Janet Yellen will use her first keynote address as Treasury Secretary to advocate for a global minimum tax rate, Axios has learned as she argues for President Biden’s plan to raise US corporate taxes to increase its $ 2 trillion + infrastructure plan to finance.
Why it matters: Convincing other countries to impose a global minimum tax would reduce the likelihood of companies moving abroad, as Biden wants to increase the corporate rate from 21% to 28%.
- “Competitiveness is about more than the way companies in the U.S. headquarters compete against other companies in global mergers and acquisitions,” Yellen said today in a speech to the Chicago Council on Global Affairs, according to an excerpt from her prepared remarks that Axios got.
- “It is about ensuring that governments have stable tax systems that generate sufficient revenue to invest in essential public goods and respond to crises, and that all citizens share the burden of government funding fairly. ‘
- “We are working with the G20 countries to agree on a global minimum tax rate for corporate enterprises that can push the race to the bottom.”
The big picture: President Trump has lowered the US rate from 35% to 21%, arguing that US companies are being harmed worldwide and are being encouraged to relocate abroad.
- According to the Tax Foundation, a conservative tax group, the average corporate rate in the G7 is 24%, while nine countries have recently lowered their corporate rate.
- Biden’s plan also raises the international minimum rate for foreign profits of US companies from 10.5% to 21%, which will still be lower than the local rate of 28% for local companies.
Drive the news: Biden has tapped five cabinet secretaries to explain – and sell – his plan to the American public – including Transport Minister Pete Buttigieg, Energy Minister Jennifer Granholm, Housing and Urban Development Minister Marcia Fudge of Labor, Marty Walsh, and Commerce Secretary Gina Raimondo.
- Yellen’s job is to speak out on the international issue. Her speech is also designed to set the tone for the annual spring meetings of the International Monetary Fund and the World Bank in Washington, which will begin virtually this week.
Between the lines door: Biden trusts Yellen to convince the business community and reassure Wall Street that its $ 2 trillion + infrastructure proposal, in addition to its $ 1.9 billion stimulus package, will not lead to inflation.
- Now he is using her to convince international finance ministers and central bankers that the world’s largest economies must act in accordance with corporate tariffs to avoid a race to the bottom.
Go deeper: Yellen will also challenge the world’s economic powers to focus on climate change and ways to improve access to vaccines for the poorest countries in the world.
- She is asking for $ 650 billion in new “Special Drawing Rights” – essentially credit lines at the IMF that can help developing countries gain access to more US dollars.
- The Trump administration was skeptical about new SDR awards, and many Republicans in Congress are still against it.
The conclusion: By trying to persuade other countries to impose a global minimum tax, Yellen acknowledges the risks to the US economy if he acts alone to raise business rates.
- “Together, we can use a global minimum tax to ensure that the world economy thrives on a more equal playing field in the taxation of multinational corporations, and this stimulates innovation, growth and prosperity,” she said.