Biden, Yellen Notch a Win in Push for Historic Global Tax Deal
Finance leaders from the G7 group of advanced economies said Saturday that they had reached an agreement on establishing a minimum global corporate tax rate, a significant step forward in the Biden administration’s effort to reduce tax avoidance by major corporations.
Under the agreement announced by the G7 nations — Canada, France, Germany, Italy, Japan, the United Kingdom and the United States — multinationals would have to pay a tax of at least 15% in each country in which they operate, less than the Biden administration’s earlier proposal of 21% but still within the range of what the White House said it would accept.
Treasury Secretary Janet Yellen reportedly played a major role in the effort to reach a consensus on an issue that has been under discussion for a decade or more. “That global minimum tax would end the race to the bottom in corporate taxation, and ensure fairness for the middle class and working people in the U.S. and around the world,” she said in a statement. “The global minimum tax would also help the global economy thrive, by leveling the playing field for businesses and encouraging countries to compete on positive bases, such as educating and training our work forces and investing in research and development and infrastructure.”
A key issue in the talks has been the taxation of technology giants like Google and Facebook, which have deployed sophisticated strategies to reduce their taxes. The U.S. has pressed G7 nations to eliminate their taxes on digital services, arguing that they unfairly target American firms, but those taxes will remain in place for now, until a final agreement can be negotiated.
“Just because their business is online doesn’t mean they should not pay taxes in the countries where they operate and from which their profit derives,” treasury officials from France, Germany, Italy and Spain said in a joint statement. “Physical presence has been the historical basis of our taxation system. This basis has to evolve with our economies gradually shifting online.”
Billions at stake: Even without all the details being spelled out, it’s safe to say that a global minimum tax, if implemented successfully, would generate significant revenues. A group that analyses European tax systems estimates that a 15% tax would generate nearly $60 billion a year, while the Biden administration projects revenues from a minimum tax of $500 billion over a decade for the U.S.
Still a long way to go: The agreement is a statement of principle and the details still need to be worked out, in a process that could take years. Any final agreement would have jump through numerous hurdles for approval, including but not limited to the broader group of G20 nations — which includes Ireland, a major beneficiary of the current status quo that has announced its opposition to the idea of global minimum tax — and the U.S. Congress, where resistance from Republicans and business lobbyists will likely be fierce.
Rep. Kevin Brady (TX), the top Republican on the House Ways and Means committee, and Sen. Mike Crapo (ID), the top Republican on the Senate Finance Committee, issued a joint statement criticizing the “speculative agreement,” charging that it “could adversely affect U.S. businesses, and ultimately harm American workers and jobs.”
Still, numerous economic experts said the agreement was a major milestone. “This is truly a BFD,” tweeted Steven Rattner, the journalist-turned-investment manager who served as the auto czar in the Obama administration. “Multinational corps have been gaming the system for decades at the expense of Treasury and American people. Hats off to @SecYellen.”
Wall Street, however, isn’t so sure. Bloomberg Opinion columnist David Fickling wrote Monday that as far as major corporations are concerned, “we’ve yet to see anything that suggests the gravitational pull of ever-lower corporate taxes is about to be reversed.” Reaching an agreement will take a long time, and any final agreement will no doubt be immensely complex — providing plenty of opportunities for loopholes and new tax minimization strategies.
“A successful deal on multinationals’ tax minimization would represent a major blow for the world’s biggest companies,” Fickling said. “In the wake of this weekend’s agreement, their silence speaks volumes.”
White House Outlines 3 Paths Forward on Infrastructure
The White House on Monday outlined a number of possible paths toward passing infrastructure legislation.
White House Press Secretary Jen Psaki told reporters Monday that President Biden would be speaking again with Sen. Shelley Moore Capito, the lead Republican negotiator on infrastructure, before leaving for a week-long trip to Europe on Wednesday. Those talks had been expected to occur on Monday, but Psaki said the White House was still scheduling them as of midday.
Biden and Capito spoke on Friday, after which the White House said Biden thought that the latest Republican offer was still too small. "The president has come down by about a trillion dollars" from his original proposal of nearly $2.3 trillion, Psaki said. "What we’ve seen on the other side is they've only come up by a small percentage of that."
Capito's latest offer reportedly totaled just under $1 trillion, though the bulk of that money is in existing spending plans. Psaki added that Biden is eager to see where the talks go from here. “He’s come down quite a bit. We’re looking to see more” from Republicans, she said.
At the same time, Psaki raised two other options for an infrastructure bill. One is a five-year, $547 billion surface transportation package called The INVEST in America Act, which is set to be marked up this week by the House Committee on Transportation and Infrastructure and has significant overlap with Biden’s American Jobs Plan.
Psaki also pointed to ongoing discussions among a bipartisan group of lawmakers including Sens. Susan Collins (R-ME), Joe Manchin (D-WV), Rob Portman (R-OH) and Mitt Romney (R-UT), who are trying to craft their own infrastructure package. “We’ll look forward to seeing what they have to offer and what conversation we can have with them,” Psaki said.
Psaki told reporters that the White House expects progress on all three fronts this week — but she made clear that the clock is ticking.
