Elizabeth Warren Floats Yet Another Tax Hike Idea to Raise $1T
Sen. Elizabeth Warren has been offering up a number of economic proposals since announcing her bid for the Democratic nomination for the presidency, and the latest is a 7% tax on corporate “real” profits above $100 million.
Warren says her latest tax hike idea will raise $1 trillion in revenue — without saying what the government would spend it on — and stop major companies like Amazon from wiping out their tax liabilities altogether. Instead of taxable corporate profits as defined by the IRS, Warren’s 7% surtax would apply to profits companies report to their investors.
Warren has been the economic policy pacesetter in a crowded Democratic primary field. The Massachusetts Senator has already offered up her version of a “wealth tax,” a universal child care proposal and said she wants to break up big tech companies like Amazon and Facebook.
The corporate profits tax, called the “Real Corporate Profits Tax,” would apply to worldwide profits exceeding $100 million to beef up government coffers by preventing corporate giants from exploiting loopholes and avoiding federal taxation.
“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,” Warren wrote in a Medium post published Thursday morning. “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.”
The Trump tax cut, following entreaties from corporations for a more globally competitive U.S. system, reduced the top corporate rate to 21% from 35%. But deductions remaining in the IRS code allow some large corporations to reduce their effective rates far below that — in some cases all the way to zero.
Her new surtax would prevent them, and other corporations with profits exceeding $100 million, from wiping out their tax liabilities. Instead of taxable corporate income as defined by the IRS, the 7% surtax would apply to profits companies report to their investors.
Because stock values and executive compensation turn on those public reports, Warren reasons, corporations don’t obscure their real profits to shareholders with the write-offs they use for the IRS. Those include large deductions for depreciation, the value of stock options and overseas tax shelters.
The new surtax would be separate from the existing corporate tax. If applied in 2018, Warren said, Amazon would owe $698 million and Occidental Petroleum $280 million.
In a letter released by Warren aides, University of California-Berkeley economists Emmanuel Saez and Gabriel Zucman estimated that 1,200 public companies would be subject to the tax if it took effect in 2019. Warren said she designed it to avoid hitting small businesses or even large ones that experience a subpar year.
Warren aides said they were unaware of previous attempts to enact a tax of this kind. But they pointed to polls showing strong public support for making large corporations pay more — even within a GOP increasingly dependent on blue-collar voters.
Her proposals, like the major plans of other 2020 Democratic candidates, stand no chance of enactment in the next two years. But they signal ideas that would take center stage if a Democrat wins the presidency in 2020 and the party takes control of Congress.
Warren has previously proposed a substantial increase in estate taxes to help pay for expanding the supply of affordable housing, and a wealth tax on the richest Americans.
The wealth tax would raise $2.7 trillion over 10 years, according to projections. Roughly $700 million from the wealth tax would finance her proposal for universal child care and early childhood education. That would leave her $2 trillion for either deficit reduction or additional spending plans as yet unannounced.
Warren didn’t specify how she would spend the $1 trillion over 10 years that the corporate profits surtax would generate, either. That brings the total of available new revenue under her proposals to $3 trillion.