Big = Powerful?

Concentration of economic power makes me nervous, and I’m unpersuaded by the assertion that “”Top researchers just demolished a huge fear about legal pot” in a Brookings study saying, “Worry about bad marijuana—not Big Marijuana.” Big companies selling marijuana will have economies of scale to push prices way down, and political power to oppose tax increases.

Now well organized small businesses, acting in concert, can have plenty of political power, adequate to prevent taxes from going up. Here are a couple of anecdotes, based on my recollections from working for Congress three decades ago, before Citizens United:

The major, multinational oil companies were pretty good at lobbying, but the small, independent producers were said to be extraordinarily successful in keeping tax benefits during the 1986 Tax Reform Act: “1986: President Reagan takes aim at federal tax breaks. Oil and gas is one of few industries to emerge unscathed from the ‘showdown at Gucci Gulch.’ He fails to convince Congress to kill the depletion allowance for most oil wells.”  That is an unnuanced take.  Percentage depletion was limited to independent companies owned by wealthy individuals (and families) – the majors (Exxon, Mobil, etc.) did not benefit. The story of how a tax break for those independents stayed in at the last minute is told in Chapter 9, on page 229, of the hardback Showdown at Gucci Gulch, by Jeff Birnbaum and Alan Murray.  The majors got hit by foreign tax credit changes and other 1986 tighteners that applied to multinationals generally.

In my work on the Hill,  the most effective pressure to keep tax breaks for insurance companies came not from the big companies, but from the thousands and thousands of agents, spread through every state and Congressional district. Insurance agents make it a practice to know lots of people, so they seemed to have disproportionate influence.  Big business benefited, but from lots of individual effort, not concentration of persuasive power.

Again, those anecdotes predate Citizens United.

Sure, big businesses may be easier to regulate and tax than small ones.  And corporate employees may have less incentive to cheat than 100-percent owners of businesses, who get every dollar of tax relief personally.  But the Sanders campaign shows a lot of concern in this country that big business is calling the shots, to the detriment of the average citizen.  To a large extent, these are ideological questions, without correct answers.

UPDATE 30 June:  Still thinking about this.  Here’s a key point:  The tax cases where small business succeeded involved stopping something – saying No. It’s relatively easy to get a large number of small players to say No – to stop a change, or to repeal a law. It’s harder to get them to coalesce around a positive agenda. It’s hard to imagine a group of small soda bottlers convincing the public to drink cola the way Pepsi and Coke have. The advertising and marketing needed to brainwash people are more likely to come from huge, wealthy entreprises.

 

 

 

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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