Biden's government defends raising taxes on corporations

Biden announces “bold” two-part infrastructure plan 18:07

(CNN) -

The Biden administration has launched a campaign to justify why it needs to raise taxes on corporations to fund its $ 3 trillion infrastructure plan, which already faces strong opposition.

However, on Wednesday President Joe Biden also left the door open to negotiate one of the most controversial provisions: raising the corporate tax rate to 28%.

"I'm very open, but we have to pay for this," Biden told reporters after his remarks on the US Employment Plan.

“There are many other ways we can do it.

In my opinion, I have presented the best way, the most rational, the fairest way to pay for it.

But there are also many other ways, and I am open, "he said.

The president invited Republicans and others to join him, although he cautioned that he will not accept a narrow definition of infrastructure that includes only elements such as roads and bridges.

Some time ago, the president issued a similar invitation regarding his US $ 1.9 trillion covid-19 relief plan.

However, he did not make any changes to the proposal after meeting with a small group of GOP lawmakers who were proposing a version of the bill worth about $ 600 billion.

On Wednesday, Biden said he could have worked with them if they had supported a broader version, but "they didn't budge an inch."

Congress eventually passed the stimulus package without Republican support.

The Secretary of the Treasury defends the plan

Treasury Secretary Janet Yellen noted Wednesday that corporate tax collection has fallen to its lowest level since World War II.

Yellen said the Republicans' Tax Cuts and Jobs Act (TCJA) of 2017 did not attract new production or investment to the United States.

Rather, it gave companies incentives to send workers and profits abroad.

In addition, other countries lowered their corporate rates in response to the US cut, he said in a phone call with reporters.

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"The TCJA not only perpetuated this race to the bottom, it also put America at a disadvantage in the race," Yellen said of the Republican tax cuts.

He also made his case in an opinion piece in the

Wall Street Journal

on Wednesday.

Yellen argued that the administration's proposal - dubbed the "Made in America" ​​tax plan - would make the country more competitive and remove incentives to operate abroad.

This would leave more income in the United States that can be used to finance the US $ 2 billion that Biden wants to invest in roads, bridges, broadband, clean energy, care for the elderly and other measures.

Generally speaking, as a result of previous years' tax cuts, the US now collects only about 16% of GDP in federal tax revenue.

This represents a decrease of about four percentage points in the last two decades.

What could the government give in?

However, Commerce Secretary Gina Raimondo said Wednesday that the president is willing to reach an agreement on the proposal to increase the corporate tax rate to 28%, but still asked Congress to "act big." .

Biden had tasked the cabinet to "work with the opposition and in a bipartisan manner" to pay for the plan, he said.

While the administration proposes to invest for eight years and repay the money in 15 years, Raimondo said officials are open to discussing repayment in 20 years and raising the rate to less than 28%.

“What I implore the business community not to do is say, 'We don't like the 28%.

We're leaving, we're not going to discuss it. '

That is unacceptable, ”he said.

"Come to the discussion and solve the problem with us to come up with a reasonable and responsible plan," he added.

Raimondo called for a "discussion" with congressional leaders and instructed opponents to say "what they think is a reasonable alternative plan," as long as it does not "harm the United States."

White House report defends plan to increase corporate taxes

The White House also made its case in a 19-page report released Wednesday.

The report focuses on four big messages: the tax package would increase the revenue that is needed, prevent companies from taking profits and operations abroad, make the system fairer for workers, and move towards an energy sector. cleaner.

Republicans' tax cuts in 2017, which lowered the corporate tax rate from 35% to 21%, caused the share of tax revenue collected relative to the economy to drop to 1%, according to the White House.

Historically, corporate taxes have collected around 2% of GDP.

In addition, the report notes that the United States in general has collected less revenue through corporate taxes than other advanced countries.

Over the past two decades, the average Organization for Economic Cooperation and Development country has collected about 3% of GDP from corporate taxes.

Like its predecessors, the Biden administration is also trying to stem the wave of American corporations taking their profits to offshore tax havens through a variety of measures, including a global minimum tax.

