Sen. Elizabeth Warren (D-Massachusetts) introduced a bill Tuesday that would create a tax on corporate profits that she says could help raise hundreds of billions of dollars of revenue for the government.
The bill, called the Real Corporate Profits Tax Act of 2021, would levy a 7 cent tax on every dollar of profit above $100 million that corporations report to their shareholders, otherwise known as their book income. It’s the same proposal that Warren had introduced during her presidential campaign in 2019.
The tax proposal is aimed at ensuring that corporations pay taxes on their income even if they’re able to avoid taxes elsewhere. Levying the tax on their book income as opposed to the income that they report to the government could help capture taxable income that a company may otherwise try to obscure from the government.
“Companies cannot be allowed to continue reporting billions in profits to shareholders and then turn around and pay nothing in taxes to the IRS. The American people know that’s wrong. People in Congress know that’s wrong. The President of the United States knows that’s wrong,” Warren said in a statement.
“The Real Corporate Profits Tax Act would end corporate double dealing and ensure they pay their fair share so that we can raise essential revenue needed to invest in families and our economy,” the senator continued. According to a press release on the bill, it would raise nearly $700 billion in revenue over the next decade.
Warren introduced the bill alongside Sen. Angus King (I-Maine) and Rep. Don Beyer (D-Virginia). It’s been cosponsored by Senators Jeff Merkley (D-Oregon), Ed Markey (D-Massachusetts) and Sheldon Whitehouse (D-Rhode Island). The lawmakers hope for the bill to be incorporated into the Democrats’ $3.5 trillion reconciliation package as a revenue raiser.
President Joe Biden had unveiled a similar tax proposal in the spring to levy a 15 percent tax on book income for a select few of the largest corporations in the U.S. to help pay for his infrastructure package. Nearly all of Biden’s tax proposals on corporations and the wealthy were cut from bipartisan negotiations on the package, however.
The lawmakers point out that corporations are often able to get away with paying little to no corporate income tax because of the many loopholes in the tax code and the very low statutory corporate tax rate. It enables corporations to paint a rosy picture about their profits to their shareholders, while at the same time withholding that information from the government.
In 2018, for instance, Amazon didn’t pay any federal income tax at all. According to an Institute on Taxation and Economic Policy report, a large swath of the nation’s largest corporations in fact were able to avoid paying taxes in at least one year between 2008 and 2015 — and that was back when the statutory corporate tax rate was 14 percent higher than it currently is after Republicans slashed the rate in 2017 under President Trump.
“Our tax code allows profitable companies to pay little or no tax because there are two sets of rules for reporting profits. When reporting to shareholders and potential investors, companies follow established financial accounting procedures to record their profits on their financial statements,” a fact sheet on the bill explains.
“When filing their tax returns, however, companies are able to exploit a host of loopholes, deductions, and exemptions to drive down their tax liability,” the fact sheet continues. “As a result, corporate giants that report billions in ‘book income’ on their financial statements – and tout these numbers in order to drive up their stock prices and CEO bonuses – can end up paying no income tax to the IRS.”
By creating a minimum tax on corporate book income, the lawmakers hope to create more airtight tax rules that could stop companies from skirting income taxes. The bill would apply to about 1,300 public companies and a host of other private companies, they estimate.
“In 1965, corporations paid roughly 4 percent of the nation’s GDP in state and federal income tax. Today, that rate is only 1 percent,” King said in a statement. “This massive decline has contributed to the nation’s rising debt and threatened basic public sector services Americans rely upon.”
Help us Prepare for Trump’s Day One
Trump is busy getting ready for Day One of his presidency – but so is Truthout.
Trump has made it no secret that he is planning a demolition-style attack on both specific communities and democracy as a whole, beginning on his first day in office. With over 25 executive orders and directives queued up for January 20, he’s promised to “launch the largest deportation program in American history,” roll back anti-discrimination protections for transgender students, and implement a “drill, drill, drill” approach to ramp up oil and gas extraction.
Organizations like Truthout are also being threatened by legislation like HR 9495, the “nonprofit killer bill” that would allow the Treasury Secretary to declare any nonprofit a “terrorist-supporting organization” and strip its tax-exempt status without due process. Progressive media like Truthout that has courageously focused on reporting on Israel’s genocide in Gaza are in the bill’s crosshairs.
As journalists, we have a responsibility to look at hard realities and communicate them to you. We hope that you, like us, can use this information to prepare for what’s to come.
And if you feel uncertain about what to do in the face of a second Trump administration, we invite you to be an indispensable part of Truthout’s preparations.
In addition to covering the widespread onslaught of draconian policy, we’re shoring up our resources for what might come next for progressive media: bad-faith lawsuits from far-right ghouls, legislation that seeks to strip us of our ability to receive tax-deductible donations, and further throttling of our reach on social media platforms owned by Trump’s sycophants.
We’re preparing right now for Trump’s Day One: building a brave coalition of movement media; reaching out to the activists, academics, and thinkers we trust to shine a light on the inner workings of authoritarianism; and planning to use journalism as a tool to equip movements to protect the people, lands, and principles most vulnerable to Trump’s destruction.
We’re asking all of our readers to start a monthly donation or make a one-time donation – as a commitment to stand with us on day one of Trump’s presidency, and every day after that, as we produce journalism that combats authoritarianism, censorship, injustice, and misinformation. You’re an essential part of our future – please join the movement by making a tax-deductible donation today.
If you have the means to make a substantial gift, please dig deep during this critical time!
With gratitude and resolve,
Maya, Negin, Saima, and Ziggy