Alex Padilla U.S. Senator for California

WASHINGTON, D.C. — Today, U.S. Senator Alex Padilla (D-Calif.), a member of the Senate Budget Committee, participated in a hearing examining how corporate greed and profiteering are fueling inflation. He questioned UC Berkeley professor and former U.S. Secretary of Labor Robert Reich about how a windfall tax on large oil and gas companies can help ease inflationary pressure and provide relief for Americans.

Prices are up by nearly 8 percent over the last year, including 7.9 percent for food, 25.6 percent for energy, and 4.7 percent for housing, yet corporate profits hit a record-high in 2021 at nearly $3 trillion, up 25 percent.

Senator Padilla is working to lower costs for American families and alleviate the pressures of inflation. He is a cosponsor of the Big Oil Windfall Profits Tax Act to lower costs for Americans at the gas pump. The legislation would establish a per-barrel tax equal to 50 percent of the difference between the current price of a barrel of oil and the pre-pandemic average price per barrel between 2015 and 2019 for large oil companies that produce or import at least 300,000 barrels of oil per day. Revenue raised from the windfall profits of big oil companies will be returned directly to consumers in the form of a quarterly rebate.

Key Excerpts:

• PADILLA: Estimates show that the earnings of S&P 500 companies rose nearly 50% over the past year, and no doubt they boast about these statistics to their boards and to their investors while they justify increased prices for American families to the public by citing the pandemic, or supply chain-related.
  
  I approach the topic not just as a member of this committee, and as a member of the Senate, but as a parent. We’ve seen it first-hand, Angela and I when we go to the grocery store, when we’re at the gas station, prices are up and we know how it impacts working families.
  
  As working families are paying the price amid these higher gas prices, it’s outrageous that oil companies continue to reap billions in profits and use those profits to further enrich their executives and shareholders. That’s why I’m a proud cosponsor of the “Big Oil Windfall Profits Tax Act,” which would establish a per-barrel tax to capture the windfall profits of the largest oil companies and return that money to consumers in the form of a quarterly rebate.
  
  Mr. Secretary, I know you are joining us virtually, but can you spend a minute talking how a windfall tax can help counter the outsized power of these large corporations and reduce inflationary pressure.

• REICH: Yes, Senator, and I think it’s very important. A windfall statute is exactly what is needed right now. When oil companies, for example, are showing–as they are–historical profits, they are making huge amounts of money, they are raising prices at the pump at the same time, they don’t need to raise those prices. They could easily absorb any cost increases, but they are not absorbing those cost increases, they are instead, as you pointed out, they’re taking their huge windfall profits, and they are buying back shares of stock to help their shareholders and executives.

Full transcript of Padilla’s questioning can be found below:

PADILLA: Thank you, Mr. Chair, and thank you for once again putting the spotlight on how corporate greed drives up costs for working Americans and hurts workers across the country.

As I have noted in this Committee before, I approach the topic not just as a member of this committee, and as a member of the Senate, but as a parent. We’ve seen it first-hand, Angela and I when we go to the grocery store, when we’re at the gas station, prices are up and we know how it impacts working families. We get the feeling, and the feeling isn’t good.

But these price increases–right, this is our job to lay out what is causing it in our attempts to how to address it. These price increases that are in the news constantly aren’t just about rising costs or small businesses that may be struggling to get by. The reality is, and you’ve pointed out the evidence Mr. Chairman, that corporations across industries are posting record profits.

In 2021, corporate profits hit an all-time high of nearly $3 trillion, up 25% from 2020.

Estimates show that the earnings of S&P 500 companies rose nearly 50% over the past year, and no doubt they boast about these statistics to their boards and to their investors while they justify increased prices for American families to the public by citing the pandemic, or supply chain-related.

And to add insult to injury, while major corporations are increasing costs for working families, they are issuing stock buybacks that were just mentioned, and record executive compensation packages that enrich CEOs and shareholders.

Some have tried to blame inflation on the critical assistance provided to the American people to help them endure a once in a century global health pandemic, or some have even blamed workers for fighting for the right to organize and standing up for fair pay and benefits and safer working conditions.

But with the growing consolidation of corporate power and increasing inequality amid record corporate profits, it’s evident that corporate greed is what’s increasing costs for American families, and as we continue our recovery we must ensure that the economy works for all Americans.

And so with that as a basis, my first question is going to be directed at Secretary Reich.

With large oil and gas companies, we talked specifically about record profits while prices are going up, and I wanted to focus on the oil and gas industry for a moment, because while large oil and gas companies have raised prices at the pump, the profits of 5 of the major oil companies increased by $154 billion last year.

Now these companies have also spent nearly $13 billion on stock buybacks over the last year.

As working families are paying the price amid these higher gas prices, it’s outrageous that oil companies continue to reap billions in profits and use those profits to further enrich their executives and shareholders. That’s why I’m a proud cosponsor of the “Big Oil Windfall Profits Tax Act,” which would establish a per-barrel tax to capture the windfall profits of the largest oil companies and return that money to consumers in the form of a quarterly rebate. I know Senator Whitehouse has talked about this earlier.

The measure would provide consumers much needed relief while maintaining American competitiveness and reducing pressure on inflation by targeting corporate profiteering.

So, Mr. Secretary, I know you are joining us virtually, but can you spend a minute talking how a windfall tax can help counter the outsized power of these large corporations and reduce inflationary pressure.

REICH: Yes, Senator, and I think it’s very important. A windfall statute is exactly what is needed right now. When oil companies, for example, are showing–as they are–historical profits, they are making huge amounts of money, they are raising prices at the pump at the same time, they don’t need to raise those prices. They could easily absorb any cost increases, but they are not absorbing those cost increases, they are instead, as you pointed out, they’re taking their huge windfall profits, and they are buying back shares of stock to help their shareholders and executives.

And so, people are going to the gas pumps. They are spending their own money at very very high and rapid rates to fill their gas tanks, and that money, a large portion of that money is going to executives and major investors. So, you want a windfall profits tax that enables–that stops them from doing that, and actually rebates that money to consumers.

We did it in World War Two, we did it in World War One, we did it under emergency circumstances. There’s no reason we should not be doing it now, in fact there is every reason we should be doing it.

PADILLA: Thank you very much, and Mr. Chairman, I know my time is up, we’ll submit some additional questions for the record. I just wanted to appreciate the distinction and the emphasis on not just taxing profits, taxing windfall profits, because that is what’s happening now through the exploitation at the pump.

Thank you, Mr. Chair.

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