United States President Joe Biden will receive an economic briefing with Treasury Secretary Janet Yellen in the Oval Office of the White House in Washington on January 29, 2021.
Kevin Lamarque | Reuters
Treasury Secretary Janet Yellen on Wednesday touted the Biden government's proposed changes to corporate tax law and stated at length that the plan would be fairer, reduce incentives for businesses to move factories and income overseas, and generate revenue for domestic priorities.
Tax officials said the Made In America tax plan, which is linked to President Joe Biden's $ 2 trillion infrastructure overhaul, would bring about $ 2 trillion in corporate profits to the U.S. that are currently overseas.
The Treasury Department and the Joint Tax Committee have estimated that setting incentives for the offshore business could generate $ 700 billion in revenue.
Overall, Made In America's reforms are estimated to raise an estimated $ 2.5 trillion over 15 years to fund eight years of spending on roads, bridges, transit, broadband, and other projects.
Biden spoke about his administration's plan at the Eisenhower Executive Office Building in Washington on Wednesday afternoon.
"It's not a plan that tinkers with the edges. It's a one-time investment in America, unlike anything we've done since building the highway system and winning the space race decades ago," said Biden.
"It's a plan that millions of Americans must work with to fix what's broken in our country: tens of thousands of miles of roads and highways, thousands of bridges in dire need of repair. It's also a blueprint of the infrastructure, which is needed for tomorrow, "he added.
The Treasury's 17-page report is likely to serve as a draft for lawmakers trying to get one of the biggest spending and tax proposals through Congress through 2021.
Key provisions of the plan include increasing the U.S. corporate rate from 21% to 28% and introducing minimum taxes on both foreign income and domestic profits that companies report to shareholders. All of this is expected to increase the tax burden on American companies.
"The largest and most profitable US companies face lower tax rates than ordinary Americans," tax officials said in a presentation released on Wednesday. "The Made in America tax plan would reverse these trends. … The plan would remove distortions in existing tax laws that favor offshoring and largely end the shifting of corporate profits from country to country with a minimum tax."
Biden said Wednesday that he was open to increasing the corporate rate by a smaller amount and that he was not married at 28%.
Corporate groups oppose the changes, claiming they would affect investments and the ability of US companies to compete in global business. The Treasury report claims that the 2017 tax cuts went too far with little economic benefit, pointing out that foreign investors received a significant share of the profits.
The White House proposal would also hit key elements of Trump's 2017 corporate tax cut, including the property tax on erosion and anti-abuse, known as "BEAT". Although the BEAT was designed to penalize companies that move profits overseas, it has been criticized for taxing some non-abusive transfers and missing those who employ tax avoidance strategies.
The president's proposed minimum tax of 15% on corporate income, targeted at those reporting high profits but low tax payments to investors, would only apply to companies with profits greater than $ 2 billion, compared to the current level of 100 Million dollars.
According to calculations by the Treasury Department, this could affect about 45 companies, with the average company exposed to the tax seeing an increased minimum tax liability of about $ 300 million per year.