Treasury Secretary Janet Yellen is expected to propose a “global minimum corporate tax” when she speaks for the first time this week, according to a report from Axios, in order to prevent companies from moving operations overseas if President Joe Biden hikes corporate taxes.
Last week, Biden announced plans for a multi-trillion-dollar “infrastructure bill” designed to improve America’s physical infrastructure and fund a host of Democratic- and progressive-favored programs aimed at combatting issues like climate change.
In order to pay for the bill, Biden is proposing a corporate tax hike, from the current 21% rate to a 28% rate, partially rolling back a tax cut passed during the first years of President Donald Trump’s tenure which lowered the corporate tax rate from an Obama administration-era 35% high.
“Biden’s plan, if adopted, would also make it harder for multinational companies to qualify for federal tax deductions based on tax payments to certain foreign governments,” CNBC added in its report on the tax hike, which the Biden administration says would generate $2 trillion over the next 15 years to fund just the administration’s proposed infrastructure plan.
But a 28% corporate tax rate puts the United States on “the higher end of the global corporate tax rate spectrum among major economies,” according to CNBC, and the Biden administration is struggling to stop what it believes would be a corporate “exodus” if the hike passes.
“The administration said that it would try to work with other nations to halt a global ‘race to the bottom’ on corporate tax rates that allows countries to gain a competitive advantage by attracting businesses with lower duties,” CNBC noted. “That would allow the U.S. to hike its corporate rate to the proposed 28% without a broad exodus to countries with more competitive rates.”
To that end, Yellen is expected to propose a “global minimum corporate tax” that the Biden administration believes would keep companies inside the United States.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen is expected to tell a meeting of the Chicago Council on Global Affairs on Monday, according to Axios.
“It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government,” Yellen is expected to say. “We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom.”
Yellen will also tell members of the Council that such a global minimum tax would “level the playing field” and address income equality on a global scale.
“Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations and spurs innovation, growth, and prosperity,” she will say, per her prepared remarks.
The Biden administration, though, is facing an uphill climb on the corporate tax hike from its own party, not just Wall Street bigwigs. On Monday, Sen. Joe Manchin (D-WV), the moderate Democrat whose vote would be required to pass the tax hike, told reporters that he will not support a 21% to 28% tax hike, per The Hill.
“As the bill exists today, it needs to be changed,” he said. “If I don’t vote to get on it, it’s not going anywhere.”