The Biden administration on Wednesday announced its plan to revamp the corporate tax code, with a range of proposals that large companies should pay higher taxes to fund the White House’s economic agenda.
The plan, if implemented, would generate $ 2.5 billion in revenue over 15 years. This would be done by introducing major changes for U.S. companies, which have long adopted peculiarities in the tax code that have enabled them to reduce or eliminate their tax liability, often by shifting profits overseas. The plan also includes efforts to combat climate change, and proposes replacing fossil fuel subsidies with tax incentives that promote clean energy production.
Some businesses have expressed a willingness to pay more taxes, but the general scale of the proposal is likely to backfire on the business community, which has been benefiting from tax loopholes for years and a relaxed approach to its application.
Treasury Secretary Janet L. Yellen said during a briefing with reporters on Wednesday that the plan would end a global “race to the bottom” of corporate taxes that she said was devastating for the U.S. economy and its workers.
“Our tax revenue is already at its lowest level in generations,” she said. Yellen said. “If they continue to decline, we will have less money to invest in roads, bridges, broadband and O&D.”
The Biden administration’s plan, announced by the department of treasury, will raise the tax rate to 28 percent from 21 percent. The administration said the increase would better align the U.S. tax rate with other advanced economies and reduce inequality. It would also remain lower than before the Trump tax cuts in 2017, when the rate stood at 35 percent.
The White House has also proposed significant amendments to several international tax provisions included in the Trump tax cuts, which the Biden government described in the report as policies that put “America last” in favor of foreigners. One of the biggest changes is a doubling of the de facto global minimum tax to 21 percent and hardening, forcing companies to pay the tax on a wider range of income in countries.
This has caused particular concern in the business community, while Joshua Bolten, CEO of the Business Roundtable, said in a statement this week that it ‘threatens to subject the US to a major competitive disadvantage’.
The plan will also include the provisions introduced during the Trump administration, which, according to the Biden administration, said not the profit shift and corporate inversions, which a U.S. company merging with a foreign company, and its subsidiary, into does not bring restraint, and its headquarters effectively relocated abroad. This would replace them with stricter anti-inversion rules and stronger fines for so-called profiteering.
The plan is not entirely focused on the international side of the corporate tax code. It tries large, profitable businesses that pay little or no income tax, but still make a big profit to companies with their ‘book value’. To reduce inequality, companies have to pay a minimum of 15 percent tax on book revenue, which businesses report to investors and which is often used to assess shareholder and executive payouts.
One of the major beneficiaries of the plan is the Internal Revenue Service, which has starved through the budget over the past few years. The proposal from the Biden administration would increase the budget of the tax collection agency, so that the efforts to increase the application and tax collection.