While it got almost no traction in what passes for the media today, a recent House Resolution introduced by Representative Tulsi Gabbard (HI-02) looks to punish large corporations (i.e Amazon, Walmart, Zoom etcetera) that gleaned excessive profits from sales during the pandemic.
Here is the text from H.Res. 1267 "Expressing the sense of the House of Representatives that Congress must pass a pandemic excess profits tax on large corporations who have achieved windfall profits due to the COVID-19 public health crisis":
Here is a screen capture from Ms. Gabbard's website outlining her reasons for introducing the excess profits tax:
Here is the key paragraph:
"Big tech corporations and big box retailers are among those who have made excessive profits during the COVID-19 pandemic, while mom and pop shops are being forced to close their doors due to government-mandated restrictions. Because of this, these large corporations will be better positioned with a competitive advantage over small businesses in a post-pandemic economy. Congress must reinstate the WWII-era excess profit tax used at that time to prevent war-time profiteering, and dedicate the funds collected to helping small businesses recover. Small businesses are the backbone of our economy and have borne the brunt of this crisis. We need to support our small businesses and make sure that they are able to thrive and compete."
Recent research by Robin Greenwood et al at the National Bureau of Economic Research found that small firms were particularly at risk thanks to the COVID-19-related shutdowns. Here is a quote (my bolds):
Small firms are especially vulnerable to the crisis, not not because the pandemic has especially affected industries dominated by small firms, but instead because small firms balance sheets are more vulnerable to losses in revenues.
Figure 6 confirms that large firms in need of restructuring have multiple options available, while small firms have no other option but to liquidate. Above $500m of liabilities, close to 80% of the bankruptcy filings end up as a Chapter 11-backed reorganization. The contrast with small businesses is striking: Below $1m of liabilities, 90% of the filings are straight-out liquidations, while less than 5% of bankruptcies end- up as re-emergence from a Chapter 11 filing. For a small firm, failure typically means liquidation….
Frictions to restructuring small firms are substantially larger. Even small disruptions to cash flow can trigger restructuring as many of these firms maintain low cash buffers and lack access to lines of credit (Bartik et al 2020). Based on the June 27 Census Pulse Survey, including financial assistance and loans, only 30% of small businesses reported having enough cash to maintain operations for another three months….
Chapter 11 bankruptcy imposes costs that can be as high as 30% of a small businesses, making it close to prohibitive for many small businesses even if they wish to continue. Consistent with this, small firms are more likely to simply shut down."
Here is a graphic from the paper showing the percentage of small businesses in various sectors of the American economy that have experienced a severe negative impact thanks to the COVID-19 response:
Here is a graphic from the paper showing the year-over-year change in revenues across the same industries:
In sharp contrast, let's look at one of the leading contenders for excessive profiteering, Amazon. Here are a selection of graphics showing key metrics from the company's Q3 report:
As you can see, on a year-over-year basis, Amazon's net sales are up 37 percent and net income is up 197 percent despite the fact that the economy was in a recession and that many consumers saw their household incomes slashed.
While it is unlikely that Representative Gabbard's proposal will ever see the light of day as it winds its way through Congress, it is quite clear that Amazon is one of the bill's prime targets. Given that Amazon appears to have been guilty of price-gouging during the pandemic as you can see here, unless we all want to shop at the world's largest online emporium and make Jeff Bezos even wealthier, something will have to be done to ensure that Main Street American businesses have an opportunity to sell their goods on a level playing field.
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