah, it'll keep. That'll keep. Let's move into terms and conditions. Did you look anything up this week or have a term for this week?

• 1:57Robin Rauzi?

  I had a term that was a question, actually, that came from a listener, I think, over the summer, and I've been holding on to. The question was about the way that economists sometimes use the word "tax," which seemed confusing to him, about where they're not actually referring to a government tax, but they're referring to what would seem just to be a cost or an expense. Can you clarify why tax gets used in that way?

• 2:22Speaker 02

  I think there's like an economic reason, and then there's a rhetorical reason. So the context I hear this a lot is the US has a tax on childbirth.

• 2:33Robin Rauzi?

  Mm-hmm.

• 2:34Speaker 02

  We don't have a tax on childbirth. A tax on childbirth would be every woman, you know, in the labor and delivery room would then have to pay some type of fee or levy after they gave birth.

• 2:43Robin Rauzi?

  And specifically to the government?

• 2:44Speaker 02

  Specifically to the government.

• 2:45Robin Rauzi?

  That's how we think of tax. Normal humans think of taxes as going to a local state or a federal government.

• 2:51Speaker 02

  You know, sometimes when you say "normal humans," I get terrible FOMO.

• 2:55Robin Rauzi?

  [laughs]

• 2:57Speaker 02

  But we can talk about that later.

• 2:58Robin Rauzi?

  Okay.

• 2:59Speaker 02

  So, yeah, it would be like some government tax agent comes in and collects money, or like it's recorded that you had a birth, and you owe some state, local, federal government money, and that is the tax on childbirth. We don't have that, but we do have private health insurance that has out-of-pocket costs for almost all labor and delivery from a private health insurer in the US. If you have to pay $3,000 to $5,000 out-of-pocket, even if you have a large group health plan, that is functionally a tax on childbirth. Because it's the same as like the IRS agent in the room asking for $5,000 and said it's someone from your health insurer. So we use it to say-

• 3:36Robin Rauzi?

  I guess I don't understand how that is functionally the equivalent of that. Because some people are paying it and some people aren't?

• 3:42Speaker 02

  No, I think because it looks like a tax, even though it's not one.

• 3:48Robin Rauzi?

  Okay. Define looking like a tax.

• 3:50Speaker 02

  Well, so this is where like the rhetorical equivalent would be. This is just a way to highlight an egregious cost, a cost that shouldn't be there. We're like, I'm paying for a service for something like childbirth. Like, that's not a cost that we should be charging people for. Or you could just think of it as a way to illustrate how destructive a cost can be. Because we tend to think of taxes as quite destructive to and manipulative of behavior.

• 4:15Robin Rauzi?

  Yeah, that's what I was wondering if it had to do with the incentives and manipulation of behavior that we associate with taxes. But I don't know if that's, I don't feel like when I hear it used, it's always suggestive of that.

• 4:26Speaker 02

  Yeah, I mean, I think it's, it has more of a rhetorical point than an economic one. I think it's more helpful rhetorically to say, you know, it's a way to express that there is an added cost that's maybe not necessarily related to the price that you're paying. But I think it is a very like rhetorically, I think it is really helpful of like, would you tax childbirth? No, that's ridiculous. But like, you make women pay three to five grand, if they're lucky, three to five grand out of pocket. If you think a tax on childbirth would be ridiculous, then why do we have out of pocket costs that would function the same way? I think rhetorically, it can be really powerful.

• 5:02Robin Rauzi?

  You know, Sophie's pointing out that, you know, she hears things like the pink tax. She's referring this to the things that women have to buy that men don't have to buy and that make it more expensive in our society to be a woman. And I think that maybe makes it clearer than a tax on it on a very specific narrow thing, like labor and delivery.

• 5:21Speaker 02

  I think for the record, I think labor and delivery is part of the pink tax calculations. But, uh, yeah. Okay, so I do realize that I was like rhetorically, it's pretty good. But again, I am not an editor, famously not an editor. So that's just me economist being like, yeah, that's word good.

• 5:41Speaker 02

  Digging from the word one, that's good word.

• 5:43Robin Rauzi?

  All right, what's your term and condition?

• 5:45Speaker 02

  Capitalism.

• 5:47Robin Rauzi?

  Oh, capitalism.

• 5:48Speaker 02

  Well, capital slash capitalism.

• 5:51Robin Rauzi?

  Okay.

• 5:52Speaker 02

  But because we're talking about the corporate income tax rate today, I thought it would be helpful to do a little bit of capital backstory of what is capital?

• 6:00Robin Rauzi?

  Oh, good.

• 6:00Speaker 02

  What is capitalism?

• 6:01Robin Rauzi?

  What is capitalism?

• 6:02Speaker 02

  Yeah, well, this is again the Batman quote of like, we were born in the dark. Capitalism is what is what we all grew up with. And I think that people kind of accept the system as they, you know, experience it and live in it, but don't necessarily know the definition of it. You need three basic ingredients for capitalism. The first thing you need is private property.

• 6:23Robin Rauzi?

  Okay.

• 6:24Speaker 02

  So you can have a system of private property that's not capitalism. That would be like feudalism. So private property is the first thing you need. The second thing you need are markets where you can sell your wares or goods or services. That also existed before capitalism. You can think of like a market and like a, even like a dark ages or middle, middle English, trying to think of some historical period for capitalism, I'm struggling. But like, people would be like, okay, I make shoes and I take them to a market and I sell the shoes that I make and I use that money to buy other things. Like I, you have a market economy that operates with private property, but that is still not capitalism.

