Biden makes tax pitch to GOP

President Joe Biden is trying to break a logjam with Republicans on how to pay for infrastructure improvements, proposing a 15% minimum tax on corporations and the possibility of revenue from increased IRS enforcement as a possible compromise.

The offer was made Wednesday to Republican Sen. Shelley Moore Capito of West Virginia as part of the bipartisan negotiations and did not reflect a change in Biden’s overall vision for funding infrastructure.

White House press secretary Jen Psaki said that Biden examined all the tax overhauls from his campaign and administration to look for potential common ground with Republicans and that imposing a minimum corporate tax seemed like a possible option.

“He looked to see what could be a path forward with his Republican colleagues on this specific negotiation,” Psaki told reporters at a Thursday briefing. “This is a component of what he’s proposed for a pay-for that he’s lifting up as a question as to whether they could agree to that.”

Biden’s emphasis on these elements of his tax plan Wednesday marked an attempt by the White House to thread a delicate political needle. It aimed to preserve the president’s 2020 campaign pledge not to raise taxes on Americans making under $400,000 a year, while steering clear of the “red line” set down by Republicans who see the 2017 tax cuts as their crowning economic achievement.

Biden has proposed increasing the corporate tax rate to 28% from 21% to help fund his plans for roads, bridges, electric vehicles and broadband internet, and that remains one of his preferred approaches. But the rate increase is a nonstarter with Republicans because it would undo the 2017 tax cuts signed into law by President Donald Trump.

By floating an alternative — there is no minimum corporate tax now on profits — Biden was trying to give Republicans a way to back infrastructure without violating their own red line of keeping corporate tax rates at their current level. The Washington Post first reported the offer.

On Thursday, Senate Republican leader Mitch McConnell said he spoke with Capito after the session and is “still hoping” to reach a deal with the administration. But he prefers the GOP approach that is leaning toward a scaled-down package, paid for by tapping unspent covid-19 relief funds, rather than taxes.

“Let’s reach an agreement on infrastructure that’s smaller but still significant, and fully paid for,” he said in Paducah, Ky.


Both sides are set to meet again today, though Republican leaders are still deciding whether to put forward another counteroffer or to walk away from the negotiations entirely, according to a second source familiar with the talks.

Biden has long decried the fact that some of the country’s most profitable enterprises pay little or nothing in corporate taxes. He stressed during his first address to Congress last month that it is time to close “tax loopholes,” urging lawmakers to “reform corporate taxes so they pay their fair share and help pay for the public investments their businesses will benefit from as well.”

The president is essentially staking out the principle that profitable corporations should pay income taxes. Many companies can avoid taxes or minimize their bills through a series of credits, deductions and other ways of structuring their income and expenses.

The president has insisted that the middle class should not bear the cost of greater infrastructure spending. Yet a chasm exists in negotiations because Republicans say that corporate tax increases will hinder economic growth.

The idea of imposing a minimum corporate tax is not new for Biden, who proposed the policy during the presidential campaign last year, and that could turn off some Republicans. The center-right Tax Foundation estimated that a minimum tax would subtract 0.21% from long-run U.S. gross domestic product.

“He’s been pushing it since the primaries over a year ago,” said George Callas, managing director of government affairs for the law firm Steptoe and a former tax counsel to House Republicans. Callas said that the minimum tax would mostly hit firms such as electric utilities and telecoms that make substantial capital investments as well as companies that rely on paying their employees with stock.

Members of both parties have expressed concern with the number of large corporations paying little to nothing in federal income taxes. Fifty-five corporations in the Fortune 500 paid no federal income tax in 2020, according to a report by the Institute of Taxation and Economic Policy, a left-leaning think tank.

Corporations have paid a declining share in federal taxes since the 2017 GOP tax law dramatically slashed the corporate tax rate from 35% to 21%. Businesses are able to zero out their tax obligations because of expansive tax credits offered by the federal government for research and development and other expenses, leading some firms to repeatedly pay nothing in federal income taxes. Many corporations also use a tax break for executive stock options that allow them to reduce their income taxes, the Institute of Taxation and Economic Policy said, while tax breaks for renewable energy investments and other capital expenditures allow major write-offs.

Biden has been personally fixated on the trend and called for reversing it. But it is unclear whether Republicans would support the measure, and the president’s comments during the private meeting on Wednesday could be an attempt to draw out their position.