The administration seeks to end provisions in the 2017 tax law that it describes as "poorly designed."

These proposals would bring back more than $ 2 trillion in profits over the next decade to America's corporate tax base, says the White House.

The Biden Administration Says It Can Create A Fairer Tax System

The administration also argues that it can create a fairer tax system by increasing taxes on corporations and addressing growing income inequality.

The report notes that the portion of federal revenue collected from corporate taxes has fallen steadily since 1950. It states that it is now below 10%.

Meanwhile, the share of federal tax revenue collected from individuals now exceeds 80%.

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The president's plan would also eliminate some subsidies for fossil fuel producers and expand tax incentives for clean energy production.

By eliminating the subsidies, tax revenues would increase by US $ 35,000 million in 10 years, according to estimates by the Office of Tax Analysis of the Department of the Treasury.

The government argues that the incentives would address the climate change crisis by reducing air pollution.

What does the plan include?

Increase in corporate tax

Biden would raise the corporate income tax rate from 21% to 28%.

The rate had reached 35% before the tax cut defined in 2017 by then-President Donald Trump and Republicans in Congress.

Global minimum tax

The proposal would raise the minimum tax on US corporations to 21% and calculate it on a country-by-country basis to discourage companies from shifting their profits to tax havens.

Tax on countable income

The president would impose a minimum tax of 15% on income that larger corporations report to investors, known as countable income, as opposed to income that is reported to the Internal Revenue Service.

The administration said that, in recent years, about 45 corporations would have paid a minimum accounting tax under the proposal.

Meanwhile, average companies would see a minimum liability increase of about $ 300 million each year.

Corporate investments

Biden would make it more difficult for US companies to acquire or merge with foreign businesses to avoid paying US taxes on the grounds that they are foreign companies.

And he wants to push other countries to adopt hefty minimum taxes on corporations, even denying certain deductions to foreign companies based in countries without such a tax.

Incentives for clean energy

The plan seeks to boost the production of clean electricity by providing a 10-year extension of tax credits for the generation and storage of clean energy, and making those credits direct payment.

It would also create and expand other incentives.

The administration would eliminate subsidies to the oil and gas industry, increasing the government's tax revenue by more than $ 35 billion over the next decade, according to estimates by the Treasury Department's Office of Tax Analysis.

Compliance with laws

The president also wants to give more funds to the IRS to take action against companies that do not meet their tax obligations.

The proportion of large corporations that are audited has halved over the past decade, the White House said.

Who is against and who is in favor of Biden's plan on taxes and infrastructure?

The infrastructure and tax proposals quickly drew criticism and praise.

Governor questions Biden's infrastructure plan 1:02

The U.S. Chamber of Commerce strongly criticized Biden's proposal to undo the Trump administration's corporate tax cuts.

"We believe the proposal is dangerously wrong when it comes to how to pay for infrastructure," said Neil Bradley, the House's policy director, in a statement last week echoing statements he had previously made to CNN Business.

American companies already face a global minimum tax on their income, and no country has followed the United States on that tax, said Joshua Bolten, CEO of the Business Roundtable, whose members are CEOs of large American companies.

"However, the administration's proposed global minimum corporate tax rate threatens to put the United States at a great competitive disadvantage," he said.

The plan also raised concerns in Congress.

West Virginia Sen. Joe Manchin, a key vote of Democrats, has already said he will not accept raising the corporate rate above 25%.

Meanwhile, government officials have come out in search of more support.

Working with the G20

In her first major speech earlier this week, Yellen advocated for a global minimum tax rate on corporations.

"We are working with the G20 nations to agree on a global minimum corporate tax rate that can stop the race to the bottom," Yellen said in a speech to the Global Affairs Council in Chicago.

"Together, we can use the global minimum tax to ensure that the global economy thrives, based on a more level playing field in the taxation of multinational corporations and stimulates innovation, growth and prosperity," he argued.

CNN's Devan Cole, Jasmine Wright, and Matt Egan contributed to this report.