Biden Aims To Raise Corporate Tax

The Biden administration on Wednesday unveiled details of a plan to raise corporate taxes and discourage U.S. multinationals from shifting investment and profits overseas to reduce their tax burden.

The “Made in America Tax Plan,” which would require passage by Congress, expands on Treasury Secretary Janet Yellen’s call this week for a global minimum tax to prevent countries from cutting their tax rates to attract multinational firms.

“When other countries see us lower our rate, they lower theirs to undercut us,” Yellen said Wednesday. “The result is just a global race to the bottom.”

Corporate tax revenue in the USA is at historic lows and well below what other countries collect, according to the Treasury.

Last week, President Joe Biden announced a $2.2 trillion proposal to upgrade the nation’s roads, bridges, broadband and clean energy infrastructure. He said he wanted to pay for most of the sweeping overhaul by raising the corporate tax rate from 21% to 28% and encouraging other countries to enact a global minimum tax.

In 2017, President Donald Trump spearheaded a tax change that slashed the corporate rate from 35% to 21% and attempted to discourage companies from keeping their profits offshore to avoid U.S. taxes. The legislation had the opposite effect, the Biden Treasury Department argued, because it exempts the first 10% of returns on foreign assets from U.S. taxes — a high level — and taxes profits above that.

Treasury officials said the Trump-led tax changes spurred large corporations to move operations abroad. Many use tax credits in high tax jurisdictions to shift profits to tax havens, resulting in an overall tax burden that’s about half that of domestic companies, according to the Treasury. As a result, profits continue to be shifted to tax havens such as Bermuda, officials said.

“Despite attempts to rein in profit shifting, tax havens are as available today as they were prior to the 2017 tax reform,” a Treasury report says.