• 7:03Speaker 02

  Capitalism is the introduction of firms who own their inputs, their capital goods, like the storefront, the tools, the manufacturing facility, and they employ people. And the firm is really kind of like the necessary ingredient for capitalism because firms can specialize in a good, they can specialize in the production of that good, meaning that like they make one thing and then they also specialize in how workers are used to make that thing. So when we talk about the corporate income tax, we're essentially saying we would like to tax capital, which is tax the firm. But now we refer to these firms as corporations. For the most part.

• 7:42Robin Rauzi?

  Great.

• 7:43Speaker 02

  So, oof, this is already gonna be a tough one. So here's the thing, the short version is we want to tax those [BLEEP] a lot more.

• 7:52Robin Rauzi?

  Do we? Is that what we want?

• 7:54Speaker 02

  Uh, I think there's an argument to be made.

• 7:56Robin Rauzi?

  There's always an argument to be made, okay.

• 7:58Speaker 02

  Argument to be made. I get the sense sometimes from our listeners that we have a set of like relatively conservative people who like hearing about the economy. And this is a interesting way to hear about it. And then I get a distinct sense that some of our listener base is like to the left of Lenin. And he's like waiting for like some type of communist revolution slash socialist revolution to burn capitalism to the ground. And I'm, I'm gonna do, this is not an in defense of capitalism episode, but maybe a like, consider. Consider capitalism.

• 8:37Speaker 02

  Before you throw the baby out with the bathwater, consider capitalism.

• 8:42Robin Rauzi?

  Yeah, yeah, yeah. Okay, so we're gonna take a quick break and then we'll be right back and we're gonna talk about corporate income tax and capitalism.

• 8:50Speaker 02

  Capitalism.

• 8:58Speaker 02

  All right, we're back for a tight five on capitalism before I, I go back to my family vacation in New York.

• 9:05Speaker 02

  So taxes on capitalism, should we have them?

• 9:11Robin Rauzi?

  Okay, let's talk a little bit about the context of this. We, we meaning the United States, not we, you and me.

• 9:19Robin Rauzi?

  Well, we changed the corporate tax rate in the Tax Cut and Jobs Act of 2017. And a lot of those changes got made permanent and some other changes were added in the OBA. OBA?

• 9:32Speaker 02

  OBA.

• 9:33Robin Rauzi?

  So the corporate tax rate in the United States was in the, was 35% and now it's 21%? Is that right?

• 9:43Speaker 02

  Something like that. Just like really quick, the Tax Cut and Jobs Act had two types of tax cuts. One for the corporate income tax rate, the other was for a set of household tax breaks. The corporate income tax rate was permanent, the household tax cuts expired. And in fact, they expired this year.

• 10:02Robin Rauzi?

  In 2026, yeah.

• 10:03Speaker 02

  Which is why the one big beautiful bill was passed in 2025 and it made all of the tax cuts that were temporary in that bill permanent. I can say that the Tax Cut and Jobs Act was the single largest reduction in the corporate income tax rate in US history. The corporate income tax is quite old, it goes back to the teens. And yeah, it was a 40% reduction in the rate. And the corporate income tax rate has a statutory rate. On paper, the tax on profits is X percent. That X percent is set by Congress. But they also have a ton of deductions and write offs and ways of reducing their taxes. So we have an effective rate of how much they are actually paying in taxes, given their profits and what they report.

• 10:47Speaker 02

  And the effective rate, even when it was 35%, statutory was still quite low. I wouldn't want anyone to be under the illusion that we just made the tax code simpler and that we reduced the statutory rate so that we wouldn't have quite so many deductions. We reduced the effective rate too.

• 11:01Robin Rauzi?

  I do think maybe just for listeners, we should be clear about a couple of terms that have already come up. One is statutory, meaning that that is what's written in the language of the law. The other being that corporate taxes are a tax on profit. So corporate profits are the amount of money that is left over after a company has taken in all the money from its customers and paid out all its expenses. The profits are what's left over. So you only, they only pay taxes on that. They don't pay it on all the money they bring in, which would be their gross revenues.

• 11:34Speaker 02

  Yes. So. So to give you the numbers, in 2017, the last year before the Tax Cut and Jobs Act went into effect, the statutory corporate tax rate was 35%.

• 11:47Robin Rauzi?

  Right.

• 11:47Speaker 02

  But the effective tax rate was 17.2.

• 11:52Speaker 02

  So they were able to reduce their-

• 11:54Robin Rauzi?

  Cut it almost in half, more than half.

• 11:57Speaker 02

  Yeah. In 2018, the statutory corporate tax rate was 21% and the effective rate fell to 8.8%. More than half. Corporations now have a lower effective tax rate than the average American household.

• 12:16Robin Rauzi?

  Oh, by a long shot.

• 12:17Speaker 02

  Like, if you were to add up all of the income earned by households in the United States and then all of the taxes paid and just put that as an average, it's around 14 and a half percent. And it has been around 14 and a half percent for a long time. That's how much we pay in taxes. So I, I wanted to talk about the corporate tax rate for a couple of reasons, which I'm going to prime and give you even more numbers in quick succession. I'll say them faster to help our listeners. Make sure I get them. I'll go through them as fast as possible.

