A Mapping of the Full Potential of US Corporate Taxation to Enhance Child and Family Well-Being

January 23, 2024

For too long, corporate tax policy in the US has had a reputation for being inconsistent with economic growth and unrelated to equitable social reforms.

This report analyzes the impact of corporate taxation and shows that strong corporate tax policy is vital to all aspects of a thriving economy—and critical to the well-being of children and families.


“This Roosevelt Institute report—one of two in a series centered on corporate taxation and well-being—maps out the various pathways through which corporate taxation affects the well-being of children and families in the US.”

Introduction

For decades, dueling claims about corporate taxation and its assumed effects on children and families have shaped US policy. From the “cut-to-grow” perspective, corporate taxation is taken to be a nuisance, providing revenue for the functioning of government but inhibiting economic growth and job creation, and thus the ability of families to care for themselves and their children (York 2018). The counter perspective of those who favor raising corporate taxes argues that increasing corporate taxation will necessarily help children and families by providing additional revenue for essential public services (Milani et al. 2019). The problem is that the first assumption is mostly wrong in practice (Brun et al. 2023). The issue with the second is that it is understudied.

In order to understand the evidence underlying these assumptions, this Roosevelt Institute report—one of two in a series centered on corporate taxation and well-being—maps out the various pathways through which corporate taxation affects the well-being of children and families in the US. The report opens with an explainer on corporate taxation in the US context, then proceeds to explore some key enabling conditions for child and family well-being. Finally, we bring these two together to understand the pathways by which US corporate taxation affects the enabling conditions for children and families to flourish, including an examination of how taxing corporations simultaneously plays roles in raising revenue to fund public-interest programs, pre/redistributing resources, restructuring markets, and enhancing—or undermining—democratic representation.

Dimensions of Well-Being

While we recognize that well-being is necessarily subjective and should ultimately be democratically determined by the relevant individuals and communities to which it pertains, we outline below several well-being dimensions, or enabling conditions for children and families to thrive in the US.

1. Income and Wealth

A family’s finances—including both the income they earn through work and the stock of wealth (like savings) they can rely on in times of economic stress—are paramount to their ability to meet basic needs, especially in the absence of government programs that satisfy those needs. But long-standing patterns of institutional racism and economic inequality mean that relatively few families are able to achieve economic security, much less build wealth such that one generation can pass on financial assets to future ones.

 

2. Employment

Consistent and sufficient employment is a requisite for family well-being, both in how it dictates earnings; and because in the US, benefits—from health care and dental care, to sick time and parental leave, to retirement—are purposefully tied to employment (even though in individual cases employers may not provide benefits).

 

3. Education and Childcare

Early childhood care and education are tightly connected determinants of child and family well-being. Quality education has immediate and long-term positive effects on children’s cognitive skills, educational attainment, and employment potential as adults.

 

4. Climate

A growing body of research links climate change to many facets of family well-being—currently and intergenerationally, directly (e.g., extreme weather events cause thousands of deaths and injuries each year), and indirectly (e.g., climate change reduces the overall quality and quantity of safe drinking water, clean air, and food access).

Four Roles of Corporate Taxation

To understand the various pathways through which taxing corporations affects child and family well-being, we analyze how each of the well-being dimensions explored above are impacted by each of these four functions of corporate taxation.

1. Revenue

Revenue—including those public monies raised from corporations—is a must-have for sufficiently funding the public support programs that enhance child and family well-being.

 

2. Redistribution

The corporate tax code—through the costs it imposes and the benefits it provides—distributes resources between and within households, between communities, and between racial and ethnic groups (Darrick Hamilton and Linden 2018). But over the past 50 years, taxes have often served to expedite (rather than resolve) economic inequality—which only inhibits overall economic growth.

 

3. Restructuring

The tax code—through creating implicit and explicit incentives for different kinds of economic and social behavior—already structures our economy. But rather than serving to create an equitable one, current tax policy is a driver of corporate power and concentration—incentivizing “bigness” at the expense of small business competition, workers, and families.

 

4. Representation

Fundamentally, the tax code symbolizes the state’s contract with its citizens. When that breaks down—or is seen as corrupt, discriminatory, or otherwise unfair—so too does the public’s trust in government.

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