Democratic presidential candidate and Massachusetts senator Elizabeth Warren has announced that she will push for a surtax on large companies’ profits if she were to be elected president during the upcoming 2020 US elections.
In an effort to collect close to $1 trillion in revenue for the government and counter the Trump administration’s 2017 tax reform, Warren’s proposal calls to levy a 7 percent surtax on the worldwide profits surpassing $100 million of large American companies.
In a post on Medium, Warren said this type of tax, which she called the Real Corporate Profits Tax and would impact about 1200 companies, “will make our biggest and most profitable corporations pay more and ensure that none of them can ever make billions and pay zero taxes again.”
“To raise the revenue we need — and ensure every corporation pays their fair share — we need a new kind of tax that big companies can’t get around,” she added.
Warren said, “It’s a small new tax — but because our richest, biggest corporations are so skilled at minimizing their taxes under our current system, that small new tax will generate big new revenue,” adding that, “according to an estimate from economists Emmanuel Saez and Gabriel Zucman at the University of California-Berkeley, the tax will bring in $1 trillion in revenue over the next ten years — just from the massive profits of the thousand or so richest companies in the country.”
Warren also mentions Amazon and Occidental Petroleum as companies that have skirted their tax obligations, paying 0 percent in corporate taxes despite declaring $10 billion and $4.1 billion in profits for 2018.
Under Warren’s proposal, Amazon would have had to cough up $698 million and Occidental $280 million in corporate taxes for the last fiscal year.
Keep in mind that Trump’s 2017 tax reform reduced the US corporate tax from 35 to 21 percent, and companies still have plenty of opportunities to further reduce their tax obligations via deductions and other loopholes found in the IRS code.
However, as reported by Fortune, a poll released by Gallup back in April 2018 found that “66 percent of the country believes corporations pay ‘too little’ in taxes, while just 7 percent believe they pay ‘too much’; 24 percent said they pay their ‘fair share.’”
Amazon Responds to Warren’s Corporate Tax Proposal
Referring to these allegations, a spokesperson for Amazon said, “Amazon pays all the taxes we are required to pay in the U.S. and every country where we operate, including paying $2.6 billion in corporate tax and reporting $3.4 billion in tax expense over the last three years.”
The Amazon statement added: "Corporate tax is based on profits, not revenues, and our profits remain modest given retail is a highly competitive, low-margin business and our continued heavy investment. We are creating tens of thousands of quality jobs each year with industry-leading pay for people of all skill levels, bringing our total workforce in the U.S. to more than 250,000."
Additionally, some analysts suggest that this tax would ultimately hinder investment in the US.
Writing for Vox, Matthew Yglesias raises this exact question:
“People invest in order to reap profits so when you tax profits you are, in effect, taxing investment. And in the long-run, business investment should theoretically lead to more hiring, more productivity, and higher wages. Indeed, one reason the existing corporate tax code is so convoluted is that it has a lot of provisions that are designed to encourage investment and offset any potential negative impact. Imposing a new flat tax with no deductions and no distortions — even at a relatively low rate — would undo those efforts.”
What are your thoughts on Warren’s proposal? In a world where corporate taxes keep dropping, would the Real Corporate Profits Tax work?
Let us know here!