• 12:47Robin Rauzi?

  Yeah, okay.

• 12:48Speaker 02

  I'll just go through each number as fast as seemingly possible, talking this quickly. Okay. There is, I think, two questions for the corporate income tax rate. One is, do we think it should be higher? Why or why not? Which is what I wanted to talk about this episode. Then there's the question of how you actually do it, which we don't have time or space to put into this episode because it gets really complicated, especially with global corporate income tax rates. And how effective tax corporations are at hiding taxes in low tax countries. I think that some people would hand wave and say like, oh, but like, we can't because of like, global taxes and like wave to the air of like, no, it's not possible to effectively tax corporations. No, I assure you it is.

• 13:28Speaker 02

  If we wanted to tax a company as profitable as Amazon with a higher corporate income tax rate, I promise you, we could do it. It is, if there's a will, there's a way when it comes to taxes. And I think one of the more effective, not even propaganda, but just effective rhetorical tools that very wealthy people, including corporations, have put forward over the last 15 years is that, that you can't tax the wealthy even if you try. And maybe Europe tried and it didn't go well, so you can't tax them here. Y'all? Not true. We don't quit before we play the game. And honestly, I'd like a few at bats when it comes to designing wealth taxes. So same thing applies to corporate income tax rate.

• 14:12Speaker 02

  You've probably heard we can't have it high. It's too complicated and it wouldn't work anyway. I'm going to try and convince you of why the corporate tax rate can be higher. And then you'll just have to trust me and we'll do a later episode, how we can get it higher. How's that?

• 14:26Robin Rauzi?

  That sounds fine. So you, you obviously think it should be higher. I mean, a lot of the arguments about why it shouldn't be higher is that it comes out in either higher prices to customers or lower wages to workers.

• 14:36Speaker 02

  Yeah.

• 14:37Robin Rauzi?

  Right, that the money's going to come from somewhere and it's going to come from one or both of those sources.

• 14:42Speaker 02

  Yes. We would call this the tax incidence. This has come a ton with tariffs. If I have an import tariff on something that I use in my firm's production, I'm going to pass on the cost of that tariff to customers. So even though I pay the tax, customers actually bear the tax incidence.

• 15:02Speaker 02

  The first big key thing to keep in mind is that a corporate income tax is a tax on profits, not a specific input. In theory, it's the money left over at the end of the day.

• 15:12Robin Rauzi?

  Like a tariff is a tax on an input.

• 15:14Speaker 02

  Tariff is a tax on an input or something that you sell, right? Like if I need a very specific, you know,

• 15:20Robin Rauzi?

  Widget.

• 15:20Speaker 02

  Widget from China and now I have to pay a tax on it, but I can't make any product or sell anything without this widget. I will pay that tax, then I will pass it on in the form of the higher price of my big widget. For corporate profits, it's different because I can still have efficiently produced goods and not pay a tariff on whatever good. And the tax comes in at the end when I report my profit for the year.

• 15:43Speaker 02

  So those arguments are... Wait, what was the first one you said? Because the second one you said was they're just going to pass it on to consumers.

• 15:49Robin Rauzi?

  The other one is it comes out of wages.

• 15:50Speaker 02

  Oh, yeah. Y'all? Not much left in wages to come out of is all I'm gonna say.

• 15:56Robin Rauzi?

  Right.

• 15:58Speaker 02

  For decades, the argument about the corporate income tax rate has been that capital is mobile.

• 16:05Robin Rauzi?

  Right.

• 16:05Speaker 02

  And if you have too high of a tax on corporations in the US, they will pack up and move elsewhere.

• 16:11Robin Rauzi?

  Right. They'll go to Ireland or...

• 16:13Speaker 02

  They'll go to Ireland, they'll go to...

• 16:14Robin Rauzi?

  The Bahamas or something.

• 16:15Speaker 02

  Barbados, like they'll go somewhere else. And so you have to keep the corporate income tax rate low in order to keep corporations here. And when economists talk about the corporate income tax rate, that is what they're talking about. They almost are entirely talking about the mobility of capital. Capital, as I said, in terms and condition of like the big C capital. The actual year in which the taxes fell, you know, the motivations behind the tax cut were obviously not like, hey, these really large corporations are basically practicing extortion. And they've told us if we don't lower the tax rate, they'll pack up and leave. So we have to respond to that because apparently when you're in Congress, you do negotiate with terrorists. They didn't say that at all. What they said was this is gonna be good for the American worker.

• 16:57Speaker 02

  This is gonna be good for the American family. We're gonna have more jobs here and those jobs are gonna pay more. And so...

• 17:03Robin Rauzi?

  That's the jobs part of the Jobs Act.

• 17:04Speaker 02

  It was the jobs part of the Jobs Act is that we're gonna cut corporate taxes and keep jobs here and they'll pay more.

• 17:10Robin Rauzi?

  Right.

• 17:10Speaker 02

  Well, the way that a tax cut is absorbed is right away. Like if I cut your taxes, you make changes today. So the difference...

• 17:18Robin Rauzi?

  Who's the you in that sense? Like if I'm a company?

• 17:20Speaker 02

  Yeah, you person benefited by the corporate income tax rate or you household who benefited from a lower income tax rate.