“This might be the kind of policy that could pick off a few Republican senators. But, keep in mind, Republicans have not really voted for a tax hike since 1990. So anything is going to be a lift,” said Brian Riedl, a former aide to Sen. Rob Portman, R-Ohio, now at the Manhattan Institute, a libertarian-leaning think tank.

At the same time, both Democrats and Republicans have considered revenue that could come from stepped-up IRS enforcement of unpaid taxes. House Speaker Nancy Pelosi, D-Calif., has suggested it could amount to some $1 trillion, but others say the estimate is far lower.

The fate of any infrastructure deal is still unclear. Even with the potential concession on taxes, though, the White House’s roughly $1 trillion plan still amounts to four times as much as Republicans have been willing to spend to improve the country’s roads, bridges, pipes, ports and internet connections. Entering the meeting, GOP leaders had endorsed roughly $257 billion in new spending, while maintaining an unwavering opposition to any tax hikes to finance infrastructure reform.

Instead, GOP leaders have called on the White House to repurpose unspent coronavirus relief aid now that the pandemic is improving. The White House has expressed only a limited appetite for reprogramming existing stimulus dollars, perhaps around $70 billion to $75 billion, according to one of the people familiar with the talks.

Capito did not respond to a request for comment. Politico first reported on the $1 trillion offer.


The latest exchange comes as top White House officials have started to signal that time is running out on striking a bipartisan deal. Biden has labored to secure Republican support on infrastructure after advancing his last economic policy priority, a $1.9 trillion coronavirus relief package, without GOP votes — though he has made clear that he is not willing to haggle indefinitely.

“There’s definitely a deal to be had, and there’s definitely optimism on both sides,” Energy Secretary Jennifer Granholm told CNBC on Wednesday, stressing the administration’s “honest and earnest desire” to agree to a plan with Republican negotiators. But she added: “There is a time limit on this. You’re not going to play this back-and-forth for much longer. There is a limit.”

Transportation Secretary Pete Buttigieg, meanwhile, previously said the Biden administration sees Monday as a critical date by which the White House expects to see progress in its talks. But Psaki appeared to steer clear of issuing any deadline on Thursday, saying at her briefing that the negotiations continue — and the White House is going to “keep our options open.”

The White House’s latest attempt at compromise left some Democrats uneasy. Sen. Ron Wyden, D-Ore., the chairman of the tax-focused Senate Finance Committee, stressed in a statement Thursday that there’s support among voters for the kind of tax increases Biden initially sought.

“Inadequate corporate tax revenue could leave many critical investments the American people care about off the table,” Wyden added, “and fall far short of the $2 trillion in corporate revenue called for in the president’s proposals.”

For Biden, the proposed improvements to the nation’s infrastructure belong to a broader agenda that calls for significant increases in federal spending to address the country’s economic needs. He has also put forward a roughly $1.9 trillion “families plan” that aims to improve federal safety net programs and a 2022 budget that includes major boosts to education and health agencies.

Central to that spending are proposed tax increases on corporations and wealthy Americans, one of Biden’s signature pledges during the 2020 campaign. The president has also proposed additional rewrites of the tax code, including an attempt to raise taxes on investment income and revamp the international tax system. As Biden has issued these proposals, he has made clear that he wants to negotiate with Republicans on many aspects of the tax changes to try to draw bipartisan support.

Much as before, Biden could try to muscle the infrastructure plan through Congress using only Democratic votes. That path could be fraught with its own political challenges, though, given the wide array of opinions within the president’s own party over what infrastructure reform should entail, and how to pay for it.

Information for this article was contributed by Josh Boak and Bruce Schreiner of The Associated Press; and by Seung Min Kim, Tony Romm and Jeff Stein of The Washington Post.

In this photo taken Thursday, May 27, 2021, Sen. Shelley Moore Capito, R-W.Va., the GOP’s lead negotiator on a counteroffer to President Joe Biden’s infrastructure plan, speaks at a news conference as she is joined by, from left, Sen. Pat Toomey, R-Pa., Sen. John Barrasso, R-Wyo., chairman of the Senate Republican Conference, and Sen. Roy Blunt, R-Mo., at the Capitol in Washington. (AP Photo/J. Scott Applewhite)

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