Companies Could Still Pay $0 in Taxes Under Biden Plan

Companies Could Still Pay $0 in Taxes Under Biden Plan

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Plus, Republicans struggle to craft an infrastructure offer
Friday, April 16, 2021

Some Companies Could Still Pay $0 in Taxes Under Biden Plan: Report

When the White House announced President Joe Biden’s American Jobs Plan, the $2.3 trillion infrastructure plan it paired it with a tax plan it promised would “make sure corporations pay their fair share in taxes.” Administration officials and the president himself pointed to studies that showed how many Fortune 500 companies, the largest in the country by revenue, paid nothing in federal income taxes.

“A new, independent study put out last week found that at least 55 of our largest corporations use the various loopholes to pay zero federal tax, income tax, in 2020,” Biden said last week in a speech promoting his plan. “It’s just not fair. It’s not fair to the rest of the American taxpayers. We’re going to try to put an end to this.”

But The Washington Post’s Jeff Stein reports that it’s not at all clear that Biden’s tax proposals would eliminate the ability of large corporations to pay nothing in federal income taxes.

“That is because Biden’s plan would still allow virtually all corporations to use federal tax credits and deductions to reduce their existing tax obligations — one key reason some large firms pay nothing,” Stein writes. “Biden’s $2 trillion jobs and infrastructure plan includes a significant expansion in these kinds of credits, such as for clean energy investments, that corporations use to zero out what they owe the Internal Revenue Service. Additionally, the Biden administration dramatically narrowed its proposal to ensure large firms pay at least some federal taxes, muting its impact by having it only apply to a sliver of firms.”

Steve Rosenthal, a tax expert at the Tax Policy Center, a nonpartisan think tank, told the Post that Biden’s plan does not address key elements of the tax code that enable corporations to pay no federal income taxes, including the ability to deduct capital expenses, executive compensation and losses from prior years. And Biden’s proposal to ensure that large businesses can’t use accounting maneuvers avoid paying taxes applies only to companies with more than $2 billion in annual profit — a much higher threshold than the $100 million Biden had proposed during the presidential campaign. That threshold means that the provision would not apply to 50 of the 55 corporations that did not pay federal income taxes in 2020, Stein says.

White House officials did not deny that some corporations could still pay no federal income taxes, Stein reports, but they said that the number doing so would be significantly reduced under the president’s plan and they emphasized that big businesses overall would pay far more — some $2.5 trillion over 15 years — than under current law.

Some tax experts also suggest that the examples of corporations paying no federal taxes may matter mostly because they’re emblematic of broader issues with the corporate tax code.

“One reason the public gets so mad about these stories [about large firms paying nothing] is because they know it’s standing in for an underlying reality that companies are getting away with a lot,” Dan Shaviro, a tax expert at New York University, told the Post. “If there was still the occasional company that did it, but the public realized corporations were paying a lot more, those stories would be less significant.”

Chart of the Day: Corporate Tax Revenues as a Share of GDP

Sen. Ron Wyden (D-OR), chair of the Senate Finance Committee, issued a series of charts illustrating how corporate tax receipts as a share of GDP have fallen since the 2017 Republican tax law cuts were enacted, the outlook under current law.

Corporations have never contributed less to federal revenues than they do now,” Wyden said in a statement Thursday. “Our analysis of CBO data shows corporate revenue is down nearly 40 percent from the 21st century average since Republicans’ tax giveaway. I’m not talking about comparing where we are today to where we were in the 1950s—I’m talking about comparing where we are today to where we were just five years ago.”

Wyden said the data show that Republican opposition to raising corporate taxes to pay for infrastructure investments “is completely unreasonable.”

Why it matters: The fiscal significance of these numbers is obvious, but there may be political implications as well. The data from Wyden “vividly illustrates why the status quo on corporate taxation is so hard to defend: It shows how little we collect in corporate tax revenues as a percentage of the economy, how bad the future outlook is and how miserably this compares to other countries,” liberal Washington Post columnist Greg Sargent writes. “If Democrats can press this case about the indefensibility of the status quo, the Republican position should get even harder to sustain.”

