As working-class Americans grappled with high inflation, corporate profits hit an all-time high in 2021, hitting nearly $3 trillion.
Data from Commerce Department’s Bureau of Economic Analysis shows that pre-tax profits on the whole year increased by a whopping 25%, reaching $2.8 trillion. The fourth quarter annualized profit rate was even higher, at $2.94 trillion.
Profit growth outpaces consumer price inflation by 7%, supporting arguments that companies increase their prices above inflation rates in order to increase their profits. Meanwhile, hourly wages for American workers have risen by about 4.7 percent last year, which equates to a pay cut of approximately 2.4%.
Experts say record profits are proof that inflation is not a concern for businesses.
“Obviously, mega-corporations could easily absorb the higher costs of goods and services right now,” wrote Robert Reich, former Secretary of Labor and professor of economics at the University of California at Berkeley. “They’re not raising prices because they have to. They do it because – with so few competitors – they can. The problem, at its core, is corporate greed.
Indeed, business leaders admitted on earnings calls to shareholders that they are not afraid to exploit inflation and current crises like the pandemic and the Russian invasion of Ukraine in order to boost their profits.
“Our business performs best when inflation is around 3-4%,” Kroger CEO Rodney McMullen said. told investors last June. “A little inflation is always good in our business.”
Other corporate executives lied about their reasons for raising prices. As SCS reported, Tyson’s CEO told shareholders the company was only raising prices for meat products to cover the company’s inflation costs. However, it posted profits of $1 billion in the first quarter of 2022, a 48% increase from the same period last year.
Lawmakers have proposed legislation to reign in the skyrocketing profits. Last year, Senator Elizabeth Warren (D-Massachusetts) introduced a bill which would have created a minimum tax rate of 15% in order to prevent companies from pay $0 tax or a negative tax ratethrough corporate grants.
Other recent proposals were aimed directly at current profits. Last week, Senator Bernie Sanders (I-Vermont) unveiled its tax on exceptional business profits, which would levy a 95% tax on corporate profits that exceed pre-pandemic levels for companies that make more than $500 million in profits a year. The tax looks like policies put in place by the United States during World Wars I and II and the Korean War to discourage companies from profiting from conflict.
“We cannot allow Big Oil and other big, profitable businesses to continue to use the war in Ukraine, the COVID-19 pandemic and the specter of inflation to make obscene profits by driving up prices. Americans at the gas pump, the grocery store, or any other sector of our economy,” Sanders said in a press release on the bill. “In these troubled times, the working class cannot bear the brunt of this economic crisis, while corporate CEOs, wealthy shareholders and the billionaire class pose as bandits.”