In his meeting Wednesday with the top Republican negotiator on infrastructure, President Joe Biden reportedly insisted that the GOP must accept about $1 trillion in new spending as part of any deal but indicated that he was open to shifting his corporate tax proposals in an attempt to win bipartisan support.
Biden has proposed raising the corporate tax rate from 21% to 28%. Republicans have said that rolling back their 2017 tax cuts, which reduced the corporate rate from 35% to its current level, is a non-starter.
In talks Wednesday with Sen. Shelley Moore Capito (R-WV), Biden outlined a plan that would leave the corporate tax rate unchanged, at least for now, but would instead rely on a minimum corporate tax of 15%, aiming to ensure that profitable companies can’t avoid paying federal taxes, according to reports in The Washington Post and other outlets.
“Biden still wants to raise the corporate tax rate to 28 percent, but that effort could now be pursued outside of the infrastructure negotiations,” the Post’s Seung Min Kim and Tony Romm report. Biden reportedly also proposed increasing IRS enforcement on corporations and top earners who use loopholes to avoid taxes.
Those two revenue-raising measures were already part of Biden’s tax plans, but the offer to set aside the corporate tax rate increase “amounted to a major concession,” Kim and Romm say — and represented “an attempt by the White House to thread a delicate political needle” by raising revenue while avoiding the GOP’s red line on the 2017 tax law.
Republicans are still likely to oppose the revenue plans. Some have criticized Biden’s proposal to increase IRS funding by $80 billion over 10 years. And the 15% minimum corporate tax “has been criticized by Republicans and some economists for being an inefficient way to increase taxes,” Justin Sink and Laura Davison report at Bloomberg News. “Critics have said that imposing a minimum tax on profits would mean that companies would be less incentivized to spend money on things that Congress wants to promote, such as R&D or renewable energy, because they wouldn’t be able to claim those tax breaks.”
Biden’s call for $1 trillion in new infrastructure spending is also about four times as high as the new spending included in Republicans’ latest offer. Republicans have said that Biden told them previously that existing spending plans could count toward the total, and their most recent $928 billion plan included about $257 billion in new outlays. The GOP plan calls for using unspent Covid relief funds and user fees for drivers to cover the costs of the infrastructure package.
What’s next: “The GOP is considering another counteroffer that could come as soon as Friday, when Capito will be talking to Biden again, this time likely by phone. It’s unclear what that would look like — or even whether Republicans will make a new proposal,” Politico reported Thursday morning, noting that some Republicans involved in the talks “are starting to feel discouraged.”