The Biden administration unveiled its plan to revise the corporate tax law on Wednesday and offered a series of proposals that would require large companies to pay higher taxes to help fund the White House financial agenda.
The plan, if adopted, would raise $ 2.5 trillion in revenue over 15 years. It would do so by initiating major changes for U.S. companies that have long embraced threats in the tax code that allowed them to lower or eliminate their tax liability, often by shifting profits abroad. The plan also includes efforts to help combat climate change and proposes replacing fossil fuel subsidies with tax incentives that promote clean energy production.
Finance Minister Janet L. Yellen said during a briefing with reporters Wednesday that the plan would end a global “race to the bottom” of corporate taxation, which she said had been devastating to the U.S. economy and its workers.
“Our tax revenue is already at its lowest level in generations,” Yellen said. “If they continue to fall 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 percent from 21 percent. The administration said the increase would bring America’s corporate tax rate closer to other advanced economies and reduce inequality. It would also remain lower than it was before Trump’s tax cuts in 2017, when the rate stood at 35 percent.
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” in favor of foreigners. Among the biggest change would be a doubling of the de facto global minimum tax to 21 percent and hardening it to force companies to pay the tax on a wider range of income across countries.
This has given particular cause for concern in business, with Joshua Bolten, CEO of Business Roundtable, saying in a statement this week that it “threatens to expose the United States to a major competitive disadvantage.”
The plan would also repeal provisions introduced under the Trump administration, which the Biden administration says have not slowed profit shifts and corporate inversions involving a U.S. company that merges with a foreign company and becomes its subsidiary and effectively relocates its headquarters. abroad for tax. purpose. It would replace them with stricter anti-inversion rules and stronger sanctions for so-called profit stripping.
The plan is not entirely focused on the international side of the corporation tax law. 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 reduce this difference, companies had to pay a minimum tax of 15 percent of book income, which companies report to investors and which is often used to assess shareholder and executive payouts.
A major recipient of the plan would be the Internal Revenue Service, which has seen its budget starve in recent years. The Biden administration’s proposal would increase the tax collection agency’s budget so that it can increase enforcement and tax collection efforts.