Treasury Secretary Janet Yellen noted that corporate tax collection has fallen to its lowest level since World War II, saying Republicans’ 2017 Tax Reduction and Employment Act does not attract new production or investment to the US. Instead, it has given businesses incentives to send workers and profits abroad.
Other countries have also lowered their corporate rates in response to the US, she said in a conference with reporters.
Overall, due to the tax cuts of previous years, the U.S. has increased only about 16% percent of GDP in federal tax revenue, a decrease of about four percentage points over the past two decades.
However, Trade Secretary Gina Raimondo said on Wednesday that the president was prepared to compromise on the proposed 28% increase in the tax rate, but called on Congress to ‘grow up’.
Biden asked the cabinet to “work across the aisle and in a dual way” to pay for the plan, she said. While the government intends to invest more than eight years and repay it over 15 years, Raimondo said officials are willing to repay it rather than 20 years and bring the rate to a figure of less than 28% increase.
“What I urge the business community not to do is to say, ‘We do not like 28%. We walk away and discuss.’ That’s unacceptable, “she said.” Come to the table, and troubleshoot with us to come up with a reasonable, responsible plan. ”
Raimondo called for a ‘discussion’ with congressional leaders and accused opponents of ‘telling us what you think is an alternative reasonable plan’, as long as it does not give America a deficit.
Report explains Biden’s case
The White House also set out its argument in a 19-page report released Wednesday. It focused on four main messages: that the tax package would generate the necessary revenue, that businesses would shift profits and operations abroad, make the system more equitable for workers, and move to a cleaner energy sector.
The White House said the Republicans’ tax cuts in 2017, which lowered the company’s tax rate from 21% to 21%, resulted in the share of tax revenue collected as part of the economy reaching 1%. has dropped. Historically, corporate taxes have increased by about 2% of GDP.
In addition, the report points out that the US has typically increased less corporate tax revenue compared to other advanced countries. Over the past two decades, the typical country in the Organization for Economic Co-operation and Development has increased about 3% of GDP through corporate taxes.
Like its predecessors, the government in Biden is also trying to prevent the flood of U.S. companies from shifting profits to tax havens overseas through a variety of measures, including a global minimum tax. It is intended to end the provisions of the 2017 Tax Act, which is described as ‘poorly designed’. These proposals will bring more than $ 2 trillion in profits back into the U.S. corporate tax base over the next decade, the White House said.
The administration also argues that it can create a more equitable tax system by raising taxes on companies and addressing increasing income equality.
The report points out that the share of federal revenue collected by corporation tax has been steadily declining since 1950 and is now below 10%. Meanwhile, the share of federal revenue collected by individuals is now more than 80%.
The president’s plan will also eliminate subsidies for fossil fuel producers and expand tax incentives for clean energy production.
By eliminating the subsidies, tax revenue will increase by $ 35 billion over ten years, according to estimates from the Treasury’s tax analysis office. The administration argues that the incentives would address climate change by reducing air pollution.
What’s in the plan
Increase in company tax: Biden will increase the tax rate to 28%, compared to 21%. The rate was up to 35% before former President Donald Trump and the Republican Republic cut taxes in 2017.
Global minimum tax: The proposal raises the minimum tax on U.S. businesses to 21% and calculates it per country to deter companies from protecting profits in international tax havens.
Book income tax: The president will levy a minimum tax of 15% on the income that the largest companies report to investors, known as book income, as opposed to the income reported to the Internal Revenue Service. The administration said about 45 companies would have paid a minimum of book liability under the proposal in the past few years average company sees an increased minimum liability of about $ 300 million each year.
Corporate inversions: Biden would make it harder for U.S. companies to acquire or merge a foreign company to not pay U.S. taxes by claiming to be a foreign company. And he wants to encourage other countries to adopt strong minimum taxes on corporations, among other things by refusing certain deductions to foreign companies in countries without such a tax.
Incentives for clean energy: The plan aims to promote clean electricity production by extending the tax credits for the generation and storage of clean energy for ten years, and to pay the credits directly. It will also create and expand other incentives. The government will remove subsidies for the oil and gas industry, which will increase the government’s tax revenue by more than $ 35 billion in the coming decade, according to estimates by the Treasury’s tax analysis office.
Enforcement: The president also wants to provide more funding to the IRS to better target companies that do not meet their tax obligations. The White House said the share of large companies undergoing audits had been halved.
Supporters and opponents
The infrastructure and tax proposals quickly received criticism and praise.
The U.S. Chamber of Commerce has strongly criticized Biden’s proposal to undo the Trump tax cuts on Trump.
“We believe the proposal is dangerously misleading when it comes to paying for infrastructure,” Chief Policy Officer Neil Bradley said in a statement last week in a statement he had previously made to CNN Business.
U.S. companies already face a global minimum tax on their revenue, and no other country has followed the U.S. lead in introducing such a tax, said Joshua Bolten, CEO of the Business Roundtable. Its members are CEOs of major US companies.
“However, the proposed global minimum tax rate on corporate enterprises threatens to subject the US to a major competitive disadvantage,” he said.
The massive plan also raised concerns in Congress. Joe Manchin, a key Democratic voter in West Virginia, has already said he will not agree to raise corporate taxes above 25%.
Administration officials, meanwhile, have taken the road to raise additional support.
“We are working with G20 countries to agree on a global minimum tax rate for corporate enterprises that can stop the race to the bottom,” Yellen said in a speech to the Chicago Council on Global Affairs. “Together, we can use global minimum taxes to ensure that the world economy thrives, based on a more equal playing field in the taxation of multinational corporations, and encourages growth and prosperity.”
This story has been updated with additional comments and details.
CNN’s Devan Cole, Jasmine Wright and Matt Egan contributed to this report.