Why AT&T's CEO Wants Higher Taxes

The phone company does a lot of business with the U.S. government.


AT&T customers, pay attention: your phone company is trying to raise your rates.

No, not your phone rates: your tax rates.

And therein lies a story.

If federal campaign contributions are any guide, the CEO and chairman of AT&T, Randall Stephenson, is, or was, a solid Republican. In February, he gave $30,800 to the Republican National Committee. In September, he gave $20,000 to a committee affiliated with Mitt Romney's presidential campaign. There were no similar gifts from Stephenson to the Obama campaign or to the Democratic National Committee, according to Federal Election Commission records.

AT&T's federal political action committee also gave $10,000 to the Romney campaign. The AT&T political action committee's giving in the 2012 cycle favored Republican candidates, who received about $1.6 million, over Democrats, who received about $850,000, according to the Center for Responsive Politics.

So it was something of a surprise to see AT&T issue a statement on Friday afternoon from Stephenson calling for a federal budget deal that, he said, "will require a compromise involving an increase in both tax rates and revenue."

Stephenson participated in a meeting last week with other business leaders and President Obama that was closed to the press. Maybe Obama, who is pushing for the tax rates to go up, was extraordinarily persuasive. After all, Romney and the Republicans—the ones to whom Stephenson and his company's political action committee donated all that money—had been opposing increases in federal tax rates.

Stephenson's statement said that failure to reach a compromise would "result in severe market disruptions," and "a return to negative economic growth." It's only fair to take him at his word that that is the basis for his concern.

A skeptic might point out, however, that AT&T does a lot of business with the U.S. government. AT&T Government Solutions boasts that it employs "more than 4,000 scientists, engineers and analysts—many with security clearances" who "focus exclusively on the IT requirements of government." One federal contract AT&T won last year had a potential value of $5 billion, which is real money even to a company as large as AT&T. The company, like other wireless phone providers, also earns revenue from the "Lifeline" program that provides subsidized cellphones—so-called Obama phones—to low-income customers. And AT&T has already seen what negative effects hostile government agencies can have on its business—when a Justice Department antitrust lawsuit and FCC opposition blocked AT&T's takeover of T-Mobile, AT&T wound up paying T-Mobile a $4.2 billion "break-up fee."

There's a certain amount of irony here. The left spent the campaign season complaining that the Supreme Court's Citizens United decision would open the floodgates for corporate involvement in politics. Yet now that the election is over, President Obama seems to be encouraging corporate executives to campaign for higher taxes.

Defenders of the Citizens United ruling have argued that customers would help check the political involvement of consumer-facing companies. What that means as a practical example in this case is that though I had been planning to switch my family's two smartphone contracts from Sprint and Verizon over to AT&T, I'm hesitant to do so now that AT&T's CEO is publicly campaigning for tax rate increases that I oppose.

The sad reality, though, is that the thousands of dollars that my business would mean to AT&T, or the millions of dollars that the business of other like-minded Americans would mean, are dwarfed by the value of a $5 billion government contract or winning the favor of a regulator with the power to approve or deny a multi-billion-dollar deal.

Good-government groups and newspaper editorialists spend a lot of energy worrying about the danger that corporate cash or influence will sway political decisions. The greater danger may yet be that the influence runs in the other direction, and that government money and power influence businesses to become presidential cheerleaders, leaving America not only with higher tax rates but with a Potemkin private sector.