Sen. Elizabeth Warren (D-MA) is proposing a new tax on corporate profits above $100 million.
The presidential candidate says her “Real Corporate Profits Tax” would prevent corporate giants like Amazon from exploiting tax laws to avoid paying federal taxes. “Because of relentless lobbying, our corporate income tax rules are filled with so many loopholes and exemptions and deductions that even companies that tell shareholders they have made more than a billion dollars in profits can end up paying no corporate income taxes,” she wrote in a post on Medium Thursday.
Her plan, the latest in a string of policy proposals, would apply an additional 7% surtax to global profits companies report to their investors rather than those they file with the IRS. It would affect the 1,200 or so most profitable companies in the country and raise more than $1 trillion in revenue over 10 years, Warren says, citing estimates from economists Emmanuel Saez and Gabriel Zucman of the University of California, Berkeley. “It 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,” she wrote.
The senator argues that companies seek to minimize the profits they report to the IRS, but they want to maximize the profits they report to shareholders in order to boost their stock prices (and the executive compensation that’s tied to those prices). “Companies will be hesitant to under-report their profits to investors — which means they won’t be able to game the tax system as much as they can now,” she said.
Warren cites the examples of Amazon and Occidental Petroleum, which reported profits of more than $10 billion and $4.1 billion, respectively, in 2018 but paid no federal corporate income taxes. Under her proposal, Amazon would have paid $698 million and Occidental would have paid $380 million, she said.
An Amazon spokesperson provided a statement in response: “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.”
Why it matters: Warren’s plan is “essentially undoing the $1 trillion in business tax cuts that Trump signed into law, but with the impact concentrated on a smallish number of very profitable companies,” Vox’s Matthew Yglesias says. Federal corporate tax receipts fell by $92 billion in fiscal 2018, a 31% drop, after the GOP tax law cut the corporate income tax rate from 35% to 21%.
Warren’s proposal has no chance of being enacted before the 2020 elections. But, as with Warren’s proposed wealth tax, it allows her to contrast her agenda with the tax cuts passed by Republicans in 2017 — and it will add to the perception that she’s leading the Democratic field in setting an economic policy agenda for 2020.
This article has been updated to add a response from Amazon.