Biden Lands a Major Tax Deal

By Yuval Rosenberg

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.

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