• 17:27Robin Rauzi?

  Okay.

• 17:28Speaker 02

  That year, 2018.

• 17:31Robin Rauzi?

  Yeah.

• 17:31Speaker 02

  It was mid-lean wage growth. Wasn't low, but it wasn't high. A lot of companies said that they would pay out bonuses to workers. They didn't. If they did pay bonuses, the most generous estimate is that it was less than 2% of the corporate tax cut. More importantly, it was the single largest year in history for corporate stock buybacks.

• 17:52Robin Rauzi?

  Okay, explain that. How does that lead to corporate stock buybacks?

• 17:57Speaker 02

  Effectively, what happened to corporations is that they got a much lower tax rate. They had excess cash in 2018. What did they do with it? They spent it on corporate stock buybacks, which is where you basically invest in your own share price in order to make it higher.

• 18:12Robin Rauzi?

  That's because as your corporation buys a bunch of its own stock, you're just driving the price up? Or is it because there's then less stock on the market?

• 18:20Speaker 02

  I think it's both. Yeah, so I mean, the intellectual argument is like, y'all, we can't tax corporations. They won't stay in America. And they're saying, if you give us a lower corporate tax rate, we'll have more money to pay workers wages.

• 18:33Robin Rauzi?

  None of that is playing out.

• 18:35Speaker 02

  I mean, but the absolutely paid out is that the workers didn't get anything and they absolutely had. I mean, the largest year for corporate stock buybacks in US history, it wasn't even close. So when companies get money in the US, they have corporate stock buybacks. What they would say is getting the value of their company higher allows them to make capital investments and expansions. And that the stock price, since that's how they could issue debt and since that's how they're valued, that affects what they can borrow, what rate they can borrow at. That is a way to bring innovation and expansion and that it's working through a higher stock price. Certainly not working through workers.

• 19:15Speaker 02

  I'm sure they would deny that, too. I guess my, my, um. Here's a way to think of why I think the corporate tax rate, like if I had to make like, what is your most succinct argument for why the corporate tax rate needs to go up? It's because nobody, no locality in the country is advised now that they should do this for a company within the US.

• 19:35Robin Rauzi?

  Okay, I would say, I feel like actually as a Californian, that that states all around the country are trying to steal California businesses with lower tax rates.

• 19:44Speaker 02

  So Texas had a specific corporate tax rate that was meant to entice companies to move and relocate their headquarters to Texas.

• 19:52Robin Rauzi?

  Yeah.

• 19:53Speaker 02

  And what a set of researchers found when they looked at people who actually claimed that tax rate was that almost all of them were going to move anyway.

• 20:01Robin Rauzi?

  Hmm.

• 20:01Speaker 02

  The tax didn't influence their decision.

• 20:04Robin Rauzi?

  Hmm.

• 20:04Speaker 02

  Was the key part. It just made it more lucrative for them. You think of a company like a big relocation was Exxon moved from California to Texas. Yeah, they didn't do that like waiting for the Texas legislature, the biggest clown car in North America, to come up with some kind of package they approved of because there's a trustworthy set of people. Like, no, they had had plans for years, right, that they were going to relocate, they wanted to move to cheaper cost of living or whatever their reasonings were.

• 20:32Robin Rauzi?

  Hmm.

• 20:32Speaker 02

  And the paper was, I thought, was really interesting, but it's basically like, once they decide to go, then they tell the location, like, you know, we'll come if you can get a business-friendly environment and make sure our taxes are lower here. And it's unemployment taxes, it's property taxes, and not just state-level corporate income taxes.

• 20:50Robin Rauzi?

  Business taxes. But you're saying that nobody advises states to do that anymore because of that, that finding?

• 20:56Speaker 02

  Well, so even the Mercatus Center, which is a very conservative

• 21:01Robin Rauzi?

  Yeah.

• 21:01Speaker 02

  Economic think tank, they say that using tax incentives to lure a company into your state or locality is throwing money away.

• 21:12Robin Rauzi?

  Yeah.

• 21:12Speaker 02

  The advisement now is do not do this because they will make you promise the moon.

• 21:19Robin Rauzi?

  Hmm.

• 21:20Speaker 02

  And they mostly don't deliver. So, you know, great example is Foxconn in Wisconsin.

• 21:24Robin Rauzi?

  The big Chinese manufacturer of iPhones and other electronic devices.

• 21:29Speaker 02

  Yes, they were going to make a Silicon Prairie in Wisconsin, and they said, here's the number of jobs we're going to have, here's how much they're going to pay, we're going to make this much billion in capital investments, and we need a package that's friendly. You know, the governor goes down to the State House, tells the legislature, hey, if we approve this, we're going to get all these jobs, and this is going to be good. The legislature approves the tax package, and then, yeah, they don't come. In some ways, Amazon HQ2 might be more familiar, but you know, definitely less egregious. But it was similar. Like, they promised 50,000 jobs that were making $100,000 on average, with some billions of capital investments. Nine years later, they've got 8,000 jobs,

• 22:14Speaker 02

  and they've built two of their buildings, but not the second half of capital investment. I mean, they just, they didn't deliver as promised.

• 22:21Robin Rauzi?

  So, these bids, are they specific to the one company? It's like a, it's like a negotiation with Amazon. It's not, we're changing the tax code for all the companies, which you could imagine, per your study, would be, I mean, of course you're going to wind up behind.

