Are vaccine manufacturers profiteering on the COVID-19 pandemic? They’re certainly raking in some healthy profits amid a global disaster.
And according to the dictionary, that sounds a lot like profiteering: “the act of taking advantage of a situation in order to make a profit, usually by charging high prices for things people need.”
But is profiteering really the right word? And even if it is, should governments be trying to stop it?
The answer to both questions is no.
In a recent opinion piece for Politico, historian Mark R. Wilson of the University of North Carolina at Charlotte makes the case for an excess profits tax targeting vaccine manufacturers like Pfizer
Rooting his argument in America’s history of wartime taxation, he doesn’t mince words about the companies’ outsize profits.
“If we could transport by time machine a handful of politically moderate members of Congress and executive branch officials from the 1940s to the present day, they would be horrified at the companies’ recent financial reports and would not hesitate to call them profiteers,” he contends.
We should take Wilson seriously: He is one of the nation’s leading experts on World War II economic mobilization, and he knows a thing or two about the taxes levied during a national emergency.
However, Wilson’s wartime analogy is unconvincing. National emergencies are not all the same; they differ in both moral and economic contexts.
American political leaders have a penchant for describing almost every new initiative as a “war”: a war on crime, a war on cancer, a war on poverty, etc.
But ultimately, wars are wars, and we should reserve the word for shooting conflicts between state actors. The casual analogy of war to nonmilitary crises — including the COVID-19 pandemic — is unhelpful.
As Rodney P. Mock and Kathryn Kisska-Schulze point out in the University of Cincinnati Law Review, “Disease is certainly an enemy of the people, making it easy for humanity to embrace a wartime metaphor to feel secure against its rage. However, those who suggest that an excess profits tax be imposed on large companies benefitting from COVID-19 are misappropriating such rhetoric.”
By extension, the wartime excess profits tax, particularly as employed during World War II, is a poor model for current efforts to address vaccine profits.
The fight against COVID-19 is not a war, the vaccines are not munitions, and the economy is not facing the same wartime pressures that it did 80 years ago.
To take the last point first, the original wartime profits tax was part of a larger effort to control inflation in an economy almost wholly given over to war production.
The levy was not simply a moral statement, an instrument to “take the profits out of war,” as it was described. It was certainly that, to be sure. But it was also an instrument of macroeconomic regulation, designed to take inflation out of the economy.
But if the economic context is different, the moral distinction between 1941 and 2021 is even more stark.
There’s something fundamentally different about profits made from the sale of lifesaving vaccines and profits made from the sale of deadly weapons.
In the first case, manufacturers are cashing in by keeping people alive. In the second, they are profiting by helping to send people to the grave.
Now of course, some wars are just, necessary, or at least unavoidable. But the moral status of vaccine production and weapons production is simply not equivalent, whatever the moral status of the war in question.
Admittedly, wartime excess profits taxes did not apply solely to munitions manufacturers. But they originated in long-standing concerns about the profits earned by weapon makers. During the war, such concerns expanded to include profits earned by other kinds of companies operating in a wartime environment.
Behind that expansion lay the reality of an actual war. As I wrote in a Tax Notes piece in 2020, “The case for taxing excess profits hinged on the notion of shared sacrifice: Companies (and individuals) were taxed as a way to compensate for the sacrifice soldiers were making on the battlefield.”
One of the era’s leading tax experts, Harold Groves, made this point explicit in his description of the excess profits tax. The levy “was demanded as a monetary counterpart to the sacrifice being made by persons who entered the armed forces,” he contended.
That sort of “shared sacrifice” argument doesn’t translate especially well to the vaccine debate. Yes, it can be made to fit, but it requires a rather Herculean — and to my mind, ahistorical — effort.
Finally, the best argument against imposing excess profits taxes on vaccine manufacturers is practical: We rely on outsize profits to encourage the development of vaccines, as well as other medical treatments.
This policy approach to medical innovation may be unwise, but until it’s changed — and replaced by something better or at least equivalent — we can’t afford to eliminate the incentives currently in operation. The stakes are simply too high.
And to make the obvious point, those incentives worked quite nicely for the COVID-19 vaccines. Yes, it’s true that some manufacturers, notably Moderna, received government assistance in the development of their vaccines.
But ultimately, it was the prospect of large profits that motivated all vaccine manufacturers — including the ones that failed to produce effective products.
One of the most persuasive champions of a revived excess profits tax has been quick to acknowledge the importance of these incentives — and to propose that vaccine makers get a break from any reborn levy.
In a 2020 article published before the approval of either the Pfizer or Moderna vaccine, University of Michigan law professor Reuven Avi-Yonah called for a broadly applied excess profits tax: “Given that most corporations are losing money but some are now earning excess profits due to the crisis, it is time to revive the wartime excess profits taxes that the US successfully deployed in World War 1 and Word War 2 to prevent the winners from achieving this form of opportunistic unjust enrichment.”
But Avi-Yonah included one very important caveat. “An exception should be adopted for any corporation that produces a successful vaccine or treatment for COVID-19, to incentivize such efforts,” he wrote.
Asked recently if he would like to revise that statement in light of recent developments, Avi-Yonah offered only this: “Any such tax should not apply to the companies that developed the incredible vaccines for COVID-19 or related life-saving products.”