The Biden administration laid out its blueprint for a corporate tax overhaul on Wednesday -- one that would require large companies to pay more.
The White House’s schematic for the tax hike is to help fund its economic agenda, which includes the refurbishing of 20,000 miles of roads and 10,000 bridges; upgrading ports, airports, and transit systems; building a renewed electric grid; and delivering high-speed broadband to all Americans. Biden said the corporate tax increase would also be used to address climate change and racial inequities.
If all goes according to plan and the tax increase is enacted by Congress, the U.S.’ coffers would see an additional $2.5 trillion in revenue over 15 years.
To make his plan work, Biden proposes raising the corporate tax rate from 21 percent to 27 percent. While that may sound high, it’s actually been much higher. As part of a 2017 tax law, President Trump reduced the corporate tax rate from 35 percent to 21 percent.
What resistance will Biden get?
Biden’s plan will likely meet some resistance from American companies that have profited from Trump’s change to the tax code. Google, for example, used two legal tax strategies -- the Double Irish and the Dutch Sandwich -- to save it billions in U.S. taxes by forming a subsidiary in Ireland that turns intellectual property into tax-deductible royalty payments. But Google isn’t the only one using these kinds of tax strategies. A GAO study found that close to 66 percent of all U.S. corporations didn't pay any federal income tax at all.
While the change may cost U.S. companies more, Biden’s plan may find some early support from Amazon CEO Jeff Bezos. While Amazon has been successful in softening its tax liability in the past, Bezos gave the notion of raising corporate taxes a personal thumbs-up earlier this week. However, he stopped just short of saying he supports President Joe Biden’s plan for the increase completely.
“We support the Biden Administration’s focus on making bold investments in American infrastructure,” Bezos said in a statement. “We recognize this investment will require concessions from all sides — both on the specifics of what’s included as well as how it gets paid for (we’re supportive of a rise in the corporate tax rate). We look forward to Congress and the Administration coming together to find the right, balanced solution that maintains or enhances U.S. competitiveness."
Ending a race to the bottom
Bezos’ buy-in is meaningful -- both for the economy and the workforce. If the executive’s peers support Biden’s plan, it could end what Treasury Secretary Janet L. Yellen called a “30-year race to the bottom” of corporate taxation, one she said has been catastrophic for the American economy.
“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,” Yellen said in remarks to The Chicago Council on Global Affairs.