Republicans Struggle to Build an Infrastructure Alternative

Republican lawmakers are unified in their opposition to President Joe Biden’s $2.3 trillion infrastructure proposal, rejecting both its massive size and expansive scope. But they’re reportedly having a hard time crafting a counteroffer that would satisfy members of their own party, an early indicator of just how difficult it will be to reach a bipartisan agreement on an infrastructure bill in the coming months.

Earlier this week, Sen. Shelley Moore Capito (R-WV) floated the prospect of a slimmed-down infrastructure plan that could win bipartisan backing, with a cost somewhere between $600 billion and $800 billion. But some Republicans expressed concerns about that level of spending, and by Thursday afternoon, Capito was backing away from her proposal.

“It's too early to say right now,” Capito told reporters. “We don't have a detailed figure attached to that, and it probably won't be, I wouldn't think, an amount certain. More of a range of where we think we could fall and begin to negotiate.”

Capito, the ranking member on the Environment and Public Works Committee, said that her task now is to create a “conceptual Republican bill” focused on the meat-and-potato infrastructure issues, such as road construction and bridge repair, that Republicans say they could support. But there is no consensus yet among Republicans on what exactly that bill would do, how big it might be or how it would be funded.

Biden eager to negotiate: The White House wants to get started with negotiations, but the lack of a counteroffer from Republicans means that substantial discussions can’t begin yet.
“What we're waiting for is a counterproposal from Republicans in Congress,” Press Secretary Jen Psaki told reporters Friday. “And they've indicated that they're working through that, so we look forward to seriously considering any proposal that — any good-faith engagement, I should say, that comes our way. But we're waiting.”

Psaki added that Biden has made clear that he believes corporations should pay for the cost of an infrastructure bill. “Some in Congress think that it should be paid for by putting the burden on the backs of Americans,” she said. “We're happy to have that debate. But that's the fundamental disagreement. Those are the two major options.”

Senate Minority Whip John Thune (R-SD) expressed optimism that Republicans and Democrats could reach an agreement on a smaller infrastructure package, though he noted that not all Republicans were going to climb aboard. “If Democrats want to negotiate in good faith on a truly infrastructure package, I don't know if it would get Senator McConnell's vote, but I think there are a number of Republican votes in support of a package to include the highway bill, water, sewer, broadband, things like that," Thune said. “Much smaller than what the Democrats have proposed, but more focused.”

Smaller may be a problem, though. Pivotal centrist Sen. Joe Manchin (D-WV) said Thursday that he doesn’t support the kind of reduced package Republicans say they could back. “We're going to do whatever it takes. If it takes $4 trillion, I'd do $4 trillion, but we have to pay for it," Manchin told reporters.

Mulling their strategy: As we told you yesterday, Democrats are mulling a strategy in which they work with Republicans on a smaller bill in the name of bipartisanship while keeping the option of passing a second, larger bill with a much wider scope via reconciliation. Sen. Sheldon Whitehouse (D-RI) spoke in favor of that approach this week. “The wise thing to do is to work in two lanes. One is the reconciliation lane, which I don’t think would be wise to forgo, and the second is the bipartisan lane,” he told Politico.

But Whitehouse also warned that the strategy could backfire by giving Republicans a way to interfere with Democratic efforts. “If [Republicans] know that we’ve committed to the bipartisan lane, there’s a very strong incentive for them to make that a fake and to use it simply to slow down,” Whitehouse said.

What’s next: Biden is set to have additional meetings next week on the infrastructure plan.

Number of the Day: 200 Million

The U.S. has surpassed 200 million Covid-19 vaccine doses administered, the White House said Friday.

The chart below from the CDC’s Covid data tracker shows more than 202 million vaccine doses administered as of Friday. About 38% of the total population has now received at least one dose, and 24% are fully vaccinated. The numbers are dramatically higher for older Americans, with 80% having received at least one dose and 31% now fully vaccinated.

It took 89 days to hit the 100 million dose mark, Bloomberg said Friday, and the U.S. recorded its 200 millionth dose 36 days later.

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