• 22:38Speaker 02

  I don't even necessarily think Amazon acted in bad faith with HQ2. I think they make decisions that are irrespective of the corporate income tax rate. Like, they're making a business decision. It has its own motivations. It's not because they're necessarily like a mean, spiteful, just wanted to see how much localities could bend over backward. I think that their business changed. And I think that we have just passed this moment in US economic history that is an incredible reduction in the corporate income tax rate. People are going to write in and tell me what a stupid economist I am, that I don't know how economics works, that this is Econ 101, like, she's a bad economist, she's not a real economist, or whatever you want to hear, because I don't think the corporate

• 23:21Speaker 02

  tax rate should be this low, and I think it should be higher. And I understand perfectly that there is a risk, that if you raised the corporate income tax rate in the United States, a company would leave. And I think in my mind, I'm like, okay, buy, buy, buy. If I raise the corporate income tax rate, so you have to pay 20%, or you have to pay 30%, and you pack up and go, good riddance. I would bet my life that you are a terrible employer, that you pay awful wages, and I bet you make a suspect product. But sure, go to that low-tax haven of Canada.

• 23:56Speaker 02

  Well, you know, like I just

• 23:57Robin Rauzi?

  It felt like we didn't have businesses in 2017 when the taxes were higher.

• 24:01Speaker 02

  No, no, and I, I, I think that this goes back to why I wanted to talk about capitalism and the terms and conditions. Like, I am a capitalist, like, at heart, I am truly a capitalist.

• 24:11Robin Rauzi?

  I know, I know, it's surprising sometimes.

• 24:13Speaker 02

  It's some, like, when that guy called me a garbage communist lefty,

• 24:17Robin Rauzi?

  Yeah.

• 24:19Speaker 02

  I felt like he didn't know why he was insulting me.

• 24:24Speaker 02

  But I'm not really a communist. Like, I do believe capitalism has done more for the eradication of poverty and destitution than almost anything else we could point to.

• 24:35Robin Rauzi?

  Yeah.

• 24:35Speaker 02

  I mean, it creates an incredible amount of wealth. It does not spread it around. Government can do that with, like, really light-touch policies, but we are just in a state where we have given too much deference. And I, if, if there was, if Amazon was like, "Yeah, well, we're gonna pack up and we're gonna leave North America and Amazon will pull out", I would be like, "Yeah, man, it sounds great." Take, yeah, you, you would leave jobs behind, but we have an entrepreneurial capitalist society, someone would replace you, because you didn't exist 30 years ago.

• 25:05Robin Rauzi?

  Mm-hmm.

• 25:06Speaker 02

  I mean, same thing with, you know, if Starbucks was said, "If we unionize, Starbucks will shut down." Sounds great, people will still drink coffee?

• 25:13Robin Rauzi?

  We got plenty of coffee.

• 25:14Speaker 02

  I mean, I don't like, I don't champion people losing their jobs. I don't like the idea of there being layoffs, but our economy will pick itself up by the pieces of a Starbucks-less America and move on. We live in the largest, most dynamic economy in the world. It would be hard, there would be people who genuinely suffer, but we can ease the suffering and help people invest in new things. I'm sure someone's like, "You're a naive little girl."

• 25:39Robin Rauzi?

  Yes, I'm sure.

• 25:40Speaker 02

  Doesn't know what you're

• 25:41Robin Rauzi?

  You're not a job creator.

• 25:41Speaker 02

  She's talking about.

• 25:42Robin Rauzi?

  Um, can somebody say that to you?

• 25:46Speaker 02

  Someone said that to me. I was testifying in front of Congress, in front of the Republican-led House Ways and Means Committee, that was putting together the one big, beautiful bill. I was saying that we need to have an effective tax structure in the US, and this guy, I don't know, some jabron, said, you know, "Don't you always notice how it's the people that have never created a job in their life that are the ones telling us what to do?" And y'all, that was the closest I got to like rage crying during that hearing was when that guy said I wasn't a job creator. And I was like, "You man, I made my own job." And it is not a corporate income tax rate that is preventing me from expanding. It's the lack of reliable childcare. I was so mad.

• 26:28Robin Rauzi?

  So I didn't mean, I didn't mean to trigger you with that memory.

• 26:31Speaker 02

  I'm okay, but I do need to call my counselor after this.

• 26:36Robin Rauzi?

  Can I ask one other question before, maybe, maybe you're gonna get to this, but how much are we talking about in terms of corporate taxes? Like, how much, how much of that is, I mean, it's nearly...

• 26:47Speaker 02

  It's a lot of money.

• 26:47Robin Rauzi?

  It's a lot of money, right? It's a lot of money and tax dollars that, that we don't have to do anything else with.

• 26:53Speaker 02

  Okay, so how should we think about how much money is left on the table by having a much lower corporate income tax rate? It's hard because companies are always growing, the economy is always growing and so on. So you can look at the difference in tax collection from the corporate income tax expressed as a share of GDP.

• 27:14Robin Rauzi?

  Okay.

• 27:14Speaker 02

  Which is the size of our economy.

• 27:16Robin Rauzi?

  Sure.

