Biden's Plan To Overhaul Tax Code Would Close Offshore Tax Loopholes

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President Joe Biden’s tax plan would hike the corporate tax rate to bring in $2.5 trillion over 15 years to fund the sweeping $2 trillion infrastructure proposal unveiled last week, according to details released Wednesday by the Treasury Department. Ambitious in scope by any means, the Made in America Tax Plan would raise the corporate tax rate from 21 to 28 percent, establish a sort of alternative minimum tax for high-earning corporations and attempt to close loopholes around offshoring profits. The plan would capture $2 trillion that otherwise would “flow out of the country,” according to a Wall Street Journal op-ed written by Treasury Secretary Janet Yellen. In a speech on Wednesday, Biden said his tax plan would be more fair for middle-class Americans — a message likely to resonate with the electorate. There is clear support among voters for making behemoths in retail, technology, manufacturing and finance pay more. A recent survey by data firm Morning Consult found that roughly 60 percent of American adults think companies should be paying more in taxes — and nearly one-third of those say they “strongly agree” with higher corporate taxes. At 28 percent, the U.S. corporate tax rate would be higher than the average statutory tax rate of 23.51 percent among Organization for Economic Cooperation and Development nations. State taxes could push the effective rate even higher, some policy experts said. “Increasing the rate to 28 percent, when combined with state corporate taxes, would lead the combined U.S. rate to 32.34 percent, which would be the highest among OECD and G-7,” said Ben Koltun, director of research at Beacon Policy Advisors. Advocates who want to see the Tax Cuts and Jobs Act wholly or partially reversed, though, argue that these percentages are moot because even after the Tax Cuts and Jobs Act lowered corporate taxes to 21 percent in 2017, many companies pay far less than that — if they pay anything at all. The share of taxes U.S.-based multinationals pay on their domestic profits is less than 8 percent, according to the Treasury Department. But that doesn’t mean big business would pay that amount. “Now the effective tax rate will be lower for a lot of these companies because of deductions they can take,” Koltun added. Eric Toder, institute fellow at the Urban-Brookings Tax Policy Center, suggested the existing corporate tax structure has room for improvement. “My view — shared by many tax experts — has always been that it is best for the government to define the measure of taxable income it thinks is appropriate instead of relying on accounting rules that were developed for a different purpose,” he said. Some policy observers suspect the administration never intended for 28 percent to be the final number anyway, noting that Biden said, “I’m willing to negotiate that” on the percentage. Critical Senate swing vote Joe Manchin, D-W.Va., has said he doesn’t want the corporate tax rate to be raised higher than 25 percent, and Republicans have been united in their opposition.

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