The bottom line: The White House is holding out hope for a bipartisan deal, but the path that Psaki didn’t detail — the one that involves Democrats moving forward on their own on a broad infrastructure package using the budget reconciliation process — may still be the likeliest.
Obamacare Coverage Hits Record High of 31 Million
About 31 million people get their health insurance through pathways established by the Affordable Care Act, the Department of Health and Human Services announced Saturday. That’s a record high, driven by an increase of nearly 4 million between 2020 and 2021.
“As of the most recently available administrative data, 11.3 million consumers were enrolled in Marketplace plans as of February 2021, and 14.8 million people were newly enrolled in Medicaid via the ACA’s expansion of eligibility to adults as of December 2020,” HHS said. “In addition, 1 million individuals were enrolled in the ACA’s Basic Health Program option, and nearly 4 million previously-eligible adults gained coverage under the Medicaid expansion due to enhanced outreach, streamlined applications, and increased federal funding under the ACA.”
Psaki touted the figure Monday as “a record high that demonstrates the strength, durability and impact of the historic law after years of relentless attacks.”
Larry Levitt of the Kaiser Family Foundation noted that the coverage total announced by HHS is probably an undercount at this point, since it doesn’t include those who signed up for health insurance during the special enrollment period created by President Biden. Another ACA expert, Charles Gaba, said that the true number of people covered through Obamacare could be over 33 million, or roughly 10% of the U.S. population.
Editorial of the Day: A Bipartisan Blunder on Retirement Reform
The House Ways and Means Committee last month advanced a bipartisan bill to reform retirement savings rules. The Securing a Strong Retirement Act of 2021 would expand automatic enrollment in tax-advantaged retirement plans and strengthen incentives for small businesses to offer retirement plans, among a host of other provisions.
But The Washington Post Editorial Board argued in a piece published Sunday that, while the bill makes some needed reforms, one provision would primarily benefit the wealthy while depriving the federal government of revenue. It would let savers wait until age 73 to start taking distributions from their retirement plans, with the age threshold for mandatory distributions rising to 74 as of 2029 and 75 by 2032.
The Editorial Board’s argument:
“The ostensible purpose is to increase IRA ‘flexibility’ in an era when more people are delaying retirement, but the urgency of this objective is far from clear. The current age, 72, already represents a 1.5-year increase, enacted in 2019, over the previous standard. ...
“In 2018, the roughly 17 percent
of taxpayers with adjusted gross incomes of $100,000-plus took more than half of the $253 billion in IRA distributions, according to Howard Gleckman
of the Tax Policy Center. Under the proposed law, more of that money will stay put, thus depriving the government of taxes that would have been paid upon withdrawal. The cost: $6.9 billion over 10 years, according to the Joint Committee on Taxation.
“In short, this provision confers the bulk of its foreseeable benefits on the wealthiest — and healthiest — older Americans, and their heirs, while depriving the federal government of resources it could have used to help everyone else. ... The proposed delay in mandatory withdrawals, however, confirms a sad Washington reality: Bipartisan policy is not necessarily good policy.”
Read the full piece at The Washington Post.
- Joe Manchin’s Mighty Delusions – James Downie, Washington Post
- Turning Child Care Into a New Cold War – Nicholas Kristof, New York Times
- Yellen Won a Global Tax Deal. Now Comes the Hard Part. – Alan Rappeport, New York Times
- Yellen’s Global Tax Surrender – Wall Street Journal Editorial Board
- Yellen May Be Doing Powell a Favor on Raising Rates – Daniel Moss, Bloomberg
- Republicans, Don’t Ignore the Evidence on ‘Labor Shortages’ – Heidi Shierholz, New York Times
- Krugman Wonks Out: Do Hiring Headaches Imply a Labor Shortage? – Paul Krugman, New York Times
- The Jobs Report Takeaway: A Huge Reallocation of People and Work Is Underway – Betsey Stevenson, New York Times
- Cutting Unemployment Benefits Early Hurts Workers and State Economies – David Cooper, The Hill
- Economists Don't Know Everything About the Economy – Noah Smith, Bloomberg
- Taxing Amazon Is Like Squeezing Rice Pudding – Lionel Laurent, Bloomberg
The Fed Is Risking a Full-Blown Recession – Bill Dudley, Bloomberg
- The Fed’s Risky Fill-the-Punch-Bowl Strategy – Kevin Warsh, Wall Street Journal
- Congress Should Cancel Its Summer Recess – Jonathan Bernstein, Bloomberg
- U.S. Public Opinion and Increased Taxes on the Rich – Frank Newport, Gallup
- Restaurants Need a Bigger Menu of Government Aid – Karl W. Smith, Bloomberg
Biden Will Probably Fall Short of July 4 Vaccination Goal Because of States That Didn’t Vote for Him – Philip Bump, Washington Post
My Son’s Home Health Worker Is the Face of Infrastructure – Jeneva Stone, Washington Post
- Approving Biogen's Alzheimer's Drug Is a Big Mistake – Max Nisen, Bloomberg
- People Want an Alzheimer’s Drug. This Isn’t the One – Michael Greicius and G. Caleb Alexander, New York Times