Next year, when key provisions of President Trump’s 2017 tax breaks to the wealthy and corporations expire, we have an opportunity to get our money back.
I’m not just talking about all the foregone tax revenue we’ve lost because the rich have paid so little since 2017 — though we should get that back, too. I’m talking about the money families have lost to corporate price gouging.
Let me explain.
In 2017, Republicans slashed the corporate tax rate from 35 percent to 21 percent, giving massive corporations their biggest tax windfall since Ronald Reagan was president. A few years later, as Americans emerged from a global pandemic, these same corporations drove up prices for families.
While inflation hamstrung workers and families, it didn’t make a dent in corporate profits. In fact, as many CEOs boasted themselves, it’s been a boon. Companies simply passed rising costs along to consumers — and then some, bringing in record profits as a result.
All told, corporate profit margins skyrocketed to 70 year-highs. And by the end of 2023, when Americans were beyond fed up, after-tax corporate profits hit an all-time record high of $2.8 trillion. My organization, Groundwork Collaborative, recently found that corporate profits drove over 50 percent of inflation in the second and third quarters of last year.
But why would a change in the corporate tax rate unleash the kind of rampant corporate profiteering we saw in the aftermath of the pandemic? Simple: It’s a lot more fun to gouge customers when you get to keep more of what you pull in.
Look at Procter & Gamble, which has raised the price of everything from toothpaste to diapers. Last year, the company pulled in more than $39 billion in profit.
If they had to pay the 35 percent statutory tax rate, they would have sent nearly $14 billion to Uncle Sam. Instead, they paid a 21 percent rate and, using loopholes, got to keep an extra $10 billion — which helped with their combined $16.4 billion worth of dividends and stock buybacks for shareholders.
Corporations did well from Trump’s corporate tax cuts, with executives getting big raises and shareholders receiving big buybacks. But the real bonus came when inflation hit. Corporations used the cover of supply chain issues and broader inflation to hike prices more than their higher input costs justified — and they didn’t have to worry about their tax bill.
Our tax code is exacerbating some of the worst corporate excesses, effectively “subsidizing corporate price gouging,” as Sen. Elizabeth Warren (D-MA) described it recently. But it’s not only that low tax rates incentivize companies to overcharge. Rock-bottom tax rates also make collusion more profitable, as we saw with Pioneer Oil.
Recently, the Federal Trade Commission barred former Pioneer Oil CEO Scott Sheffield from joining the board of ExxonMobil following their merger, because Sheffield allegedly colluded with OPEC to raise oil prices. As families struggled with higher energy costs, the oil and gas industry banded together to keep prices high, which according to one analyst accounted for 27 percent of inflation in 2021.
When the reward is higher with lower corporate taxes, executives like Sheffield are more willing to take the risk. Higher corporate taxes are both crucial for accountability and for ensuring that there’s far less incentive for executives to squeeze as much as they can from their customers.
Wall Street tycoons and CEOs didn’t take the heat of inflation — they fanned its flames and families got burned. It’s no wonder people overwhelmingly favor a tax code that’s no longer rigged for corporations, especially as they struggle with high prices.
Congress raising the corporate tax rate in 2025 is an opportunity to recoup some of the truly obscene profits corporate America raked in during this period of economic upheaval for American families. It’s time Americans got their money back.
This commentary was originally published in Otherwords.org