• 27:16Speaker 02

  So, as a share of GDP, it used to be, thinking like the 50s, 60s, hung at around between 3.5 and 4%, and now it's around 1.8. So if you were to just take 2 points of US GDP, the difference in tax collection,

• 27:33Robin Rauzi?

  Yeah.

• 27:34Speaker 02

  This is $620 billion a year we don't collect in corporate income taxes. So, let's go back and do my favorite math.

• 27:41Robin Rauzi?

  That's...

• 27:42Speaker 02

  So $620 billion a year.

• 27:45Robin Rauzi?

  Yeah.

• 27:46Speaker 02

  20 billion is how much it would cost to have a universal paid family leave system. And we'd still have 600 left over.

• 27:52Robin Rauzi?

  Okay.

• 27:53Speaker 02

  100 of that you could put into a child tax credit that goes to every kid and is generous and basically eradicates child poverty. You know, another 100, you could spend on universal preschool, universal daycare.

• 28:07Speaker 02

  And then I think you could, you know, what the hell, as long as you've got the money, add another hundred to have universal after-school and universal summer programs. Yeah. Honestly, universal Medicaid for all kids, that wouldn't cost that much because we insure most of them, at least half of them on Medicaid anyway, and they're quite cheap. And then we would still have one to $200 billion left over just to deal with the debt. And that's just from corporate income tax rates. It's just... There's a lot of money to leave on the table for jobs, Robin. Jobs. They're job creators, not like you and me, stupid women who don't know what we're talking about when it comes to the big man's corporations. I mean, I would feel so differently about this. I would, I want to make some things

• 28:51Speaker 02

  very clear. I would feel incredibly different about the corporate income tax rate if we had universal paid sick days. Yeah. If the minimum wage wasn't 7.25, if 100% of people had paid family leave, or if they, everyone got bereavement leave, or if we made, you know, more income, I would feel really, really different about the corporate income tax rate if they had ever proved that they spent it on workers. Cake, eating it. I don't know how that phrase works. That's corporate income taxes. I'm so, well, no, and if you're like, I don't know, I don't know, Catherine, even after shrinkflation, I still think I'm on big corporation's side. I want to explain why I think corporate profits are too high and labor income is too low. I'm going to start technical, and I promise I will get to a human place. We

• 29:35Speaker 02

  measured the size of the economy through gross domestic product. It has a sister statistic called gross domestic income. And you can use gross domestic income to understand how much money goes to corporations after profits. As a size of the economy, how much money goes to the wages, compensation, and non-wage benefits of workers? Well, this series starts in 1929. And in 1929, corporate profits as a share of the economy was 8.9%. And you would have had economists in the almost century since tell you, there's no way we'd ever get that high again. The last four years, corporate profits as a share of the economy have been over 9%.

• 30:20Speaker 02

  The highest four years on record in almost a century of how much money corporations make in profit are the prior four. They have never been so profitable. They're even more profitable now than they were just before the Great Depression wrecked the economy. A similar measure is, you know, kind of same shares, how much goes to workers. That number has been falling for 60 years and is now at a low, just under 52%, which puts it on par with how much workers made during the Great Depression, right in the 1930s. So corporate profits right now are higher than the peak of the stock bubble.

• 31:03Speaker 02

  Labor income right now, close to where it was during the early 1930s of the Great Depression. Something has to change. When I say corporations are making too much money and people aren't making enough money, like, yes, I'm a liberal, progressive economist and I want nice things, but I have 100 years of data behind me when I say corporations are making too much money and workers are not making enough.

• 31:24Robin Rauzi?

  I feel like, yeah, I feel like we, it's weird. I feel like we have the same conversation in like 15 different ways. People are not being paid enough.

• 31:32Speaker 02

  I think some things are really complicated and they require an economist like me to explain, and some things are not that complicated. One has too much money, the other has too little, like, womp, womp, like, here, government, like, you've got a job to do. It's not that hard. We're out of balance.

• 31:48Robin Rauzi?

  Yeah.

• 31:49Speaker 02

  We are a lot of the way there, but now we have to deal with incredible complications in how businesses are taxed that they can then use to reduce their tax rate.

• 31:59Robin Rauzi?

  Right, right. What corporations can deduct and how they deduct them and how soon they deduct them and whether they deduct them over those expenses over time. And we've made it way easier for people to lower their tax bill by claiming expenses immediately in year one.

• 32:14Speaker 02

  And I should say that, like...

• 32:17Speaker 02

  Moving to a simpler tax rate is easy, you know, legally. Like, you have a tax code that's thousands of pages long and you replace it with one that's much shorter. It's that we have turned our tax system into a complex bonus and reward mechanism and there is almost no way to change the tax code without creating some kind of loser. And this is how we've gotten to where we are of like, oh yeah, make taxes simpler, but not on my thing.

• 32:46Robin Rauzi?

  Yeah. The carrots and sticks are very, and everybody knows where the carrots are and where the sticks are.

• 32:52Speaker 02

  Yeah, and no one wants to lose their carrot.

• 32:54Robin Rauzi?

  Yeah, exactly.

• 32:57Speaker 02

  Corporations, the same. So I, I think, much like our estate tax episode, like, there are still some, like, very complicated questions related to the estate tax, but like, Bezos Jr., I'm coming for you. You know what? Bezos Sr., I'm coming for you too.

