Is gift authorship for PhD advisors rampant in academia? I have had an issue with my PhD advisor where they were essentially attempting to coerce me into inappropriately adding them as a co-author on a paper that they had no part in. They agreed that they should not be an author according to ethical standards, but essentially threatened me that there would be "problems with my graduation" if I did not add their name to the paper. They have refused to collaborate with me on this paper as well as any future paper because they "are too busy" and "no professors really do research".

This appeared to be a very serious ethical breach to me, so I immediately went to the department chair to describe the situation, and started looking for a new PhD advisor. However, some of the reactions I got to the situation disturbed me. The chair of my department openly stated that all of my research is "owned" by my advisor (whatever that means) and implied that I was a bad student for not adding my advisor to the paper. He even went so far to suggest that I add my new advisor's name to the (finished) paper in order to start off on good terms! Another professor trivialized the problem, stating that compared to what many PhD students have to deal with gift authorship is "not that bad". A third professor stated that it was clearly unethical, but that it was unfortunately the norm.

It seems to me based on this small sample size (as well as hearing other PhD student's experiences) that gifting authorship to uninvolved PhD advisors is rampant. This is obviously a terrible practice. Is this behavior really rampant in academia? And if so, what happens to PhD students who refuse to participate in this practice?

A further point about my situation: I am in a theoretical scientific field where there is no lab, etc., so there is no complications arising from that sort of thing. Although even if I were working on a grant and using lab equipment gift authorship would be unethical.
This situation is not uncommon but not rampant, and depends very strongly on the culture of the institution, the department and the field of research, or even the individual thesis director.

There is some weak argument to be made that thesis directors provide resources (intellectual or otherwise) so they should be more or less automatically co-authors of work done by students.  If they are not then the resources going to the lab/research group through grants or other competitions might be jeopardized.   In other words, the resources you can access now are in part due to the past record of the supervisor so she/he needs to keep this up else these resources will not benefit the next generation of students.

There is also the argument that big names function as imprimatur in the sense that they will provide visibility to the work beyond what the junior authors could hope to provide.

Overall, I have always found both arguments not completely satisfactory.  While certainly a thesis director should help a student as much as possible, there are clearly situations where it is not necessary for a thesis director to co-sign a paper.  Likewise, it is entirely possible to highlight in a positive manner - in a grant application or otherwise - the fact that a student publish without his/her thesis director.