Why corporate tax savings should be held to a higher standard

Many are asking how last year’s U.S. tax legislation — the Tax Cuts and Jobs Act, or TCJA — will affect their responsibilities to the federal government going forward. Corporations, the largest beneficiaries of TCJA, are beginning to shed some light on the impacts of the new tax code to their bottom line through their first quarter earnings reports. They have been less forthcoming, however, in signaling how their lower tax bills might affect their commitments to society. TCJA reduces the statutory tax rate paid by corporations from a maximum of 35 percent under the previous graduated rate structure to a flat 21 percent rate. Most of the current discussion around this part of the new tax code has focused on who will benefit from the windfall handed to corporate America: shareholders, wage earners or new job seekers. While an important debate, corporations’ first-quarter earnings, the first to reflect TCJA tax savings, illuminate a unique opportunity to explore the larger responsibilities of corporations to society. Beyond simply focusing on their most immediate stakeholders, firms might also examine these new found resources within the context of their promises and progress toward how business can help solve increasingly severe social and environmental challenges.