Public Health and Corporate Avoidance of U.S. Federal Income Tax

• Published date: 01 September 2018
• Author: William H. Wiist
• DOI: http://doi.org/10.1002/wmh3.274
• Date: 01 September 2018

Public Health and Corporate Avoidance of U.S. Federal

Income Tax

William H. Wiist

The amount of U.S. federal revenue affects the government’s ability to provide public health services,

programs, infrastructure, and research to adequately protect the public’s health. Public health

funding shortages are chronic. Corporate income tax avoidance is one source of unrealized federal

tax revenue that, if collected and allocated to public health, could help offset those shortages. Major

corporate methods of tax avoidance, their effect on federal revenue, and recommended policy changes

are described. Corporate tax avoidance and government revenue shortages are framed as social

determinants of health, and research questions and data sources for public health researchers for

examining the issue are suggested. Although there is no guarantee that any additional corporate

income tax revenue would be directed to public health, the subject warrants the attention of public

health researchers and policy advocates. The United States serves as a case study for public

professionals in other countries to conduct similar analyses.

KEY WORDS: corporations, federal income tax, social determinants of health

Introduction

The U.S. public health infrastructure lacks the resources necessary to carry out

its roles effectively and to ensure basic health protections (Institute of Medicine

[IOM], 2012). Per capita public health expenditures fell 9.3 percent between 2008 and

2014. Public health’s share of total health expenditures rose from 1.36 percent in 1960

to 3.18 percent in 2002, then declined 17 percent by 2014 (Himmelstein &

Woolhandler, 2016). Funding shortages prevent public health agencies from

implementing and evaluating essential public health services (IOM, 2012), and result

in an inadequate workforce and weakened data and information systems (Baker

et al., 2005). Between 2012 and 2016 funding shortages and allocation mechanisms

resulted in a 3 percent decrease in funding for state health departments and a

decline in their provision of health and environmental services (Krisberg, 2018).

In 2013, four U.S. government agencies (the Health Resources and Services

Administration; Centers for Disease Control and Prevention; the Substance

Abuse and Mental Health Services Administration; and the Food and Drug

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doi: 10.1002/wmh3.274

#2018 Policy Studies Organization

Administration) spent $77.9 billion on public health. Def‌ined as spending on

epidemiological surveillance, disease prevention programs, public health labora-

tories, biosecurity, public health preparedness, and occupational health and

safety, public health expenditures accounted for 23.8 percent of total government

public health spending, but only 2.8 percent of total government spending on

health (personal health care and public health combined) (Dieleman et al., 2016).

Shaw-Taylor (2016) def‌ined public health as activities and spending by govern-

ments to organize and deliver health services and to prevent or control health

problems, including government administration. That def‌inition of spending was

net the expense of health insurance for implementing government health-care

programs; the difference between premiums earned by insurers and the claims or

losses incurred; and excluded spending on public works, environmental

functions, and emergency planning. Using that def‌inition, Shaw-Taylor (2016)

found that, on average, 29 percent of all government health expenditures go to

public health. Taking into account health spending that includes personal health

care (all medical goods and services for treating or preventing specif‌ic diseases or

conditions in a specif‌ic person), spending on public health (activities and

spending by the government to organize and deliver health services and to

prevent or control health problems to the benef‌it entire communities) from 2000

to 2012 was 3 percent of overall government spending on health (Shaw-Taylor,

2016).

Reports show that larger public social expenditures (e.g., education, income

maintenance) by government are associated with better population health out-

comes (Rubin et al., 2016). Increases in local health department expenditures

result in declines in state-level infectious disease morbidity and years of potential

life lost (Singh, 2014). Each $100 increase in taxation of income, prof‌its, and

capital gains (tax on investments) in low- and middle-income countries correlates

with a $16.70 increase in government health expenditure, particularly to support

universal health coverage (Reeves et al., 2015).

Federal revenue is also needed to pay for other government programs that

have public health implications, such as education and transportation, customer

service at federal agencies, infrastructure needs, and developing new initiatives

(Van de Water, 2017). Federal funding shortages also reduce the resources for the

Internal Revenue Services’ audits of corporations and decrease the assessments of

corporate taxes (Kubick, Lockhart, Mills, & Robinson, 2017; Slemrod, 2004).

Tax Avoidance

Tax Avoidance as a Social Determinant of Health

Corporate tax avoidance fulf‌ills the def‌inition of a social determinant of health

because it contributes to the unequal distribution of income across the population

and the government’s provision of goods and services to address health inequities,

while it adds to corporate political (e.g., election campaign contributions, lobbying)

and economic power (Commission on Social Determinants of Health, 2008). Tax

Wiist: Tax Avoidance and Public Health 273