excess-profits tax
LowFormal, Technical, Legal
Definition
Meaning
A special tax imposed on profits that exceed a certain normal or expected level, typically during wartime or periods of national emergency.
A levy on corporate earnings deemed unusually high compared to a base period, often implemented as a temporary fiscal measure to generate government revenue or curb windfall profits.
Linguistics
Semantic Notes
The term is historically specific, most commonly associated with World Wars I and II. It refers to a tax on the *excess* portion of profits, not the total profits. The definition of 'normal' or 'expected' profit is legally defined, often based on pre-war averages.
Dialectal Variation
British vs American Usage
Differences
Both varieties use the term identically. The concept and historical implementation are similar in both the UK and US contexts.
Connotations
Connotes government intervention, wartime finance, and economic control. May have negative connotations for businesses.
Frequency
Extremely low in contemporary everyday language. Used almost exclusively in historical, economic, or policy discussions.
Vocabulary
Collocations
Grammar
Valency Patterns
The government [verb: imposed/levied/introduced] an excess-profits tax.Companies were [verb: subject to/liable for] the excess-profits tax.Profits [verb: exceeding] the standard rate were taxed.Vocabulary
Synonyms
Strong
Neutral
Weak
Vocabulary
Antonyms
Phrases
Idioms & Phrases
- “None directly associated; related to concepts of 'profiteering' or 'war chest'.”
Usage
Context Usage
Business
Discussed in corporate history or during discussions of extraordinary fiscal policy impacting high earnings.
Academic
Used in economic history, public finance, and political science papers analysing wartime economies.
Everyday
Virtually never used. A historical term most might encounter in documentaries or history books.
Technical
Precise term in tax law history, fiscal policy, and economic legislation.
Examples
By Part of Speech
verb
British English
- The Chancellor proposed to excess-profits-tax the armaments firms.
- The legislation allowed the Treasury to excess-profits-tax any industry deemed crucial.
American English
- Congress voted to excess-profits-tax corporations earning above the cap.
- The bill sought to excess-profits-tax the booming steel manufacturers.
adverb
British English
- Profits were taxed excess-profits-tax-heavily.
- The scheme operated excess-profits-tax-efficiently for the treasury.
American English
- The funds were collected excess-profits-tax-quickly.
- The policy was applied excess-profits-tax-broadly across sectors.
adjective
British English
- The excess-profits-tax legislation was passed in 1915.
- Companies faced an excess-profits-tax liability.
American English
- The excess-profits-tax rate was set at 95%.
- An excess-profits-tax provision was included in the war revenue act.
Examples
By CEFR Level
- This is a tax from history.
- It was a tax on big company money during the war.
- During the war, the government introduced an excess-profits tax.
- Companies had to pay extra tax if their profits were too high.
Learning
Memory Aids
Mnemonic
Think of a taxman taking the EXCESS (extra) PROFITS from a company's overflowing coin chest, especially during a war.
Conceptual Metaphor
PROFITS ARE FLUIDS; excess profits are an overflow, and the tax is a drain or siphon on that overflow.
Watch out
Common Pitfalls
Translation Traps (for Russian speakers)
- Avoid translating as 'налог на избыточную прибыль' in modern contexts, as it is a specific historical term. The direct translation is accurate but carries a strong historical connotation not present in the general Russian phrase.
- Do not confuse with 'налог на сверхприбыль', which is a more general modern term.
Common Mistakes
- Using it to describe modern windfall taxes on oil/gas companies (though conceptually similar, the term is historically specific).
- Writing it without the hyphen: 'excess profits tax' is common but the standard compound form is hyphenated.
- Using it as a verb, e.g., 'The government excess-profits-taxed the companies.' (Incorrect).
Practice
Quiz
An excess-profits tax is typically associated with which context?
FAQ
Frequently Asked Questions
Not commonly under that specific name. The concept occasionally resurfaces as a 'windfall tax' on sectors like energy or pharmaceuticals during crises, but the historical 'excess-profits tax' is a distinct, period-specific policy.
It was legally defined, often by comparing current profits to a pre-war average or a government-deemed 'normal' rate of return on capital. Any profit above this baseline was considered 'excess' and taxed at a higher rate.
Primarily, yes. The tax was generally aimed at businesses, especially those in industries that saw a surge in demand due to wartime conditions (e.g., manufacturing, raw materials). Small businesses often fell below the profit thresholds.
A standard higher corporate tax rate applies to all taxable profits. An excess-profits tax applies only to the portion of profits that exceeds a 'normal' level. It's a targeted surtax on extraordinary earnings, not a blanket increase.