He noted that corporate tax collection has fallen to its lowest level since World War II, Finance Minister Janet Yellen said Wednesday that the Republicans’ 2017 Tax Cut and Jobs Act does not entice new production or investment to the United States. Instead, it gave companies incentives to send workers and profits abroad.
Other countries also lowered their corporate prices in response to undercutting the United States, she said in a conference call with reporters.
Overall, as a result of tax cuts from previous years, the United States is now raising only about 1
However, Trade Secretary Gina Raimondo signaled on Wednesday that the president is willing to compromise on the proposed increase in the corporate tax rate to 28%, but still urged Congress to “go big”.
Biden had instructed the cabinet to “work across the aisle and in a two-way manner” to pay for the plan, she said. While the administration proposes to invest over eight years and pay it back in 15 years, Raimondo said officials are open to discussing paying it back over 20 years instead and raising the rate to a figure below 28%.
“What I’re asking the business not to do is say, ‘We do not like 28%. We go away, we do not discuss.’ That’s unacceptable, “she said. “Come to the table and solve the problems with us to come up with a reasonable, responsible plan.”
Raimondo called for a “discussion” with congressional leaders and accused opponents of “telling us what you think is an alternative reasonable plan,” as long as it does not “swap America.”
The report describes Biden’s case
The White House also outlined its argument in a 19-page report published Wednesday. It focused on four main messages: that its tax package would increase the necessary revenue, prevent companies from shifting profits and operations abroad, make the system fairer for workers and move towards a cleaner energy sector.
Republicans’ tax cuts in 2017, which lowered the corporate tax rate to 21 percent from 35 percent, meant the share of tax revenue levied as part of the economy fell to 1 percent, the White House said. Historically, corporation taxes have raised approx. 2% of GDP.
Plus, the report points out that the United States has typically provided less revenue through corporation taxes compared to other advanced nations. In the last two decades, the typical country in the Organization for Economic Co-operation and Development has traveled approx. 3% of GDP from corporate taxation.
Like its predecessors, the Biden administration is also trying to curb US companies moving profits to tax havens abroad through a series of measures, including a global minimum tax. It seeks to end the provisions of the 2017 Tax Act, which it described as “poorly designed.” These proposals would bring over $ 2 billion in profits over the next decade back to the U.S. corporate tax base, the White House said.
The administration also claims that it can create a fairer tax system by raising taxes on companies and addressing rising income inequality.
The report points to the fact that the share of federal revenue raised with corporation tax has fallen steadily since 1950 and is now below 10%. Meanwhile, the share of federal revenue from individuals now exceeds 80%.
The president’s plan would also remove some subsidies to fossil fuel producers and expand tax incentives for clean energy production.
By removing the subsidies, tax revenues would increase by $ 35 billion. Over 10 years, according to estimates from the Treasury Department’s Office of Tax Analysis. The administration claims that the incentives will tackle climate change by reducing air pollution.
What’s in the plan?
Increase in corporation tax: Biden would raise the corporate tax rate to 28%, up from 21%. The rate had been as high as 35% before former President Donald Trump and congressional Republicans lowered the tax in 2017.
Global minimum charge: The proposal would increase the minimum tax on US companies to 21% and calculate it country by country to deter companies from protecting profits in international tax havens.
Tax on book income: The president would levy a minimum tax of 15% of the income that the largest companies report to investors, known as book income, as opposed to the income reported to the Internal Revenue Service. The administration said that in recent years around 45 companies would have paid a minimum booked tax liability under the proposal with average company sees an increased minimum liability of around $ 300 million each year.
Business inversions: The bid would make it harder for U.S. companies to acquire or merge with a foreign company to avoid paying U.S. taxes by claiming to be a foreign company. And he wants to encourage other countries to adopt strong minimum taxes on companies, including by denying certain deductions to foreign companies based in countries without such a tax.
Incentives for clean energy: The plan seeks to promote clean electricity generation by offering a 10-year extension of the tax deductions for clean energy production and storage and making these credits direct payroll. It would also create and expand other incentives. The administration would remove subsidies to the oil and gas industry, which would increase state tax revenue by more than $ 35 billion in the coming decade, according to estimates from the Treasury Department’s Office of Tax Analysis.
Enforcement: The president also wants to provide more funding to the IRS to better prosecute companies that do not meet their tax obligations. The proportion of large companies facing auditing has halved over the past decade, the White House said.
Supporters and opponents
The proposals for infrastructure and taxes quickly attracted criticism and praise.
The U.S. Chamber of Commerce has strongly criticized Biden’s proposal to phase out Trump’s corporate tax cuts.
“We believe the proposal is dangerously misleading when it comes to how to pay for infrastructure,” Neil Bradley, the chamber’s chief of staff, said in a statement last week, reiterating comments he had previously made to CNN Business.
U.S. companies are already facing a global minimum tax on their income, and no other country has followed U.S. leadership in adopting such a tax, said Joshua Bolten, CEO of Business Roundtable, whose members are CEOs of large U.S. companies.
“However, the administration’s proposed global corporate tax rate threatens to expose the United States to a major competitive disadvantage,” he said.
The massive plan has also given rise to concern in Congress. West Virginia Senator Joe Manchin, an important Democratic voter, has already said he would not agree to raise corporate taxes above 25%.
Administration officials have meanwhile taken the road to raise further support.
“We are working with G20 nations to agree on a global minimum tax rate that can stop the race to the bottom,” Yellen said in a speech to the Chicago Council on Global Affairs. “Together, we can use the global minimum tax to ensure the global economy thrives, based on more equal terms in the taxation of multinational corporations, and promotes innovation, growth and prosperity.”
This story has been updated with further comments and details.
CNN’s Devan Cole, Jasmine Wright and Matt Egan contributed to this report.