Biden unveils plan to raise corporate taxes
President offers proposals that would require large companies to pay higher taxes to help fund the White House’s economic agenda.
The Biden administration unveiled its plan to overhaul the corporate tax code Wednesday, offering an array of proposals that would require large companies to pay higher taxes to help fund the White House’s economic agenda.
The plan, if enacted, would raise $2.5 trillion in revenue over 15 years. It would do so by ushering in major changes for U.S. companies, which have long embraced quirks in the tax code that allowed them to lower or eliminate their tax liability, often by shifting profits overseas. The plan also includes efforts to help combat climate change, proposing to replace fossil fuel subsidies with tax incentives that promote clean energy production.
Some corporations have expressed a willingness to pay more in taxes, but the overall scope of the proposal is likely to draw backlash from the business community, which has benefited for years from loopholes in the tax code and a relaxed approach to enforcement.
Treasury Secretary Janet Yellen said during a briefing with reporters Wednesday that the plan would end a global “race to the bottom” of corporate taxation that she said has been destructive for the U.S. economy and its workers.
“Our tax revenues are already at their lowest level in generations,” Yellen said. “If they continue to drop lower, we will have less money to invest in roads, bridges, broadband and R&D.”
The Biden administration’s plan, announced by the Treasury Department, would raise the corporate tax rate to 28% from 21%. The administration said the increase would bring the U.S. corporate tax rate more closely in line with other advanced economies and reduce inequality. It would also remain lower than it was before the 2017 Trump tax cuts, when the rate stood at 35%.
The White House also proposed significant changes to several international tax provisions included in the Trump tax cuts, which the Biden administration described in the report as policies that put “America last” by benefiting foreigners. Among the biggest change would be a doubling of the de facto global minimum tax to 21% and toughening it to force companies to pay the tax on a wider span of income across countries.
That, in particular, has raised concerns in the business community, with Joshua Bolten, CEO of the Business Roundtable, saying in a statement this week that it “threatens to subject the U.S. to a major competitive disadvantage.”
The plan would also repeal provisions put in place during the Trump administration that the Biden administration says have failed to curb profit shifting and corporate inversions, which involve a U.S. company merging with a foreign firm and becoming its subsidiary, effectively moving its headquarters abroad for tax purposes. It would replace them with tougher anti-inversion rules and stronger penalties for so-called profit stripping.
The plan is not entirely focused on the international side of the corporate tax code. It tries to crack down on large, profitable companies that pay little or no income taxes yet signal large profits to companies with their “book value.” To cut down on that disparity, companies would have to pay a minimum tax of 15% on book income, which businesses report to investors and which are often used to judge shareholder and executive payouts.