RAMP’s goal is to induce most American businesses to share their gains with their workers in a way that keeps their CRs stable. A key question, then, is whether RAMP’s incentives, as modeled in our illustrative example described in the Working Paper, are in fact strong enough.  Are they sufficient to have the desired impact on companies?

Among the incentives in the illustration of RAMP modeled in the Working Paper is a 20% tax redirection for participating companies. That tax redirection is coupled with tax penalties for companies that don’t participate in RAMP. The penalties would entail the loss of 60% of a company’s tax reductions from the 2017 Tax Act and loss of 60% of other tax loopholes. (Nearly all tax reductions and tax loopholes have had their origin in the justification of generating growth for companies that would be shared more broadly and not simply go to top employees and profits.) In addition, nonparticipating companies would go to the back of the line in terms of eligibility for federal contracts and subcontracts. Companies participating in RAMP would continue to enjoy all the benefits of the current tax structure, plus the 20% tax redirection and priority for federal contracts and subcontracts.

We modeled the combined impact of the tax provisions—what we call “the hammer”—on the after-tax profits of companies over a ten-year period. We examined companies from every industrial sector and considered both smaller public companies of 500 workers and larger ones with 2,000 workers.  

The table below displays the results. The companies at the left of the table represent a “typical” company for each industrial sector. That is, the size of their profits, revenues, compensation costs, growth, taxes, and so forth are all set to equal the overall average of their industry. The figures in the first column of the table show for each company the costs or benefits, in millions of dollars, that are involved in participating in RAMP (such as the cost involved in paying higher wages or the benefit of the tax redirection). The second column displays the same for non-participants. The third column shows the difference in costs/benefits over the ten years between participation and non-participation and represents what we’re calling the “hammer”: the net cost of non-participation. Finally, figures in the fourth column for each company give the bottom-line results for the company, the difference that the tax incentives make as a percentage of the company’s profits depending upon whether the company participates in RAMP or does not participate.

The figures in the table reveal that regardless of the industrial sector, RAMP’s tax incentives mean that an average company will experience no less than an 18% overall advantage in after-tax profits over the ten years, even after paying higher wages, if it joins RAMP and keeps its CR stable as compared to not joining RAMP and paying lower wages.  That same outcome holds regardless of the size of the company, small or large. The average overall difference in after-tax profits from participating in RAMP over the ten years is about 24%. These figures do not include the positive impact on profits that priority bidding for the more than $500 billion in annual federal contracts and subcontracts would lend to RAMP participants, nor the effect on profits that paying better wages would likely have on reducing turnover of workers, on worker morale and productivity, and on competing for the most skilled workers.

The incentives we modeled are not written in stone. We have examined only one possible mix. The size of the incentives could be altered and other incentives could also be brought into the mix.

However, in a world in which shifts of 5% in profits would catch attention, we believe the more than 20% average difference that RAMP’s tax incentives would make in a company’s after-tax profits, plus other advantages positively affecting profits, would be a powerful incentive for such companies, indeed more likely a compelling incentive.