Janet Yellen sees Joe Biden’s tax plan recouping $ 2 trillion in overseas profits

Photographer: Erin Scott / Bloomberg

Treasury Secretary Janet Yellen unveiled a detailed breakdown of sales of the new corporate tax code proposed by the Biden administration, a plan she said would be fairer for all Americans. it would eliminate incentives for companies to change their investments and make profits abroad and raise more money for critical needs at home.

Extending the tax proposals released last week in President Joe Biden’s $ 2.25 trillion economic package, the Treasury said the changes, over a decade, would return $ 2 trillion in corporate profits to the tax network. American, with a federal revenue of about $ 700 billion by ending incentives to relocate profits abroad.

All in all, taking an additional $ 2.5 trillion in taxes over 15 years would pay off Biden’s eight-year spending initiative, aimed at infrastructure, green investments and social programs that would support a larger workforce. great, according to the Treasury. Few major corporations would be intact, with tech giants like Apple Inc. and Microsoft Corp. they would probably pay more.

“Our tax revenues are already at their lowest levels in generations and as they continue to fall, we will have less money to invest in roads, bridges, broadband and R&D,” Yellen told reporters during a phone call , in reference to research and development. “In choosing to compete in taxes, we have neglected to compete for the skill of our workers and the strength of our infrastructure. It is a self-defeating competition.”

Key elements

The Treasury published a 17-page page Wednesday’s report is likely to serve as a roadmap for administration officials and lawmakers who want to navigate the combined package of spending and tax proposals through Congress in the coming months.

Key elements of the corporate tax plan include raising the U.S. corporate tax rate to 28% from 21% and imposing minimum taxes on both foreign earnings and domestic profits that companies report to shareholders, changes that would significantly increase taxes. that companies owe. .

Read more: Biden’s economic plan depends on the unity of the party after winning the procedure

Fiscal proposals are already facing strong opposition from Republican lawmakers and the backlash from some moderate Democrats. West Virginia Sen. Joe Manchin has said he opposes a corporation tax rate of more than 25 percent. With the Senate split between 50 and 50, Biden cannot afford to lose the support of a single Democratic senator if he wants to push through any portion of the package.

While most business groups, including the U.S. Chamber of Commerce and the Business Roundtable, have opposed tax increases, some have acknowledged that there would be higher corporate tax benefits for finance infrastructure spending. Jeff Bezos, CEO of Amazon.com Inc., said Tuesday that he would support an increase in the tax rate, but did not specify any number.

The proposal for a global minimum tax comes as the Organization for Economic Co-operation and Development manages talks with nearly 140 countries, including the United States, to set a global rate on corporate profits. A global rate has yet to be decided, although previous proposals had suggested approximate rates of 12.5%. Biden’s plan for 21% would be significantly higher and could complicate negotiations.

Read more: The world’s minimum tax boost wins with the G-20 with a half-year bid

The Treasury report contained a series of data to support the administration’s case. U.S.-based companies operating collectively worldwide paid an effective rate of 7.8% in 2018, the first year that former President Donald Trump’s tax cut went into effect. , according to the Joint Committee on Non-Partisan Taxes. The previous year, companies paid 16%.

In all OECD member countries, corporate tax revenue equals an average of 3.1% of GDP. In the United States, it is 1%, the Treasury said.

Worker load

This puts an unfair burden on workers, exacerbated by the 2017 Trump changes that reduced corporate taxes, according to the Treasury report. The report points to research showing that companies spend more of their savings from Trump’s tax cuts on stock repurchases and dividend distributions than on new investments.

Profitable companies could no longer use tax credits to completely eliminate their federal tax bills and would have to pay at least 15% of the profits reported to their financial statements, known as accounting income.

This tax would apply to companies earning at least $ 2 billion, an increase over the $ 100 million threshold included in the Biden campaign tax plan. About 180 companies have reported revenue at these levels in recent years and about 45 of these companies would have paid the minimum tax if the Biden plan were in place, according to the report.

The average company facing the tax would have an increase in the minimum tax liability of about $ 300 million a year, the Treasury said.

Technical giants