From the twisted world of Bernie Sanders, where he believes that if he has a dollar and you have a dollar, then he has two dollars, comes another terrible idea: the Ending Corporate Greed Act (ECGA).  According to the Vermont socialist, inflation is the fault of large corporations and wasn't caused by the hyper-stimulating government give-away programs of recent years.  His plan is to egregiously tax away so-called "windfall" COVID profits, believing that somehow this will eliminate what he sees as corporate greed and profiteering.  Voilà — no more inflation!

In his rambling press release announcing this miracle solution of taxing away inflation, he specifically calls out a few large corporations — the usual punching bags of the left.  You know the street gang's names: Chevron, Amazon, JP Morgan Chase, and the like.  He recalculates their taxes and estimates that his new expropriation of others' money will net an extra $500 billion a year for the government to waste.  In what world does increasing corporate expenses (taxes) result in lower prices?

His claim is that these evildoers raised prices during the COVID years and blamed it all on inflation.  Secretly, however, they knew this wasn't the case, and they were just padding their bottom lines, earning windfall profits.

If passed, the ECGA would tax away 95% of all profits a corporation earned above its five-year average income pre-pandemic. Soaring gasoline prices are a hot topic right now, so let's bypass the Amazon boogie man and go straight to Chevron.

His press release calculates that under his plan, Chevron would have paid $12.9 billion in additional taxes for 2021.  It goes further by pointing out that in 2021, Chevron's revenues increased 84%, while oil prices doubled.  Note to Bernie: Chevron does not set global oil prices.  More obviously, if its revenues increased 84% but its materials cost — crude oil — increased 100%, that seems about even, right?

But revenues aren't profits.  Let's look at those.

In 2018, the last truly pre-COVID year, Chevron earned globally about $14.8 billion.  But in 2019, as international alarms began sounding, Chevron's income plunged to $2.9 billion.  This was followed in 2020 when they recorded a loss of $5.5 billion with Americans hiding in their homes.

Now enter Bernie and his plan to tax the recovered 2021 Chevron earnings of $15.6 billion.  However, measuring from 2018 through 2021, Chevron's earnings grew only 5.4% over the entire three-year COVID period.  That's an annual average growth rate of just 1.8% in earnings — hardly a windfall.

One last thought about the Chevron tycoons: the company produces about 28 billion barrels of oil and gas per year.  Bernie wants to tax them an additional $12.9 billion.  After refining, a barrel yields about 20 gallons of gasoline.  Even a third-grader can do this math: it works out to about an extra 92 cents per gallon of gasoline at the pump.  Yeah, an extra buck a gallon will definitely end inflation and stop corporate greed!

Let's leave the oil patch and take a quick stroll down the aisles of Amazon.  In Sanders's world, Amazon is profiteering because the company earned more income during the pandemic.  Wait.  They made more profit because they sold more — remember, things are sold by businesses for a profit.  And they sold more during the COVID years because people shopped online from home.

But what about Amazon raising prices?  The Ending Corporate Greed Act maintains that companies raised prices while blaming it on inflation.  According to data analytics company Profitero, Amazon raised prices in 2021 by an average of 7.5% on 20,000 popular items.  During the same time period, the Consumer Price Index increased about 7%.  However, Amazon's gross margin on sales both in pre-COVID 2019 and in "profiteering" 2021 remained constant, hovering around 40%.  Amazon is not the cause of inflation or profiting from it.

It's true that we do live in extraordinary times, but taxing corporations 95% of their earnings growth is more than extraordinary — it's confiscatory.  Sanders cites similar historic windfall taxes imposed during WWII to ensure that companies weren't profiting from the war.  Fair enough, but the U.S. isn't in a war...yet.  He also cites the windfall tax imposed on energy companies in 1980, but that was to recoup profits earned due to the deregulation of oil prices previously, and capriciously, set by the government.

No, these times are not those times.  Perhaps the senator from Vermont would do better just to spend his money on gasoline driving among his three houses and shopping online.

Kevin Cochrane is an economist who teaches economics and business at Colorado Mesa University.  He previously taught at the University of California and was a senior national banking executive.

Image: AFGE via Flickr.