Biden Floats 15% Minimum Corporate Tax in Talks With GOP
(Bloomberg) -- President Joe Biden has pitched to Republicans the idea of a 15% minimum tax on U.S. corporations, along with strengthened IRS enforcement efforts, as a way to fund a bipartisan infrastructure package.
The proposal sets aside the Biden administration’s proposal to raise the headline corporate income rate to 28% from 21% -- a non-starter for Republican lawmakers -- though that could be pursued elsewhere. White House Press Secretary Jen Psaki confirmed the offer during a briefing Thursday.
Under the pitch to Republicans, companies that have lots of tax credits and deductions would be required to pay at least 15%. The plan would also increase tax revenues by conducting more audits of rich taxpayers.
Those two funding measures were already included in Biden’s tax plans. The White House sees the offer as raising money without increasing tax rates or rolling back President Donald Trump’s 2017 tax cuts, something that Republicans have said is a red line in the negotiations. The Washington Post reported earlier on the proposal as part of an offer for $1 trillion in spending.
Biden met on Wednesday with Senator Shelley Moore Capito, the West Virginia Republican leading the infrastructure talks for the GOP, in the latest attempt at a compromise. The discussion did not yield a deal on how much to spend or how to pay for it, but the two are scheduled to speak again on Friday. Kelley Moore, a spokeswoman for Capito, declined to comment.
Biden had earlier made a $1.7 trillion infrastructure proposal to Republicans. Taking a 28% corporate tax rate increase off the table for these discussions would eliminate what the Treasury Department estimates is $857.8 billion in revenue over a decade.
The Internal Revenue Service enforcement plan, projected to raise $778.8 billion, combined with the $148.3 billion from the 15% minimum tax, would collectively offset about $927.1 billion in infrastructure spending, based on Treasury estimates released last week.
Democrats could still pursue other tax plans in a partisan reconciliation bill later this year.
Psaki stressed that the 15% profits tax was included in Biden’s American Jobs Plan and proposed budget, and said the president was “absolutely not” abandoning efforts to raise the corporate rate to 28%. She characterized the latest offer as an attempt to find a path forward on this specific negotiation with Republicans.
“This is a way for him to identify pieces he’s long been a proponent of,” Psaki said. “This should be completely acceptable” to Republicans who want to leave the 2017 tax law untouched, she said.
Biden is also open to reallocating some $75 billion of funds left over from coronavirus-relief bills passed in 2020, Psaki said.
Also Thursday, the No. 3 House Democrat said that time may be running out to reach a bipartisan deal on a national infrastructure plan, suggesting that Biden and congressional Democrats should be preparing to act on their own.
“We are still negotiating,” Representative Jim Clyburn of South Carolina, said during an appearance on Bloomberg Television’s “Balance of Power” program. But, he added, “I don’t think we should run the risk of not getting something done because the other side is not cooperating.”
But progressive Democrats expressed dismay at reports the negotiations could be headed toward what they an consider unacceptable compromise. “If what we’ve read is true, I would have a very difficult time voting yes on this bill. Two trillion dollars was already the compromise. President Biden can’t expect us to vote for an infrastructure deal dictated by the Republican Party,” Jamaal Bowman of New York, a freshman congressman, said in a statement.
The 15% minimum tax address situations where major tech companies, like Amazon.com Inc, Netflix Inc. and Zoom Video Communications Inc., have largely been able to avoid paying federal income taxes in some years despite turning a profit because they used legal maneuvers, including write-offs for business expenses, to whittle down their tax bill.
The measure was included in Biden’s American Jobs plan announced in March. It would impose a minimum 15% levy on corporations’ profits reported in financial statements, also known as book income. The change would upend decades of differences to how companies compute their finances for tax purposes and would limit the amount of legal tax breaks that the companies could use.
The provision has been criticized by Republicans and some economists for being an inefficient way to increase taxes. Critics have said that imposing a minimum tax on profits would mean that companies would be less incentivized to spend money on things that Congress wants to promote, such as research and development or renewable energy, because they wouldn’t be able to claim those tax breaks.
Biden has also proposed an $80 billion investment in the IRS, which the White House says could raise an additional $700 billion over a decade. The plan would ramp up IRS enforcement, which has declined in recent years, as well as give the IRS more visibility into the bank accounts of some taxpayers.
The White House has argued that additional enforcement has bipartisan support. A Data for Progress report released last month showed that 60% of Americans -- including 40% of Republicans -- back increased IRS enforcement.
Republican lawmakers have said they support some additional funding for audits, but some have criticized the Biden plan for going too far.
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