Biden ties tax plan, economy goals
President says size of hike is on table, adds US must invest for future
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, including a $2.3 trillion infrastructure package.
The plan, if enacted, would usher 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.
In a Wednesday afternoon speech, President Joe Biden noted that he was open to compromise on how to pay for the infrastructure package, but turned fiery in insisting that inaction is unacceptable, saying that the United States is failing to build, invest and research for the future and that failure to do so amounts to giving up on “leading the world.”
“Compromise is inevitable,” Biden said. “We’ll be open to good ideas in good faith negotiations. But here’s what we won’t be open to: We will not be open to doing nothing. Inaction, simply, is not an option.”
Biden challenged the idea that low tax rates would do more for growth than investing in care workers, roads, bridges, clean water, broadband, school buildings, the power grid, electric vehicles and veterans hospitals.
The president has taken heat from Republican lawmakers and business groups for proposing that corporate tax increases should finance an infrastructure package that goes far beyond the traditional focus on roads and bridges.
“What the president proposed this week is not an infrastructure bill,” Sen. Roger Wicker, R-Miss., said on NBC’s “Meet the Press,” one of many quotes that Republican congressional aides emailed to reporters before Biden’s speech. “It’s a huge tax increase, for one thing. And it’s a tax increase on small businesses, on job creators in the United States.”
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%.
But Biden said he was willing to accept a rate below 28% so long as the economic projects he envisions are financed and taxes are not increased on people making less than $400,000.
“I’m willing to listen to that,” Biden said. “But we gotta pay for this. We gotta pay for this. There’s many other ways we can do it. But I am willing to negotiate. I’ve come forward with the best, most rational way, in my view the fairest way, to pay for it, but there are many other ways as well. And I’m open.”
He stressed that he had been open to compromise on his $1.9 trillion coronavirus relief plan, but Republicans never budged beyond their $600 billion counteroffer.
“If they’d come forward with a plan that did the bulk of it and it was $1.3 billion or four ... that allowed me to have pieces of all that was in there, I would have been prepared to compromise,” Biden said. “But they didn’t. They didn’t move an inch. Not an inch.”
The president added that America’s position in the world was incumbent on taking aggressive action on modern infrastructure that serves a computerized age. Otherwise, the county would lose out to China in what he believes is a fundamental test of democracy. Republican lawmakers counter that higher taxes would make the country less competitive globally.
“You think China is waiting around to invest in this digital infrastructure or on research and development? I promise you. They are not waiting. But they’re counting on American democracy, to be too slow, too limited and too divided to keep pace.”
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 Treasury Department report as policies that put “America last” by benefiting foreigners. Among the biggest changes 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 also 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.