The Biden administration on Wednesday (April 7) unveiled details of its plan to significantly raise taxes on U.S. corporations with tax reforms, reversing many key provisions of the 2017 Trump administration tax overhaul and replacing some tax breaks with direct government spending. Administration officials noted that the new plan seeks to raise $2.5 trillion in corporate tax revenue.
The plan to raise the corporate tax rate to 28 percent and expand the global minimum tax rate to 21 percent was formally announced by Biden on Wednesday at a “Jobs for America” event in the White House’s South Court Auditorium, where he said the tax increase would largely pay for the administration’s $2.3 trillion infrastructure spending bill proposed last week.
Treasury Secretary Janet Yellen said the tax increase would generate about $2.5 trillion in revenue over 15 years, enough to pay for the proposed eight years of infrastructure investment.
The Biden administration’s $2.3 trillion spending plan is billed as an infrastructure plan, but conservatives have criticized that most of the plan’s spending would go to social welfare, new energy and racial equality programs long favored by Democrats, with only a portion going to roads, bridges, airports or other traditional infrastructure projects.
U.S. media outlet Breitbart noted that the rate at which additional revenue is captured from the new tax increase package lags far behind the $2.3 trillion plan’s spending. The $2.3 trillion of Biden’s infrastructure plan would be spent over eight years, while the tax plan would take 15 years to raise $2.5 trillion in revenue. Thus, the proposed $2.3 trillion plan would raise the deficit in the short term.
The new tax reform plan would also repeal parts of the corporate tax law enacted in the 2017 law to curb corporate inversion taxes, the practice of U.S. companies moving their headquarters abroad through the practice of becoming subsidiaries of foreign acquirers, as well as moves to assist in tax shifting.
The plan also eliminates subsidies to the fossil fuel industry. With the increase in taxes on oil and gas production, subsidies for so-called clean energy production and consumer purchases of electric vehicles would also increase significantly.
Breitbart argues that the new tax reforms will shift the economy toward a model that relies more on government spending to create economic growth; for example, the plan would eliminate tax breaks on the income of U.S. companies that export goods and services worldwide and replace them with provisions for government spending on research and development.
The higher rates would make U.S. corporate taxes higher than in some other developed economies, but still lower than the 35 percent rate under Obama.
Critics decry the fact that because the corporate tax rate is a flat rate levied on corporate profits, it tends to hit smaller companies harder than larger ones. That’s why some giant U.S. companies, such as Amazon, support the plan.
Commerce Secretary Gina Raimondo said Wednesday that businesses and members of Congress should come to the negotiating table, noting that there may be room to negotiate on the tax rate and schedule.
“There’s wiggle room,” Raimondo said at a White House briefing. “What we should not do, and what I counsel the business community not to do, is, ‘We don’t like the 28 percent tax rate. We don’t support it. We’re withdrawing from the discussion.'”
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