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Simple English definitions for legal terms
excess-profits tax
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A quick definition of excess-profits tax:
An excess-profits tax is a type of tax that the government charges to businesses or individuals who make more money than they usually do. It is an additional tax on top of the regular taxes that people or businesses have to pay. The purpose of this tax is to generate more revenue for the government and to prevent people or businesses from making too much profit.
A more thorough explanation:
An excess-profits tax is a type of tax imposed by the government on businesses that earn more than a certain amount of profit. The tax is designed to prevent companies from making excessive profits during times of war or other emergencies.
For example, during World War II, the United States government imposed an excess-profits tax on businesses that earned more than a certain amount of profit. The tax was intended to prevent companies from profiting too much from the war effort.
Another example of an excess-profits tax is the windfall profits tax that was imposed on oil companies in the 1980s. The tax was designed to prevent oil companies from making excessive profits due to the increase in oil prices.
These examples illustrate how excess-profits taxes are used to prevent companies from making excessive profits during times of emergency or when prices are artificially high.