Why Taxing Big Corporations Matters

Designing a Tax on Excess Profits

The consolidation of power in a few massive corporations has damaged the US economy and democracy alike. In a new brief, Niko Lusiani and Roosevelt’s Ira Regmi explain how to design a corporate income tax that targets excess profits—and boosts competition, equality, and democracy in the process.

The tax structure as it currently exists favors bigger, more profitable corporations. Meanwhile, growing proportions of the profits earned by large multinationals are excess profits, or economic rents—profits that, due to market inefficiencies, exceed the amount that is economically necessary. 

• What to do: Target these excess profits and prevent rent-seeking, Lusiani and Regmi argue. The brief guides us through the design of such a reform, including how to differentiate excess profits from normal returns, use tax credits in tandem with a tax to promote investment, and prevent tax avoidance.  
• An excess profits tax could have multiple benefits beyond raising revenue: 
  • Spurring innovation: Monopolies stifle innovation, and research and recent court decisions agree: A ruling last year in a DOJ case against Google suggested that its power over the market helped reduce the quality of its search engine. Taxing monopolistic rents helps ensure that stagnation is not a viable business strategy. 
  • Protecting democracy: Corporations have captured our democracy, making it, effectively, an oligarchy. Reducing their excess profits is critical to weakening the power of billionaires like Elon Musk who seek to dismantle the regulatory state.
  • Empowering the working class: “Across the political divide,” Lusiani and Regmi write, “Americans are hungry for policies that reduce the concentrated economic power of large corporations.” Delivering on what people want and curbing corporate extraction could help repair public trust in government.

Read the brief: “Taxing Excessive Profits: Designing a Pro-Competition Corporate Tax System”

What We’re Talking About

It's clear that corporate tax cuts deepen racial inequities.

White households receive 88% of corporate tax break benefits. Black & Hispanic households each get just 1%.

The system isn't broken—it’s rigged. https://t.co/dJxmFa09Bt pic.twitter.com/UEbMulvaYG

— Roosevelt Institute (@rooseveltinst) January 30, 2025

Join the Roosevelt Institute Team

The Roosevelt Institute is hiring! If you’re interested in joining our community of thinkers, advocates, and champions of a more democratic economy—or you know someone else who is—please apply! 

We’re looking for a Chief of External Relations to lead Roosevelt’s government affairs and advocacy work and align it with our communications efforts; a Director of Tax Policy and Analysis to lead our work in building a more progressive tax code; and a Senior Executive Assistant and Board Liaison to work with our incoming President and CEO, Elizabeth Wilkins.

What We’re Reading

When the COVID-19 recession struck, government took bold action to provide the public investment necessary for a full employment recovery. It’s a lesson we shouldn’t forget, Roosevelt’s principal economist Michael Madowitz told the New York Times: “Everybody wants to make sure that we can reenact this recovery the next time we have a recession.”

Roosevelt Fellow Michael McCarthy’s new book on the need for economic democracy is featured in Jacobin: “At its core, our major crises are the result of a basic design feature,” McCarthy writes. “Capitalism shields investment decisions from democratic input.” 

“There’s truth in many of the critiques of our financial system that crypto firms and their customers endorse,” Graham Steele told Semafor in a piece about regulating the cryptocurrency industry, “and those shortcomings only serve to increase the appeal of misleading claims made by predatory financial actors looking to cheat people out of their hard-earned money.” 

Jeremy Bearer-Friend explained to the American Prospect his proposal of a tax on stocks to fund progressive priorities like reparations. (Read the proposal here.)

“While America was busy with stock buybacks and quarterly profits,” Corbin Trent writes in The Nation this week, state-led investment helped China’s DeepSeek AI model stun markets and tech companies. “Markets aren’t designed to solve national challenges,” Trent writes. “They’re designed to maximize profits.”