A trio of Senate Democrats on Monday unveiled a proposal to raise taxes on U.S. multinational corporations, after the White House last week put forward a plan to increase corporate taxes in order to finance infrastructure investments.
The senators’ proposal has some similarities to the proposal President Biden released last week, though it does not propose specific numbers for tax rates. Both Biden and the senators say their plans would help to prevent companies from moving their jobs and profits overseas.
The senators’ proposal was released by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Finance Committee members Sherrod Brown (D-Ohio) and Mark Warner (D-Va.). Brown is among the more progressive senators, while Warner is more of a centrist.
Biden is hoping to follow up the enactment of his $1.9 trillion coronavirus relief bill with an even larger infrastructure package that is paid for by raising corporate taxes. But he could face challenges in getting his infrastructure plan enacted given that Democrats only narrowly control both chambers of Congress and Republicans are opposed to raising corporate taxes.
The senators are hoping that their proposal could garner widespread support in the Democratic caucus, and are seeking feedback from stakeholders.
“I think the fact that the three of us, who are looking at this from unique parts of the country, have come together really bodes well for our building a coalition for this,” Wyden said on a call with reporters.
The senators’ proposal, like Biden’s, calls for increasing the rate of a minimum tax on U.S. companies’ foreign earnings created by former President Trump’s 2017 tax law.
Biden has proposed setting the rate for the minimum tax at 21 percent and the corporate tax rate at 28 percent, while the senators’ proposal says that it’s an “open question” about whether the minimum tax rate should be less than or equal to the U.S. corporate tax rate.
Both the senators’ proposal and Biden’s proposal call for moving to calculate the minimum tax on a country-by-country basis, rather than on a global basis as is the case currently. The senators suggested that this goal could be achieved by dividing income into two groups — income from high-tax countries and income from low-tax countries — and then only applying the minimum tax to the income from the low-tax jurisdictions.
Biden’s proposal would repeal a portion of Trump’s tax law that created a special lower tax rate for certain income of corporations relating to exports and use the revenue raised by repealing the provision to expand research and development incentives. The senators’ proposal would not completely repeal the provision but instead aims to realign it in an effort to make it more focused on encouraging innovation.
Biden’s proposal would also repeal a tax in the 2017 law aimed at preventing foreign companies from shifting their profits out of the U.S., with the White House calling the tax ineffective. Instead, the administration is calling for certain deductions to be denied to foreign corporations if the companies are based in countries without strong minimum taxes.
The senators proposed modifying the tax rather than repealing it, calling for the addition of a second, higher tax bracket for income associated with erosion of the tax base.