Joe Biden’s plan to fully fund his $ 2 billion infrastructure plan through corporate tax hikes has sparked his first big clash with big U.S. corporations, heightening tensions that complicate the package’s outlook in the country. Congress.
Corporate America has generally hosted ad massive government spending on everything from roads to the electricity grid, which includes funding for research and development and new manufacturing subsidies.
But breaking away from the Democratic administration, some of America’s largest corporate trading groups have threatened to oppose the package over Biden’s bid to fund the effort with increases in corporate levies that cancel many. Donald Trump’s tax cuts in 2017.
The plan would raise the corporate tax rate in the United States from 21% to 28%, still below the level of 35% under Barack Obama, while increasing the minimum tax on profits abroad and eliminating the provisions of the tax code which allow companies to shift their income around the world to reduce their tax burdens.
On Wednesday in Pittsburgh, Biden directly attacked Fortune 500 companies, singling out Amazon, for not paying enough federal taxes.
White House officials stressed on Thursday that even with the planned increases, corporate tax revenues as a percentage of gross domestic product would remain well below the OECD average and that the corporate tax rate would still be at its peak. the lowest post-war level, except in recent years under Trump.
“This is a perfectly reasonable reform package that would actually remove a bunch of bad incentives that companies currently have and fund critical investments that would put the United States in a better position,” David Kamin, deputy director of the National Economic Council, told the Financial Times.
Critics from business groups, however, have been deadly and marked a departure from strong support from business executives for the recently passed $ 1.9 billion stimulus package. Biden’s first major economic legislation was greeted by strong increases in business confidence.
But that honeymoon period seemed to end on Wednesday. The US Chamber of Commerce said the plan to fund Biden’s infrastructure proposals with higher corporate taxes was “dangerously misguided.” The National Manufacturers Association said it would “turn back time to archaic tax policies that gave other countries an advantage over America,” and the Business Roundtable warned that the increases would create “new barriers to creation. jobs and economic growth ”.
“They have no idea how difficult it is for American companies to compete with foreign competitors who are not subject to these high minimum taxes,” said Cathy Schultz, vice president of policy at the National Foreign Trade Council, a lobby group for American Multinationals.
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She added: “Some companies have done really well during the pandemic, but there are a lot that are in really difficult circumstances.”
But officials in the Biden administration believe the tax changes do more than just cover the cost of the plan. They hope they inspire a reset of the global tax system through multilateral negotiations at the OECD, preventing an international race to the bottom on taxes in some countries, and unilateral increases in others in areas such as digital transactions.
“We have a real opportunity to stabilize the Corporation tax system. . . ensure that multinational corporations – both US and foreign – are not able to play on tax systems around the world by shifting the profits on the books to tax havens, ”Kamin said. “It’s a problem that the world has sort of come to recognize. . . and this is an area in which the United States can now play a leading role. “
Nonetheless, the scale of the corporate tax increases surprised some in the business community, even though equity markets did not react negatively to the announcement.
Business opposition, if it escalates, will not only embolden Republican opposition to the plan, but could make it more difficult for Biden to gain support from moderate Democrats – who will be essential given the party’s slim majority in the government. Congress.
Neil Bradley, director of policy for the Chamber of Commerce, said he expected the administration to keep its election promises to tax businesses more heavily, but believed that funding for the plan infrastructure would be “more mixed”, including user fees and more. individual taxes rather than corporate taxes increase on their own.
Bradley added, however, that he viewed Wednesday’s announcement as “the start of a process.” He said groups like the House had found “a tremendous level of engagement” with Biden’s team, although they had not always come to an agreement.
“The public and private message [from the White House] it’s the same thing, ”he said. “They are open to negotiation.”
Kamin said the White House remains open to compromise, as long as there is no tax increase for anyone earning less than $ 400,000 a year. “The president wants to hear the ideas of others,” he said. “If they have better ideas for paying for these investments, they should put them on the table.”
Despite the combative rhetoric this week, some lobbyists still believe a deal is possible.
“[Biden] established a marker, ”said Arshi Siddiqui, an associate at Akin Gump and a former Democratic congressional aide. “This is the start of the discussion and it’s going to be a heated discussion, but I think it’s a good thing. . . it is now a matter of finding common ground. “
