Janet Yellen will use her first major speech as Secretary of the Treasury to defend a global minimum corporate tax rate, Axios has learned, while defending President Biden’s plan to raise U.S. corporate taxes by fund its $ 2 trillion infrastructure plan.
Why is it important?: Convincing other countries to impose a global minimum tax would reduce the likelihood of companies moving out of the country, as Biden seeks to increase the corporate rate from 21% to 28%.
- “Competitiveness is more than the way U.S.-based companies position themselves against other companies in global merger and acquisition offerings,” Yellen will say today in a speech to the Chicago Global Affairs Council, according to an excerpt of his prepared comments obtained by Axios.
- “It is about making sure governments have stable tax systems that raise enough revenue to invest in essential public goods and respond to crises and that all citizens fairly share the burden of government funding. ”
- “We are working with G20 nations to agree on a global minimum corporate tax rate that can stop the race to the bottom.”
The general picture: President Trump reduced the U.S. rate from 35% to 21%, arguing that U.S. companies were at a global disadvantage and were being encouraged to relocate on the high seas.
- The average corporate tax rate in the G7 is 24%, and nine countries have recently lowered their corporate tax rate, according to the Tax Foundation, a conservative tax group.
- The Biden plan would also raise the international minimum rate of foreign profits of U.S. companies from 10.5% to 21%, which would still be lower than the national corporate rate of 28%.
Driving the news: Biden Approves Five Cabinet Secretaries to Explain and Sell His Plan to the American Public, Including Transportation Secretary Pete Buttigieg, Energy Secretary Jennifer Granholm, Housing and Urban Development Secretary Marcia Fudge, Labor Secretary Marty Walsh and Commerce Secretary Gina Raimondo.
- Yellen’s job is to present the international case. His 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 lines: Biden has relied on Yellen to convince the business community and reassure Wall Street that its $ 2 trillion + infrastructure proposal, in addition to the $ 1.9 trillion stimulus package, will not lead to inflation.
- It is now deploying it to convince international finance ministers and central bankers that the world’s largest economies must act in concert on business rates to avoid a race to the bottom.
Deepen: Yellen will also challenge global economic powers to focus on climate change and ways to improve access to vaccines for the world’s poorest countries.
- It will solicit $ 650 billion in new “special drawing rights,” essentially lines of credit from the IMF that can help developing countries access more U.S. dollars.
- The Trump administration was skeptical of the new SDR allocations and many Republicans in Congress still oppose it.
The conclusion: In trying to convince other countries to impose a global minimum tax, Yellen recognizes the risks to the U.S. economy if it acts alone in raising corporate rates.
- “Together we can use a global minimum tax to ensure that the global economy thrives based on more equitable conditions in the taxation of multinational corporations and fosters innovation, growth and prosperity,” he will say.