Office Hours: My appearance yesterday before the Senate Budget Committee

Why I endorsed a windfall profits tax on big profitable corporations that are raising their prices

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Today’s Office Hours discussion question: Is a windfall profits tax a good idea? How could it get the political support it needs? Would this be helpful for the Democrats in the midterms?

Background: Yesterday I testified before the Senate Budget Committee about the power of American corporations — now enjoying the highest profits in 70 years — to raise their prices. And I endorsed a windfall profits tax. (You can see my testimony below.) Lindsey Graham told me he “couldn’t disagree with me more.” He and other Republicans on the Committee blamed inflation on Biden and the Democrats whom, they charged, spent too much on measures such as the American Rescue Plan.

Senator Sheldon Whitehouse (also on the Committee) has introduced a windfall profits tax on big oil companies that would tax half the difference between their current profits and their average profits between 2015 and 2019, and then remit the proceeds to Americans in quarterly payments. Senator Bernie Sanders (the Committee chair) has introduced a windfall profits tax on all big corporations that would tax 95 percent of their profits in excess of their average profit level from 2015-2019, adjusted for inflation. It would apply only to large companies with $500 million or more in revenue annually, and be a temporary emergency measure, applying only in 2022, 2023, and 2024.

Both bills would tax profits, not revenues, so companies that raise their prices for legitimate reasons related to rising expenses would not be penalized. But companies that have chosen to raise their prices (presumably to further enrich their CEOs and wealthy shareholders) would pay the windfall profits tax.

Here’s my testimony yesterday:

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Some added thoughts, in response to your very thoughtful comments: Yes, Lindsey Graham wanted to cut me off so he could talk about “securing the southern border” rather than about corporate power. That’s the problem in a nutshell. Democrats have an important opportunity between now and the midterm elections to frame the national conversation as it should be framed -- around corporate power to raise prices, price gouging and profiteering, CEO pay that's now reached almost 350-to-1 relative to median worker pay, billionaire gains of $1.7 trillion during the pandemic while most Americans struggled, illegal union-busting by giant corporations such as Amazon, and hugely profitable corporations and billionaires paying little or no taxes. If Democrats don't focus the public’s anger on these economic abuses, Americans will be inundated with Republican “culture war” messaging intended to deflect attention from them.

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