Tax Excessive Corporate Profits



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Time to Tax Excessive Corporate Profits

We did during WWII and in the 1980s. It’s the right way to deal with ‘inflation’ that is pure price-gouging.

 "a strong Jobs Report is concerning" says the Federal Reserve about Inflation. March 2023
CONCERNING TO WHOM? Not to the American Worker !!!


Prices for a gallon of gasoline are posted on the sign of an Exxon station, March 7, 2022,
 in the Capitol Hill neighborhood of Washington.


Sen. Bernie Sanders recently introduced the
 Ending Corporate Greed Act.
The act would impose a 95 percent tax rate on the excess profits of large corporations that earn more than $500 million a year.
Excess profits are defined as profits that exceed the corporation’s average profit level from 2015 to 2019, adjusted for inflation.
This excess profits tax will be imposed over and above the normal corporate tax of 21 percent, but the two rates will be coordinated so that the maximum combined tax rate will not exceed 75 percent of income for any year.

The tax will be a temporary emergency measure, applying only in 2022, 2023, and 2024.

Like many of Sen. Sanders’s ideas, this sounds radical (95 percent taxation!), but in fact it is not.
 The Sanders proposal is entirely in line with both the tradition of U.S. corporate taxation and with its underlying economic and regulatory rationales.


During the First and Second World Wars and the Korean War, the United States implemented a broad-based windfall profits tax. During World War II, the tax rate reached as high as 95 percent, which ensured that companies could not profit from war.
 In addition, the United States enacted a windfall profits tax on oil and gas companies as recently as the mid-1980s.
The idea underlying these prior efforts was that companies should not profit from raising their prices in hard times including Inflation.

The COVID pandemic raised the profits of companies like Amazon to record levels, and
the war in Ukraine, which did the same to oil and gas companies,
fully justifies reviving the windfall profits tax.
 The Sanders proposal is essentially identical with the Word War II version of the tax, including the reliance on

bulleta pre-war average,
bulletthe 95 percent rate, and
bulletthe limitation on the overall effective tax rate.

Monopolies' and Oligopolies' EXCESS profits, with lack of competition:

Economists distinguish between

bulletnormal returns to capital, which are subject to competition and therefore are relatively constrained, and

rents or excess returns, which are not.
Normal returns are a legitimate target of taxation, but the tax rate should not be too high because a high rate would deter companies from socially useful investments.
Excess returns, on the other hand, are those that are not subject to competition.

 They are the returns a company that enjoys

bulletquasi-monopoly status like Amazon or Google, or
bulletquasi-oligopoly status like ExxonMobil or Chevron,

earns from their access to a unique resource and their domination of the market.
Because excess returns are not subject to competition, taxing them at even very high rates will not deter investments because the remaining after-tax profit will still be a windfall.
The Sanders proposal correctly distinguishes between normal profits taxed at the regular 21 percent rate and extraordinary profits taxed at 95 percent.

Regulate increasing profits ( excess profits during Inflation).

The tax includes tax incentives (for example, green-energy credits) and disincentives (like the proposed tax penalties for investing in Russia).
But imagine how Corps might reduce their tax burden by INCREASING WAGES !

and induce a fall in prices, which would benefit everyone (except shareholders).

$400 billion tax revenue if Corps. don't change.

But if such a price decrease and wage increase does not happen, the tax would raise significant tax revenue (according to Sen. Sanders, an estimated $400 billion in one year from 30 of the largest corporate profiteers alone).
These tax revenues could be used to subsidize working families that suffer the effects of rising prices, and to accelerate the shift to renewable energy so that the economy is less at the mercy of the oil companies, domestic and foreign.