Biden’s Plan to Raise $2.5 Trillion in Corporate Taxes

By Yuval Rosenberg

Biden’s Plan to Raise $2.5 Trillion From Corporations

The Biden administration on Wednesday unveiled its plan to
overhaul the corporate tax code, providing a framework for raising
trillions of dollars in revenue to help pay for the president’s
ambitious economic agenda.

The “Made in America Tax Plan,” outlined in a
17-page document released by the Treasury
Department, would raise $2.5 trillion over 15 years, enough to
cover the $2.3 trillion cost of President Joe Biden’s recently
released infrastructure plan.

If enacted, the plan would reverse the trend of falling
corporate tax collections. In an
op-ed published in The Wall Street Journal
Wednesday, Treasury Secretary Janet Yellen described the dynamic
the administration seeks to overcome: “Over the past three years,
corporate tax collections have fallen to their lowest level since
World War II: 1% of gross domestic product.”

Reversing course on the Trump tax cuts: The
proposal makes it clear that the White House seeks to undo much of
the GOP tax overhaul from four years ago. “The 2017 tax law reduced
U.S. corporate tax rates, resulting in a significant decrease in
corporate tax collection,” the outline of the plan says. “There is
little evidence of an increase in economic growth or corporate
investment resulting from these dramatic reductions in corporate
tax rates.”

One of the plan’s main provisions would raise the
corporate tax rate to 28% – halfway between the current 21% rate
imposed by the GOP tax overhaul in 2017 and the 35% rate that was
in effect before then.

In addition to raising the corporate tax rate, the plan
also makes changes to the international provisions of the tax code
as part of an effort to eliminate incentives to shift profits to
low-tax jurisdictions. The White House wants to apply a minimum tax
rate of 21% to foreign earnings, and convince other countries to do
the same, thereby ending the “race to the bottom” in tax rates that
has starved governments of revenues they need to invest
domestically.

“Our tax revenues are already at their lowest levels in
generations, and as they continue to drop lower we will have less
money to invest in roads, bridges, broadband and R&D,” Treasury
Secretary Janet Yellen
told reporters. “By choosing to compete on taxes,
we’ve neglected to compete on the skill of our workers and the
strength of our infrastructure. It’s a self-defeating competition,
which is why we’re proposing this ‘Made in America’ tax plan. It
changes the game we play.”

The G-20 could reach an agreement on tax rate harmonization as
soon as July, Italian Finance Minister Daniele Franco
said Wednesday.

A minimum corporate tax: The Biden plan would also impose
a minimum corporate tax of 15%, taking aim at companies that report
billions in revenues and yet avoid paying federal income taxes.

Still, the proposed minimum tax is less aggressive than the one
Biden campaigned on. The tax would apply only to firms with incomes
over $2 billion, considerably higher than the $100 million
threshold in Biden’s original plan. Only 180 companies meet that
requirement, and the minimum tax would affect just 45 of them, the
Treasury said.

Supporters and critics prepare for battle: In her Journal

op-ed, Yellen said the plan would also make the
tax system fairer and boost incentives for U.S. companies to invest
at home. “Tax reform is not a zero-sum game, with corporations on
one side and government on the other,” she wrote. “There are
policies that are mutually beneficial, true win-wins. Washington
has one in front of it right now.”

But business groups, Republicans and some centrist
Democrats have signaled that they will not support the plan, at
least in its current form. Sen. Joe Manchin (D-WV) has already said
that he and several other Democrats are uncomfortable raising the
corporate tax rate above 25%, and the U.S. Chamber of Commerce and
the Business Roundtable have spoken out against tax hikes, with the
latter saying the tax hike plan “threatens to subject the U.S. to a
major competitive disadvantage.”

Biden Says ‘Changes Are Certain’ on His Infrastructure
Plan

Biden on Wednesday said that compromise on his $2.25 trillion
infrastructure plan was “inevitable” but that inaction was not an
option.

“Democrats and Republicans will have ideas about what they like
and what they don’t like about our plan. That’s a good thing,”
Biden said. “Debate is welcome. Compromise is inevitable. Changes
are certain.”

Biden said he and Vice President Kamala Harris would be meeting
with Republicans and Democrats about the plan. “We will be open to
good ideas and good faith negotiations,” Biden said, adding,
“Here’s what we won’t be open to: We will not be open to doing
nothing. Inaction simply is not an option.”

Republicans have criticized Biden’s plan, arguing that
traditional infrastructure investments comprise
only a fraction of the total spending it proposes.
Biden said he was happy to debate what should be in the plan, but
defended his proposals as the right path to help American workers.
“We are America. We don’t just fix for today. We build for
tomorrow,” he said. “The idea of infrastructure has always evolved
to meet the aspirations of the American people, and their needs.
And it’s evolving again today.”

As we noted above, Biden's proposed corporate tax increases have
been dismissed by Republicans and criticized by business groups.
Senate Minority Leader Mitch McConnell (R-KY) continues to call
Biden’s plan “a Trojan horse for massive tax increases and a whole
lot of more debt and whole lot of spending.”

McConnell
said Wednesday that he’s “hopeful that not every
single Democrat” will line up behind Biden’s bill and that some
centrists “will have some skepticism about this massive growth of
government.”

Biden on Wednesday reiterated a campaign pledge that he
would not raise taxes on households earning less than $400,000 and
said he would be open to other ideas about how to pay for his
infrastructure package.

Number of the Day: 156 Million

The federal government has sent out more than 156 million
Covid direct payments from the $1.9 trillion Covid relief law, the
Treasury Department said,
as another 25 million payments totaling $36 billion were disbursed
on Wednesday. The latest round of so-called stimulus checks brings
the total sent so far to about $372 billion, according to the
Treasury Department.

Poll of the Day: A Surge in Democratic Affiliation

Gallup polling from the first quarter of the year finds
that 49% of American adults identified with the Democratic Party or
leaned Democratic compared with 40% who identified as Republicans
or lean toward the GOP.
Gallup says the 9 percentage-point edge is the
largest it has measured since the fourth quarter of
2012.

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