U.S. presidential hopeful Warren proposes new corporate profit tax

WASHINGTON (Reuters) - U.S. Senator Elizabeth Warren is proposing a new 7 percent tax on corporate profits that exceed $100 million, her presidential campaign said on Thursday.

FILE PHOTO: Democratic 2020 U.S. presidential candidate and U.S. Senator Elizabeth Warren (D-MA) speaks to supporters in Memphis, Tennessee, U.S. March 17, 2019. REUTERS/Karen Pulfer Focht/File Photo

Warren’s proposal would apply the new tax to the profits reported to shareholders, instead of the amounts companies already report to the Internal Revenue Service. The profits reported to shareholders are frequently much larger, given the loopholes, deductions and other accounting differences allowed by the tax code.

Her campaign estimates about 1,200 companies would be subject to the new tax. It would bring the government an additional $1.05 trillion in new tax revenue over 10 years, according to estimates from economists Emmanuel Saez and Gabriel Zucman at the University of California-Berkeley.

Under her proposal, companies’ first $100 million in profit would be exempt from the new tax, which would be in addition to existing corporate taxes that companies pay.

Warren specifically targeted and Occidental Petroleum as two companies that are not paying enough in corporate taxes and would be forced to pay more under her proposal.

Amazon disputed that the company is not paying adequate taxes, and a spokesperson also pointed out that the company creates “tens of thousands of quality jobs.”

“Amazon pays all the taxes we are required to pay in the U.S. and every country where we operate, including paying $2.6 billion in corporate tax and reporting $3.4 billion in tax expense over the last three years,” an Amazon spokesperson said in a statement.

For each dollar over that threshold, the companies would be subject to a 7 percent tax, Warren outlined in a post on the website Medium and seen by Reuters.

Warren hopes to challenge Republican President Donald Trump, who has focused on tax cuts for corporations, which he says have allowed the economy to flourish and helped lower the unemployment rate.

Warren is competing in a crowded field of more than 15 Democrats vying for their party’s nomination and has sought to distinguish herself by offering the most numerous and expansive policy proposals.

Warren’s new tax, which she dubs the “Real Corporate Profits Tax,” would account for profits U.S. companies make globally and would also be imposed on foreign companies doing substantial work in the United States.

“This new tax applies to the profits very large American companies report to their investors -- with no loopholes or exemptions,” Warren wrote in her proposal.

Republicans are likely to criticize her plan by arguing it will drive companies currently incorporated in the United States to leave or change domicile to avoid the tax - a practice known as inversion.

Warren’s campaign argues that rules on inversions put in place by the Treasury in 2016 have halted the practice and that she would continue strict enforcement if elected.

Reporting by Ginger Gibson; Editing by Sonya Hepinstall and Bernadette Baum