WASHINGTON – U.S. President Joe Biden is looking to raise corporate income tax rates to help pay for his proposed $2.3 trillion infrastructure spending plan, but dozens of the country’s biggest and best-known companies are currently legally avoiding paying any federal taxes.
Biden says he wants to raise the corporate income tax rate from 21% to 28%. The rate was cut from 35% in 2017 under Biden’s predecessor, Donald Trump.
On Monday, U.S. Treasury Secretary Janet Yellen called for a global minimum tax. In a speech before the Chicago Council on Global Affairs, she said the tax would apply to multinational corporations no matter where they locate their headquarters, to prevent countries from trying to outdo one another by lowering tax rates in order to attract business.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen said. “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.”
Republican lawmakers in Congress are already criticizing the new Democratic president’s infrastructure plan as too expensive and straying far afield from traditional road and bridge repair and construction. The plan aims to fund other programs favored by liberal Democrats, such as manufacturing investment, child-care services and raising wages for essential home-care workers.
For the most part, Republicans also are adamantly opposed to raising taxes, with Biden also proposing to increase taxes on the wealthiest individual taxpayers, those making more than $400,000 a year.
Senate Republican leader Mitch McConnell said there is no chance Republicans would back any tax increases to pay for Biden’s infrastructure plan.
“I don’t think there’s going to be any enthusiasm on our side for a tax increase,” McConnell said.
That would leave Democrats to approve any tax increases on their own, just as they pushed through Biden’s $1.9 trillion coronavirus relief measure over unified Republican opposition. Democrats hold a narrow majority in the House of Representatives, and an edge in the Senate split evenly between 50 Democrats and 50 Republicans with the tie-breaking vote of Vice President Kamala Harris, assuming all Senate Democrats vote as a bloc.
But one key Senate Democrat, Joe Manchin of West Virginia, called Monday for a 25% corporate rate, which could complicate Biden’s call for a 28% rate if no Republican was willing to support any tax increase.
Even if the corporate tax rate is raised and a 15% minimum tax imposed, its full import would not totally affect corporations unless numerous write-offs for an array of business costs are eliminated.
According to the Institute on Taxation and Economic Policy, a progressive research group in Washington, at least 55 of the U.S.’s largest corporations paid no federal income tax on more than $40 billion in profits last year.
Without various business expense write-offs, they would have collectively paid $8.5 billion in corporate income taxes at the 21% rate in the U.S. and instead received $3.5 billion in tax rebates, for an effective tax rate of negative 9%.
As the United States added 916,000 jobs in February, Biden defended his tax increase proposal.
“Asking corporate America just to pay their fair share will not slow the economy at all,” he said last week. “It will make the economy function better. It will create more energy.”