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Biden Floats 15% Minimum Corporate Tax in Infrastructure Talks

BrexitJun 03, 2021 18:17
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2/2 © Bloomberg. The Internal Revenue Service (IRS) headquarters in Washington, D.C., U.S., on Friday, March 19, 2021. The IRS is delaying the April 15 tax-filing dead{{0|line}} to May 17, giving taxpayers an additional month to file returns and pay any outstanding levies. Photographer: Samuel Corum/Bloomberg 2/2

(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, according to a person familiar with the discussions.

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, the person said.

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 thinking is they could raise 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 person said, who requested anonymity to discuss the private conversation. The Washington Post reported earlier on the offer.

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.

Partisan Option

The offer does not mean that Biden is abandoning his larger ambitions to raise taxes on corporations and wealthy individuals, the person said, characterizing the proposal as simply a bid to find common ground in the Capito talks. Democrats could still pursue those plans in a partisan reconciliation bill later this year.

The 15% minimum tax address situations where major tech companies, like Amazon.com Inc (NASDAQ:AMZN), Netflix Inc (NASDAQ:NFLX). and Zoom Video Communications (NASDAQ:ZM) 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 R&D or renewable energy, because they wouldn’t be able to claim those tax breaks.

IRS Enforcement

Biden has also proposed an $80 billion investment in the Internal Revenue Service, 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.

©2021 Bloomberg L.P.

Biden Floats 15% Minimum Corporate Tax in Infrastructure Talks
 

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