March 5 (Bloomberg) -- Throughout the recent debates in Washington over whether taxes should be increased, one group has consistently maintained its opposition: the leaders of American businesses.
Large U.S. corporations haven’t always been opposed to tax increases, however. In fact, as recently as 1989, and for decades before, big companies routinely called for tax increases, even on themselves, to balance the budget.
Groups such as the Committee for Economic Development, the Business Roundtable, and even the more conservative National Association of Manufacturers and the U.S. Chamber of Commerce, called for tax increases on a number of occasions, under both Republican and Democratic administrations.
In 1950, shortly after the U.S. entered the Korean War, the CED, the Chamber of Commerce and the NAM all supported increasing taxes to raise funds for the war. In March 1951, the CED recommended a $10 billion tax increase to prevent inflation. “Taxes are already very high,” the group said. “Now we need still higher taxes -- higher than we have ever had before, even at their wartime peak.”
Three years later, when President Dwight D. Eisenhower sought an extension of the wartime excess-profits tax on corporations, the CED supported the idea, drawing praise from the editorial page of the New York Times.
Later in the decade, the group supported an increase in gasoline taxes to fund the interstate highway system. In 1966, it called for a temporary increase in the income tax to counter the deficit resulting from the Vietnam War, noting that it should be of a kind that can “yield the revenue needed, that can be quickly imposed, that will be accepted by the country, and that can be easily withdrawn when the emergency has passed.”
The Business Roundtable, a group of Fortune 500 executives that, after its formation in 1973, began to replace the CED as the leading representative for big businesses, supported tax increases for individuals even as it sought reductions in corporate taxes. In response to the deficits that resulted from President Ronald Reagan’s tax cuts, the Roundtable called for an increase in income-tax rates, even though its high-earning members would pay a disproportionate price.
As late as 1989, after George H.W. Bush was elected president on a promise of “Read my lips, no new taxes,” Fortune magazine printed a story with the headline, “CEOs to Bush: Raise Taxes Now.” Bush did in fact acquiesce to a tax increase, a decision that many believe cost him re-election in 1992.
It was only after President George W. Bush’s tax cuts created deficits even larger than those of the Reagan years that big businesses suddenly refused to call for tax increases. Despite expensive wars in Afghanistan and Iraq, which drove the deficit even higher, the Business Roundtable remained silent.
Perhaps the Roundtable had accepted Vice President Dick Cheney’s alleged claim that “Reagan proved deficits don’t matter,” because rather than criticizing the Bush tax cuts, the group actually supported making them permanent.
So why were large corporations, which had been willing to recommend tax increases for almost half a century, suddenly unwilling to even acknowledge the relationship between tax cuts and the deficit?
The answer lies in part with the fragmentation of the corporate elite. In the 1950s, business leaders had to cooperate to negotiate with both a strong labor movement and a powerful federal government. The need to work with these constituencies created a community of pragmatic businessmen who tried to devise policies acceptable to everyone at the table. But as the labor movement crumbled, and government lost some of its legitimacy, corporate elites had little incentive to build coalitions to secure favorable policies. Instead, they began unilaterally pursuing their own interests.
As a consequence, the corporate elites were increasingly unable and unwilling to act collectively to address the problems they -- and the nation -- faced. This was evident in the debate over President Bill Clinton’s health-care plan in the early 1990s, as the large corporations that supported the plan caved under pressure from Republicans in Congress, who were more responsive to small companies, opposed to the plan. It was evident during the debate over President Barack Obama’s health-care overhaul, in which large companies were largely absent from the discussion. And it remains evident in the controversy over how best to rein in the deficit.
Today’s corporate elites have abandoned their pragmatic interest in the collective good, and now pursue a far narrower quest to secure benefits for their companies. Despite a few dissenting voices, such as Warren Buffett and Robert Rubin, business leaders continue to oppose tax increases, even for those earning tens of millions yearly. Fix the Debt, a group of business and public officials devoted to reducing the deficit, has focused almost exclusively on spending cuts, referring vaguely to “revenue increases” while simultaneously advocating reduced tax rates.
The American corporate elite of the postwar period exercised a sense of responsibility, willing to support policies that would impose a disproportionate burden on its own members. The elites of today, by contrast, are extremely successful in gaining political favors for themselves, but they have shown little willingness to address problems of business-wide -- and societal -- concern.
(Mark S. Mizruchi is the Barger Family professor of organizational studies, professor of sociology and professor of business administration at the University of Michigan. His book, “The Fracturing of the American Corporate Elite,” will be published by Harvard University Press next month. The opinions expressed are his own.)
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