During WW2, Corporate Profiteering Was Curbed. Does Covid-19 Require the Same Response?
Many have likened our current battle against the coronavirus pandemic to the world wars. It has been pointed out that our society requires a massive mobilization – the likes of which has not been seen since the war effort. Centralized control and allocation of resources, however, was just one part of the war effort. To make it all work, there was another important factor: excess profit taxes.
During the Second World War, the Canadian government enacted an excess profits tax on corporations. The tax would be applied to any corporation’s “excess profits” – defined as any profits that exceeded their average yearly profits from 1936 to 1939. Initially, the tax rate on excess profits was 75% but was later raised to 100% in 1942.
The tax measure not only raised much-needed funds to finance the war effort, but it also discouraged corporations from profiteering off the crisis. By disincentivizing the corporate urge to exploit the crisis for profits, Canada was able to bring together disparate industries for the common good of the country.
In many ways, the COVID-19 pandemic is a more difficult foe to face. Canada had several months, if not years, to prepare for the war effort. The coronavirus, on the other hand, has caught us off-guard.
The concept of an excess profits tax has precedent in Canadian history. When faced with a massive emergency, we put the brakes on corporate profits to help our country weather the storm. Of course, that was a time when paying taxes was seen as a patriotic duty and a time where profiteering corporations – who did not pay their fair share – were seen as unpatriotic. Only time will tell if Canada still holds those values to be true in this impending crisis.