Portion of profits a company makes above the level of US wages paid that year
Profits up to the same level as the company pays out in federal wages are taxed at the lower 28% level
Majority of companies' pre-tax profit is lower than the company's wages
More taxes on no one
Large parts of the economy are not related to people. Tax them more, without raising taxes on anyone's work.
“We have a system that increasingly taxes work and subsidizes nonwork.”
Milton Friedman
of US corporate profits come from companies whose pre-tax income is higher than their wage bill.
The proposal
on profits up to the size of that year's wage bill.
on profits above the wage bill. Companies with high profits and few employees pay more.
Try it
Move the slider to set a company's pre-tax profit as a multiple of its wage bill.
Today's US federal rate
21.0%
Under the proposal
41.3%
Profit above the wage bill is taxed at 48%, so the blended rate rises.
Effective tax rate by profit ÷ wage bill
Why it works
Harder to lobby against
Highly profitable companies are organised and motivated to keep rates low. Taxing profit above the wage bill more removes their key argument: that they create jobs.
Every extra wage lowers the bill
Each additional dollar spent on wages raises the amount taxed at 28%, so hiring directly reduces a company's tax.
Most businesses unaffected
Only companies that make large profits relative to the employment they provide pay the higher rate.
What it changes
A hedge against AI
If AI agents replace tax-paying employees, the companies making that choice pay a higher rate on the profits it creates.
Support for government bonds
More revenue for government, and bonds become more attractive relative to equities, which should help bond yields.