• 33:13Speaker 02

  Um, did I get people mad enough about how much profit corporations have relative to how much money they have and all the nice things we could buy?

• 33:22Robin Rauzi?

  I mean, I don't know, do you want to go back to you're a capitalist at heart?

• 33:25Speaker 02

  I am a capitalist at heart because I don't think that this incredible economy that's 31 trillion in size, that employs 170 million people, should be held hostage by a corporation that wants lower taxes.

• 33:38Robin Rauzi?

  Yeah.

• 33:39Speaker 02

  Like, I would bet on 170 million people, people who have access to a loan, to family money, to put it all together on a credit card, and they put their life on some dream business. I would put my money on them over Amazon any day.

• 33:52Robin Rauzi?

  Yeah.

• 33:52Speaker 02

  I would always put my money on people building new businesses than old businesses staying in power because they are able to use their threat and their size in order to get more money from the government and get more protection.

• 34:04Robin Rauzi?

  Yeah.

• 34:04Speaker 02

  I also don't think it's good for the economy to have such concentrated wealth amongst businesses because big businesses don't innovate. Innovation comes from new businesses, not big businesses already in existence.

• 34:14Robin Rauzi?

  Yeah, no, big businesses just bully everybody around them. Witness Ticketmaster and what they just, you know?

• 34:19Speaker 02

  Yes, yes. It's like, yeah, all right, well, eradicate Ticketmaster. You know, y'all still have concert tickets.

• 34:25Robin Rauzi?

  We would still have concerts.

• 34:26Speaker 02

  It's funny, like, we're afraid to talk about the pain that comes from making a big corporation mad, but we're okay with the pain that comes from staggering income inequality on perpetuity. Or the pain that comes from not being able to afford childcare, the pain that comes from not being able to afford healthcare, the pain that comes from not being able to afford elder care as your parents are dying and all these terrible decisions, all that pain's okay, but if like Bezos feels the squeeze and he cuts jobs, we can't allow that.

• 34:57Robin Rauzi?

  Well, nothing's stopping Bezos from cutting jobs now. I mean, they're gonna cut 10,000 jobs, I don't know, in the next few months, you know?

• 35:04Speaker 02

  Yeah, I mean, corporate income taxes don't give you, they don't like recession-proof the economy, they don't create wages or income, like, you're rewarding people who are already winners, like, I just don't like that, I don't feel like that's very American or capitalist.

• 35:17Robin Rauzi?

  Right, and certainly not getting us subsidized childcare.

• 35:20Speaker 02

  Uh-uh. All right, we need to wrap?

• 35:24Robin Rauzi?

  Take a quick break, yeah.

• 35:25Speaker 02

  Quick break?

• 35:26Robin Rauzi?

  We'll be right back.

• 35:31Robin Rauzi?

  Okay. We're back with executive orders. Catherine, do you have an executive order?

• 35:37Speaker 02

  Uh, come back to me.

• 35:41Robin Rauzi?

  Okay. I'm gonna share an executive order from Valerie Worth in Raleigh, North Carolina. She wants all commercial construction sites to have a sign that tells you what's being built. She wants to know whether she could be excited that she's getting a yummy new restaurant versus a boring bank. Like, this would be very, this would be very easy. I'm also down with this, I'm very curious, what is going in, in that, in that hole?

• 36:04Speaker 02

  Mm-hmm.

• 36:05Robin Rauzi?

  This is similar to the, am I moving in or moving out, uh, sign on the, on the moving trucks?

• 36:12Speaker 02

  Yeah, I want, I want some like idiot-proof in here, like, I want like a little picture of what it's gonna be.

• 36:17Robin Rauzi?

  They do that sometimes, they do that sometimes here.

• 36:21Speaker 02

  They do it sometimes, I want, I want, I want more. My executive order, I am currently in the greatest city in the world, New York City, and it has some of the most incredible playgrounds my children have ever or will ever go to, and we need like a massive playground fund, just to build playgrounds everywhere. Like, we, every airport needs one, every library needs one, um, most public spaces need one, I mean, I, I want playgrounds like, I wanna be able to walk and trip over a playground first in a new street in the US, once I want a massive playground fund, and I'd be willing to take it from people who own corporations.

• 37:01Robin Rauzi?

  I was gonna say, well, I think we've got 200 to 300 billion dollars left.

• 37:05Speaker 02

  Yeah, we've got 200 billion, $300 billion. But yeah, my, my, my executive order is we need more playgrounds. They need to be built like with art students. I mean, I'm thinking like big government liberal stuff from here to high heaven. But I want some like, I want some like public funded art student to be working on playgrounds all over and every airport and train station need them. So more playgrounds, spiritual sponsors.

• 37:32Robin Rauzi?

  All right. We end our show talking about our spiritual sponsors, which are the non-financial things that get us through the week. Catherine, what's your spiritual sponsor?

• 37:42Speaker 02

  My spiritual sponsor is mutton bustin'.

• 37:45Robin Rauzi?

  What is this?

• 37:46Speaker 02

  Okay, okay. Imagine a rodeo where like a cowboy gets on like a bucking bronco horse and he has like eight seconds to try and stay on and the horse like tries to kick him off. Okay, now imagine instead of a man on a horse, it is a kindergartner on a sheep. This is mutton bustin'.

• 38:06Robin Rauzi?

  This is, I'm sorry, this is an actual activity?

