Due to the vagaries of American corporate accounting, companies routinely tell investors on conference calls that they made billions in profit over the previous quarter, then turn around and tell the IRS that, actually, they made no money at all, so they don’t owe any taxes. Warren’s plan would tax those companies on the profits they claim publicly.
The proposal, called the “Real Corporate Profits Tax,” would only apply to companies that report more than $100 million in worldwide profits, and every dollar above $100 million would be taxed at 7 percent.
Warren’s new corporate profits tax plan is the latest in a series of sweeping, detailed policy proposals. Her platform includes a plan to introduce universal child care, which would be paid for with a new tax on multimillionaires, breaking up big tech monopolies, and combating corruption in government, among other positions that have largely been adopted by Democratic contenders, such as Medicare for All.
In a Medium post outlining the plan, the lawmaker explained the reasoning behind creating a new marginal tax: Raising the corporate tax rate alone isn’t enough when the corporate tax code is “so littered” with loopholes. “We need corporate tax reform, but we also need to recognize that enormous companies with armies of lawyers and accountants will always try to exploit any deductions and exemptions that remain,” wrote Warren, a Democratic presidential candidate.
“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.”
An estimated 1,200 public corporations would be subject to this tax, a move Warren said would neutralize the financial advantages of massive companies and give smaller businesses “a fighting chance.” Amazon, for example, would pay $698 million in taxes under the corporate profits tax instead of zero. And Occidental Petroleum, a summary of the proposal noted, would pay $280 million in taxes instead of zero.
“In a recent eight-year period, 25 big companies alone claimed $286 billion in tax breaks,” Warren noted. “And that was before the Republican tax bill slashed the corporate tax rate and handed hundreds of billions of dollars more to corporations.”
Under President Donald Trump’s tax overhaul, the Tax Cuts and Jobs Act, the corporate tax rate dropped from 35 percent to 21 percent, making it easier for companies to avoid paying taxes. This year, twice as many companies are paying zero taxes on their billions of profit, NBC News reported. At least 60 companies reported a tax rate of zero, according to an analysis by the Institute on Taxation and Economic Policy.