The U.S. tax code functionally rewards corporations who use anti-union consultants: Congress must take action

The U.S. tax system is deeply flawed. While millions of working-class Americans pay their fair share, corporations are dodging more and more of their tax responsibilities. Despite record profits, corporate taxes are way down, as corporations exploit loopholes that allow for offshore profit-shifting and various tax breaks and deductions. Specifically, the 2017 Tax Cuts and Jobs Act (TCJA) decreased the statutory corporate income tax rate from 35% to 21% and simultaneously introduced new tax loopholes. Consequently, the TCJA has slashed the effective tax rate for corporations almost in half, further damaging the progressivity of the overall federal tax system. In turn, this erosion of corporate liability and the proliferation of tax avoidance have exacerbated inequality, with the working class facing starved social services, reduced household incomes, and lower standards of living.

One proven tool to combat this rise in inequality is unions. By bringing workers’ collective power to the bargaining table, unions are able to win better wages and benefits for working people—reducing income inequality as a result. Yet data show that U.S. employers are willing to use a wide range of legal and illegal tactics to frustrate the rights of workers to form unions and collectively bargain. And much like our overall tax system favors corporations over working people, the tax code functionally rewards corporations for anti-union activities that suppress worker power.

Over the past few decades, employers’ attempts to thwart organizing have become more prevalent, with more employers turning to the scorched-earth tactics of “union avoidance” consultants. These firms work to prevent a union election from taking place—and if that fails, to ensure that workers vote against the union. Amazon, for example, which paid no federal income taxes in 2018, spent $4.3 million on anti-union consultants in 2021 alone. Estimates show that employers are now spending nearly $340 million per year—a likely underestimation—on such efforts, with consultants often reporting being paid $350-plus hourly rates or $2,500-plus daily rates for their work defeating union-organizing efforts. This form of legal coercion, combined with illegal tactics, has ensured that union elections are characterized by employer intimidation and in no way reflect the democratic process guaranteed by the National Labor Relations Act (NLRA).

The tax code allows for the deduction of any fees that are “ordinary and necessary” and directly related to operating a business, with typical deductible expenses including salaries and wages, charitable contributions, and insurance premiums. But corporations exploit this feature by categorizing funds spent on anti-union activities as ordinary and necessary business expenses even though these activities contradict the country’s fundamental labor law. This is emblematic of how corporations are doubly empowered to attack unionization efforts; not only are some union suppression tactics legal, but corporations also reap financial benefits from engaging in these heavy-handed tactics.

The recent surge in highly publicized unionization efforts within major corporations and corresponding union-busting tactics present an urgent need to correct shortcomings in our tax code. Congress must take steps to curtail anti-union activity by prohibiting the deduction of expenditures related to anti-union consultants. One study estimates that such a move could rake in at least $71 million per year and likely much more. While not intended to be a revenue-raiser, implementing this policy is crucial to efforts to deter employers’ hostility toward unionization efforts.

With inequality on the rise, we must move toward expanding access to unions and give workers a real chance at bargaining for better wages, working conditions, and benefits. Now is the time to reform our tax code to ensure that corporations are not rewarded for union-busting activities that ultimately hurt workers.