• 38:08Speaker 02

  This is, oh, okay, hold on. Some respect in your voice.

• 38:11Robin Rauzi?

  Wait, is this a cartoon? What is this?

• 38:12Speaker 02

  No, no, mutton bustin' is real. It happens at the Houston rodeo. I just, I just watched it. Mutton bustin', they put these little kids on sheep and they wear like helmets and they have like a pad on their chest and basically they put the kid on, they have them like wrap their arms around the sheep and they hold on to the wool as tightly as they can and the sheep just runs from one side of the like rodeo to the other. Yeah, they go, they are in a pen that's like 50 feet long and the sheep is trained to just run from one side to the other. And then you just see how long the little kid can stay on before he falls off. This is mutton bustin'. They're like featured on the local news during the rodeo. It's so precious. A lot of times the kids are really traumatized and crying and other times they think it's hilarious. But it's just, it's adorable.

• 38:57Speaker 02

  So the sheep that I saw this year were Woolley Nelson.

• 39:00Robin Rauzi?

  These are the names of the sheep?

• 39:01Speaker 02

  Of the sheep, yeah. Woolley Nelson, Merrill Sheep, Fleece Wood Mack, Lamborghini, and then of course, my favorite, the toddler tosser. But the sheep are so, I mean, they're so mild and dumb, like they just jog over. They, they just stand in one corner of the pen. Like they don't do anything. They just, they all know to stand in one group. And so it ends up being like 20 sheep are just watching the other ones run up, being like, you had a kid on you, you don't anymore? Anyway, mutton, mutton bustin' is my spiritual sponsor.

• 39:31Robin Rauzi?

  Excellent.

• 39:32Speaker 02

  You can see videos of mutton bustin' online.

• 39:36Robin Rauzi?

  Okay, well, my spiritual sponsor, before I knew you were gonna talk about Jeff Bezos and Amazon so much, was I just read that Mackenzie Scott, famously his ex-wife, but also the most prolific philanthropist this country has ever seen, gave away $7.17 billion in charitable giving last year. And just so you know, the giving rate among the ultra wealthy is generally 1.2% of their net worth. I mean, she funds, you know, college scholarships and programs that connect low-income communities with union jobs and all sorts of really amazing things that I think also pay, that she believes anyway will pay dividends. And every time I read a story about what she's done and who she's funded, it's just totally inspiring.

• 40:21Speaker 02

  But did you read about her process?

• 40:23Robin Rauzi?

  Yeah.

• 40:24Speaker 02

  Listeners, this is crazy. She, basically, they do an incredible amount of research on their side. Then Scott gets in touch with the people that they want to fund and is like, "Yeah, we like what you do, so here's $20 million." Like, they don't make them fill out, like, applications for days.

• 40:39Robin Rauzi?

  They sent, they just sent an email and it's like, "Can we schedule a call?"

• 40:43Speaker 02

  Talk.

• 40:44Robin Rauzi?

  And I read, it is this story I just read recently, there was a person who just kept throwing it to junk. It was like, until finally she sent it to her, you know, the development team, and the development team replied, and then called back and was like, "They want to give us $20 million." She was like, "Wait, what?" And it was, it was a historically black college in Maryland. They, so she gets on the call and is ready to make this big pitch, and they're like, "Oh, no, no, no, we already know. We already know all about you."

• 41:11Speaker 02

  Yeah, yeah, we're done. It's 20. You're great.

• 41:12Robin Rauzi?

  Yeah.

• 41:13Speaker 02

  Yeah.

• 41:13Robin Rauzi?

  It's, it's, it's amazing. It's amazing.

• 41:16Speaker 02

  I appreciate philanthropy like that because I feel like a lot of philanthropy is formalized, labor-intensive begging.

• 41:23Robin Rauzi?

  Yeah.

• 41:24Speaker 02

  And I, I like that. I mean, the quote from the Scott people was, you know, "We do all the hard work on our end so they don't have to."

• 41:33Robin Rauzi?

  Yeah.

• 41:33Speaker 02

  And I was like, "Wow, that is not how most people who do philanthropy feel about it."

• 41:37Robin Rauzi?

  It's like, it's like, "Please spend a week on this application so we can give you $3,000. Like, give me a break."

• 41:43Speaker 02

  Oh, yeah. Yeah, not that, not that you and I would know anything about that. Anyway, we gotta go.

• 41:56Speaker 02

  The Optimist Economy podcast is edited by Sophie Lawnd. Our video production for social media is by Andy Robinson. Thank you very much. You can share video clips from the show on TikTok, Instagram, YouTube, or LinkedIn. You're going to want to see the episodes from this show, since I'm not in my typical office and I'm in another location that has a glass wall behind me with people walking by or just stopping right over my shoulder and talking throughout the episode.

• 42:17Robin Rauzi?

  If you're on Substack, you can follow us there, too. We have an Optimist Chat going where you can talk with fellow optimists. Optimist Economy is supported, at this point, solely by listeners like you, not by Mackenzie Scott. So if you have the means to contribute, you can do so at optimist economy dot com. And we'll also happily sell you a T-shirt, a hat, and have I mentioned we have stickers?

• 42:36Speaker 02

  Yes. I don't know if you have, but we do. Thank you, optimists, and see you next week.

• 42:42Robin Rauzi?

  Okay.