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We called Mexico—no dice. Instead, the Biden administration revealed a plan yesterday that would hike taxes on corporations in order to pay for its $2.3 trillion proposal to revamp the nation’s roads, transit, ports, and more. The details:
- The corporate tax rate would increase to 28% from its current 21%.
- Profitable companies earning $2 billion or more would face a 15% minimum tax on the income they report to investors, a rule targeting serial tax avoiders.
- The tax rate on companies’ foreign earnings would double, from 10.5% to 21%.
This isn’t a prix fixe menu. In a speech, Biden said he was open to compromise on how to pay for the plan, but insisted he would “not be open to doing nothing” on infrastructure.
The case for a tax hike: Treasury Secretary Janet Yellen portrayed it as a net positive
for corporations: You pay more in taxes→we give you more support, such
as quality transportation networks and high-speed broadband, to help
your business grow.
- She said that the government’s investments in infrastructure will add 1.6% to US GDP by 2024.
Not everyone loves hiking
Sen. Joe
Manchin, a moderate Democrat who wields a lot of power in the Senate,
said he doesn’t support raising the corporate tax rate above 25%.
Plus, a who’s who of business trade groups object to the increase.
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US Chamber of Commerce: The proposal is “dangerously misguided.”
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National Association of Manufacturers: Higher taxes will “turn back the clock to the archaic tax policies that gave other countries an advantage over America.”
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Business Roundtable: The plan would create “new barriers to job creation and economic growth.”
Some execs do support the plan. Amazon CEO Jeff Bezos endorsed
Biden’s infrastructure proposal and a corporate tax hike on Tuesday,
saying, “This investment will require concessions from all sides.”
Zoom out: While all this is going on in the US, momentum is building
for a global minimum corporate tax rate, which would eliminate
companies’ HQ-hopping to the most attractive tax location. Finance
ministers said they could elbow bump on a plan as early as July.
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