Policy- The Biden administration is suggesting an international minimum tax rate on corporations.
Republicans are unlikely to support it given their reluctance to cede domestic tax authority overseas.Mitch McConnell already criticized a minimum tax last week.
The Biden administration moved one significant step closer to achieving one of its key tax goals when the G7 group of major global economies announced over the weekend that it had struck a deal to levy a 15% minimum tax on multinational corporations.
It marked the start of a potentially historic measure and signaled support from key allies for a deal that would tamp down on tax havens - and work in tandem with tax-increase proposals from the Biden administration.
The agreement contains a pair of planks that, if enacted, would increase large firms' taxes. The first is an accord to tax major companies wherever they operate, not merely where they are headquartered. That would open up large tech companies like
The other is a 15% minimum corporate tax rate, aimed at setting a floor so firms can't move their operations to a country with a lower tax rate and pit major economies against each other.
"That global minimum tax would end the race-to-the-bottom in corporate taxation, and ensure fairness for the middle class and working people in the US and around the world," Treasury Secretary Janet Yellen said in a statement on Saturday.
But Republicans are unlikely to support the measure, arguing that it would cut the nation's economic competitiveness overseas and cede a level of tax decision-making to foreign countries. Sen. Pat Toomey slammed it as a "terrible agreement" on Monday.
"Why would we want to commit to doubling our global minimum tax, that's a very bad
"The whole fact that they had to try to persuade all these other countries to make sure they raise their taxes is a confession of the damage we're doing to our own country," Toomey said of the Biden administration.
Yellen has emerged as a vocal proponent of the tax, consistently pushing it since taking office - she called for the new levy in her first major address as treasury secretary.
She said it would ensure that "the global
The G7 followed the US's lead on how high the rate should be. Reports at the end of May said the US had proposed a 15% rate, lower than the anticipated 21%. While a draft proposal seen by Reuters did not have a number attached, the G7 ultimately went with the 15% rate.
The tax complements proposals in the US to raise corporate rates domestically.
President Joe Biden is seeking to increase the corporate tax rate to 28% from 21%, amounting to a partial reversal of the 2017 Republican tax law. Yellen defended the measure in an interview with The New York Times on Sunday, saying, "I honestly don't think there's going to be a significant impact on corporate investment."
Negotiations between the White House and Senate Republicans on a bipartisan infrastructure package are entering their fifth week, with few signs of progress. The Washington Post reported on Thursday that Biden had pitched a $1 trillion infrastructure plan that would instead levy a 15% minimum rate.
Even the idea of a new minimum tax rate as part of a deal triggered early Republican criticism. "I don't think that's going to appeal to members of my party, and I think it'll be a hard sell to the
Republicans have staunchly opposed any tax increase. Sen. Shelley Moore Capito of West Virginia, the chief GOP negotiator, has long called a corporate tax increase "a non-negotiable red line."
While a global minimum tax may seem like a promising entry in what's shaping up to be a hot tax summer, there's still a long way to go before it becomes anything close to law. The G7 proposal is a powerful endorsement, but the measure heads to the G20 next, The Times reported. From there, it would go to an OECD-led group taking on taxes.
If that group agreed to a framework, the measure would probably have to be passed through legislation. That's where the Republicans could come in and sink it.