The word ‘markups’ does not arouse the same emotions as taxes and profits. But markups are an important and little understood form of ‘taxation’. When a business sells something, it takes the cost of either making it or buying it and adds a markup. The markup can be low for high volume goods and services, or very high, even as high as 1000% or more. The portion of the markup depends on what the market will bear. For a life and death drug, the market will bear a lot. The markup produces the company’s profit.
Taxes are almost always portrayed as evil. Some say, ‘Government takes your hard earned money and wastes it.’ Others, myself included, see taxes as the source of many important goods and services in society – education, health care, roads, clean water supplies, regulations to protect us from the unscrupulous, to name just a few. It may not be always perfectly spent but then again neither is my annual income.
Profits get a more mixed review. Some see them as the just reward for wise investment decisions, hard work and a reward for superior intelligence and innovativeness. They are portrayed as what drives progress. Only when they are seen as excessive are they associated with greed. Let us suspend the usual usage of the word tax, and think about markups and the profits they produce, as ‘taxes’ – corporation imposed taxes. Let’s call them CITs.
When big corporations impose CITs on what we buy they use that tax for many purposes. We are paying for the advertisements that manipulate us to buy more. The ads are seldom informative and often deceptive and manipulative. So we are paying a tax to be misled. Perhaps, more starkly, we are taxed on what we buy so we can be lied to about what we bought.
Businesses also use their profits to lobby government. For example oil industry profits go into massive lobbying campaigns that environmental groups could never afford. They want tax breaks for finding more oil that we dare not use if we love our grandchildren. They use CITs to pressure government to build more pipelines and get tax relief to do so. Profits are used to hire tax lawyers and high powered accountants to design tax havens and other ways to avoid paying taxes. More lawyers are used to defend tax cheats and corporations who have broken the law to defend themselves from prosecution. Often governments simply back off prosecution or give a minor slap on the wrist, because they cannot afford the legal power to enforce the law. SNC Lavalin was a clear example.
Profits go for big companies to buy up small companies. In the US most of the recent huge tax cuts by their ‘billionaire in chief’ went to pay for buyouts, senior management bonuses, and to purchase company shares to drive up share values for wealthy shareholders. Very little went into new investment that would result in more jobs or higher incomes for workers.
Finally, most profits go to what are often referred to as the 1%. That is the tiny group who globally own more than 50% of all the world’s wealth. Their take from Canada’s and the world’s economy has steadily grown since 2008. The share of the 99% has remained virtually unchanged. CITs are powerful!
There is another way to compare government imposed taxes and CITs. Governments face parliaments and legislatures, houses of representatives and ‘upper chambers’ elected by the people. They can ask questions and demand answers. Many countries have freedom of information laws and are served by enquiring journalists. These may not be perfect, although the accountability of governments to their citizens in our ‘quasi democratic’ countries as to how tax dollars are spent is fairly high.
How do corporations and the richest people account for how they use the CIT money they take from you? They don’t. When have we seen corporations report to citizens on how much they spend influencing elections, lobbying officials and politicians? How often do they report on their expenditures creating tax havens, paying lawyers to intimidate people and governments? How much was spent in the case of the oil industry, hiding vitally crucial information about climate change? They seldom report any of that information, even to shareholders. How often have citizens been told, “That is commercially sensitive information and cannot be made public”?
A final reflection. Most people, including me, are hesitant about ‘excessively big’ governments. What is even scarier is big corporations. Yet we live in an age when corporations are growing very quickly. Google bought almost 200 companies since 2008. Microsoft acquired 100. A handful control the internet and social media, the global food supply, broadcasting and news media, energy, etc. When fewer and fewer control more and more, is it surprising that more and more people have less and less? What kind of world will our grandchildren be left with? Is this sustainable?