Treasury Secretary Janet Yellen on Tuesday made a direct pitch for raising corporate taxes to the business community, telling the U.S. Chamber of Commerce that the funds would be an investment to reduce inequality and rebuild the country’s infrastructure.
“With corporate taxes at a historical low of 1 percent of GDP, we believe the corporate sector can contribute to this effort by bearing its fair share. We propose simply to return the corporate tax toward historical norms,” Yellen told the Chamber at the opening of its Global Forum on Economic Recovery.
“At the same time, we want to eliminate incentives that reward corporations for moving their operations overseas and shifting profits to low-tax countries. As part of this effort, we are working with our international partners on a global minimum corporate tax to stop the race to the bottom,” she added.
The pitch comes as the Chamber makes a concerted push to prevent corporate tax increases. As part of his $4.1 trillion in infrastructure and family support plans, President Biden has proposed raising the corporate tax to 28 percent from its current 21 percent, though key moderate Democrats have only signaled support for raising the rate to 25 percent.
Chamber President Suzanne P. Clark opened the plenary by reiterating the business community’s opposition to raising corporate taxes, saying it would make the country less competitive.
“The data and the evidence are clear: Tax increases would greatly disadvantage American businesses,” she said. “There are other ways to finance it.”
Senate Republicans who are negotiating on the infrastructure portion of the plan have drawn a red line at increasing taxes, saying they are unwilling to revisit the 2017 GOP tax cut that brought corporate rates down from 35 percent.
Democrats could still raise the taxes without GOP votes through budget reconciliation, a process that sidesteps the Senate filibuster requiring 60 votes for procedural motions.
Democrats appear likely to pursue a strategy of striking a narrow deal on traditional infrastructure with the GOP and then pushing through additional portions of their agenda through reconciliation.
In her speech, Yellen framed the tradeoff between higher taxes and increased government investment as the next step in a long history of addressing economic disparities that led to important agencies such as the Federal Reserve and the Federal Deposit Insurance Corporation, popular programs such as Social Security, and key economic laws including antitrust policies and the progressive income tax.
The move toward smaller government and lower taxes, she said, has led to under-investments in infrastructure, family support and new programs to address modern economic problems.
“This approach to U.S. fiscal policy, founded on a distrust of government motives and effectiveness, along with resistance to higher taxes, has had profound effects on our nation and our people,” she said.
“We are confident that the investments and tax proposals in the Jobs Plan, taken as a package, will enhance the net profitability of our corporations and improve their global competitiveness,” she added in a final pitch to the Chamber.
“We hope that business leaders will see it this way and support the Jobs Plan.”