WASHINGTON — The Biden administration unveiled a tax plan on Wednesday that would increase the corporate tax rate in the U.S. and limit the ability of American firms to avoid taxes by shifting profits overseas.
Much of the plan is aimed at reversing a deep reduction in corporate taxes under President Donald J. Trump. A 2017 tax bill slashed the corporate rate to 21 percent from 35 percent and enacted a series of other provisions that the Biden administration says have encouraged firms to shift profits to lower-tax jurisdictions, like Ireland.
Some of the provisions in President Biden’s plan can be enacted by the Treasury Department, but many will require the approval of Congress. Already, Republicans have panned the proposals as putting the U.S. at a disadvantage, while some moderate Democrats have indicated they may also want to see some adjustments, particularly to the proposed 28 percent corporate tax rate.
Administration officials estimate the proposals will raise a total of $2.5 trillion in new tax revenue over a 15 year span. Analysts at the University of Pennsylvania’s Penn Wharton Budget Model put the estimate even higher, estimating a 10-year increase of $2.1 trillion, with about half the money coming from the plan’s various changes to the taxation of multinational corporations.
Organization for Economic Cooperation and Development.
The administration sees raising the rate as a way to increase corporate tax receipts, which have plunged to match their lowest levels as a share of the economy since World War II.
Ensure big firms pay at least 15 percent in taxes
Many large companies pay far less than the current tax rate of 21 percent — and sometimes nothing. Tax code provisions allow firms to reduce their liability through deductions, exemptions, offshoring and other mechanisms.
The Biden plan seeks to put an end to big companies incurring zero federal tax liability and paying no or negative taxes to the U.S. government.
the so-called global intangible low-taxed income (or GILTI) tax to 21 percent, which would narrow the gap between what companies pay on overseas profits and what they pay on earned income in the U.S.
And it would calculate the GILTI tax on a per-country basis, which would have the effect of subjecting more income earned overseas to the tax than under the current system.
Punish U.S. companies that headquarter in low-tax countries
A provision in the plan known as SHIELD (Stopping Harmful Inversions and Ending Low-tax Developments) is an attempt to discourage American companies from moving their headquarters abroad for tax purposes, particularly through the practice known as “inversions,” where companies from different countries merge, creating a new foreign firm.