The Biden administration on Wednesday announced its plan to revise its corporate income tax and made a series of proposals that would require large corporations to pay higher taxes to fund the White House's economic agenda.
If the plan went into effect, it would generate revenues of $ 2.5 trillion over 15 years. This would lead American companies, who have long had quirks in the tax laws that allowed them to lower or eliminate their tax bill, to make big changes, often by shifting profits overseas. The plan also includes efforts to combat climate change and proposes replacing fossil fuel subsidies with tax incentives that encourage clean energy production.
Some companies have expressed a willingness to pay more taxes, but the overall scope of the proposal is likely to have an impact on the business community, which has benefited from loopholes in tax law and a loose approach to enforcement for years.
Treasury Secretary Janet L. Yellen said during a briefing with reporters Wednesday that the plan would end a global "race to the bottom" of corporate taxation.
"Our tax revenues are at their lowest level in generations," said Ms. Yellen. "If they keep falling, we will have less money to invest in roads, bridges, broadband, and research and development."
The plan announced by the finance department would raise the corporate tax rate from 21 percent to 28 percent. The government said the increase would align the US corporate tax rate more closely with other advanced economies and reduce inequality. It would also stay lower than it was before Trump's 2017 tax cuts, when the tax rate was 35 percent.
The White House also proposed major changes to several international tax rules, contained in the Trump tax cuts, which the Biden administration described in the report as guidelines that will make "America last" by benefiting foreigners. One of the biggest changes is doubling the de facto global minimum tax to 21 percent and tightening it to force companies to pay the tax on a wider income range between countries.
This has been a particular concern in the business community when Joshua Bolten, executive director of the Business Roundtable, said in a statement earlier this week that "the US is facing a major competitive disadvantage".
However, on Wednesday some companies expressed their openness to the new proposals.
Lyft president and co-founder John Zimmer told CNN that he supported Mr Biden's proposed corporate tax rate of 28 percent.
"I think it is important to invest in the country and the economy again," said Zimmer.
The Biden administration also made it clear that the proposal was something of an opening offer and that there will be room for negotiation.
Trade Minister Gina Raimondo on Wednesday urged lawmakers not to simply reject the plan and invited them to a "discussion" – even if she suggested that the basic parameters of the proposal remain in place.
"We want to compromise," she said during a briefing at the White House. "What we can't do, and what I beg the business community not to do, is to say," We don't like 28. We go away. We don't argue. "This is unacceptable."
The plan would also repeal provisions enacted during the Trump administration that the Biden administration said failed to curb profit shifting and business reversals where an American company merged with a foreign company and became its subsidiary, effectively making its headquarters for tax purposes was relocated abroad purposes. It would replace them with stricter anti-inversion rules and stricter penalties for so-called profit stripping.
The plan does not focus solely on the international side of corporate tax legislation. Attempts are made to take action against large, profitable companies that pay little or no income tax and still signal large profits with their "book value". To reduce this inequality, companies would have to pay a minimum 15 percent tax on book revenues that companies report to investors, which is often used to assess shareholder and executive payouts.