Jun 3, 2021
Biden floats 15% minimum corporate tax in infrastructure talks
I don’t see Biden’s corporate tax proposal passing at 28%: Peapack Private Wealth's Dietze
President Joe Biden has pitched to Republicans the idea of a 15 per cent minimum tax on U.S. corporations, along with strengthened IRS enforcement efforts, as a way to fund a bipartisan infrastructure package.
The proposal sets aside the Biden administration’s proposal to raise the headline corporate income rate to 28 per cent from 21 per cent -- a non-starter for Republican lawmakers -- though that could be pursued elsewhere. White House Press Secretary Jen Psaki confirmed the offer during a briefing Thursday.
Under the pitch to Republicans, companies that have lots of tax credits and deductions would be required to pay at least 15 per cent. The plan would also increase tax revenues by conducting more audits of rich taxpayers.
Those two funding measures were already included in Biden’s tax plans. The White House sees the offer as raising money without increasing tax rates or rolling back President Donald Trump’s 2017 tax cuts, something that Republicans have said is a red line in the negotiations. The Washington Post reported earlier on the proposal as part of an offer for US$1 trillion in spending.
Biden met on Wednesday with Senator Shelley Moore Capito, the West Virginia Republican leading the infrastructure talks for the GOP, in the latest attempt at a compromise. The discussion did not yield a deal on how much to spend or how to pay for it, but the two are scheduled to speak again on Friday. Kelley Moore, a spokeswoman for Capito, declined to comment.
Biden’s had earlier made a US$1.7 trillion infrastructure proposal to Republicans. Taking a 28 per cent corporate tax rate increase off the table for these discussions would eliminate what the Treasury Department estimates is US$857.8 billion in revenue over a decade.
The IRS enforcement plan, projected to raise US$778.8 billion, combined with the US$148.3 billion from the 15 per cent minimum tax, would collectively offset about US$927.1 billion in infrastructure spending, based on Treasury estimates released last week.
Democrats could still pursue other tax plans in a partisan reconciliation bill later this year.
Psaki stressed that the 15 per cent profits tax was included in Biden’s American Jobs Plan and proposed budget, and said the president was “absolutely not” abandoning efforts to raise the corporate rate to 28 per cent. She characterized the latest offer as an attempt to find a path forward on this specific negotiation with Republicans.
“This is a way for him to identify pieces he’s long been a proponent of,” Psaki said. “This should be completely acceptable” to Republicans who want to leave the 2017 tax law untouched, she said.
Biden is also open to reallocating some US$75 billion of funds left over from coronavirus-relief bills passed in 2020, Psaki said.
Also Thursday, the No. 3 House Democrat said that time may be running out to reach a bipartisan deal on a national infrastructure plan, suggesting that Biden and congressional Democrats should be preparing to act on their own.
“We are still negotiating,” Representative Jim Clyburn of South Carolina, said during an appearance on Bloomberg Television’s “Balance of Power” program. But, he added, “I don’t think we should run the risk of not getting something done because the other side is not cooperating.”
The 15 per cent minimum tax address situations where major tech companies, like Amazon.com Inc, Netflix Inc. and Zoom Video Communications Inc., have largely been able to avoid paying federal income taxes in some years despite turning a profit because they used legal maneuvers, including write-offs for business expenses, to whittle down their tax bill.
The measure was included in Biden’s American Jobs plan announced in March. It would impose a minimum 15 per cent levy on corporations’ profits reported in financial statements, also known as book income. The change would upend decades of differences to how companies compute their finances for tax purposes and would limit the amount of legal tax breaks that the companies could use.
The provision has been criticized by Republicans and some economists for being an inefficient way to increase taxes. 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 has also proposed an US$80 billion investment in the Internal Revenue Service, which the White House says could raise an additional US$700 billion over a decade. The plan would ramp up IRS enforcement, which has declined in recent years, as well as give the IRS more visibility into the bank accounts of some taxpayers.
The White House has argued that additional enforcement has bipartisan support. A Data for Progress report released last month showed that 60 per cent of Americans -- including 40 per cent of Republicans -- back increased IRS enforcement.
Republican lawmakers have said they support some additional funding for audits, but some have criticized the Biden plan for going too far.