Biden Introduces Tax Reform to Raise $ 2.5 Trillion

President Joe Biden, in Washington on Tuesday.KEVIN LAMARQUE / Reuters

The president of the United States, Joe Biden, has revealed this Wednesday the details of the fiscal plan that will finance the two trillion dollars in investments of his ambitious infrastructure plan, the second phase of his economic program after the approval of the stimulus package to overcome the pandemic.

The plan's goal is to raise $ 2.5 trillion over the next 15 years by increasing corporate tax, a minimum rate of 15% on after-tax profits, and by encouraging large corporations that pay outside taxes to repatriate their profits.

The new taxation of the Joe Biden Administration is made up of three pillars.

The first is the increase in corporation tax, from the current 21% - the result of Donald Trump's 2017 tax reform - to 28%, a percentage increase of seven points that, however, remains below the 35% in force until the presidency of the republican.

The second is to adopt strong measures against companies that are taxed in other countries with a more favorable tax climate, such as the Bahamas or Ireland;

This is the case of many multinationals, including several large technology companies.

That is, increase taxes on your earnings abroad, while introducing a minimum effective rate of 15% on the after-tax profits declared in the consolidated income statements.

Third, the Biden Administration will end subsidies to fossil fuel companies and replace them with incentives for the production of clean energy, a measure in line with the idea of ​​a sustainable and green economy, which transversally defines its political agenda. .

Companies that are currently taxed abroad will no longer be able to avoid paying US taxes on payments they make to foreign subsidiaries.

A Treasury Department report predicts that this will force companies to repatriate $ 2 trillion in profits over the next decade from abroad.

Faced with opposition from large corporations, all Republicans and even some Democratic legislators, Biden has explained one of his recurring arguments to defend the tax increase, “why it is not acceptable that 91 of the 500 largest corporations in the country paid zero in federal taxes in 2019, "while challenging his critics to point out" which parts of this [tax] package they think are not worth it. "

Biden announced this Wednesday that in the coming weeks he will meet with Vice President Kamala Harris "with Republicans and Democrats" to study the plan.

Republicans will have until the end of May to present amendments to it, said Chris Coons, a close associate of Biden in the Senate.

A week ago, during the presentation of the infrastructure plan in Pittsburgh, Biden directly named Amazon as one of those 91 companies that have avoided paying federal taxes for years.

Amazon's response was swift, and this Tuesday its founder and CEO, Jeff Bezos, said, succinctly, that the technology defends "the increase in the corporate rate."

According to the latest survey published, the American Employment Plan - the name officially given to the infrastructure plan for its goal of creating millions of jobs while modernizing the country - has the support of 73% of voters, without ideology distinction (among Republicans 57% support it).

But in Congress, where opposition to the plan is fierce, Democrats will have to do their best to convince their political rivals, who criticize him for not spending most of his funding on modernizing or building road projects such as roads or bridges. .

The president considers spending to modernize the hydroelectric network - with special emphasis on remediating lead contamination in many pipes - and guaranteeing affordable access to broadband internet, especially in rural areas, as a top priority.

Following Trump's tax reform in 2017 - the only major legislative initiative of his term - federal income from corporate tax plummeted.

If between 2000 and 2017 they were equivalent to 2% of GDP, in 2018 and 2019 they fell by half, 1%, while the countries of the Organization for Economic Cooperation and Development (OECD) stood at an average of between 2.9% and 3.1% during those same years.

Meanwhile, after-tax corporate profits increased relative to the country's economy.

They went from representing 5.4% of GDP in the period 1980-2000 to 9.7% between 2005 and 2019.

"" There is not the slightest evidence to show that [Trump's] cuts in 2017 increased growth or productivity, "Commerce Secretary Gina Raimondo said Wednesday," and the fact is that the current corporate structure is broken. ”.

The head of Commerce described as unacceptable the frontal rejection of the plan by the Chamber of Commerce, the largest business group in the country, and other

economic

lobbies

, which she urged to negotiate and debate around the White House proposal.

In a platform published today in

The Wall Street Journal

, the US Treasury Secretary, Janet Yellen, assured that the tax increase plan "is mutually beneficial" for the country and companies.

“Tax reform is not a zero-sum game, with companies on one side and the government on the other.

There are policies that are mutually beneficial, true

win-win

.

Washington has one in front of it right now, ”Yellen wrote.