President Biden Proposes Raising the Corporate Tax Rate to 28%
To fund his $2 trillion infrastructure plan, President Joe Biden has proposed to raise the corporate tax to 28%. According to the New York Times, corporations will be required to pay fifteen years of taxes at the 28% rate. This is an increase from President Trump’s previous tax cuts, which decreased the corporate tax from 35% to 21%. Not all companies will be taxed the same amount, however.
President Biden plans to target companies who make $100 million or higher. CNBC reports that in a recent audience at the White House, President Biden stated, “Here you have 51 or 52 corporations in the Fortune 500 that haven’t paid a single penny in taxes for three years.” The New York Times states that some Republican voters also support higher taxes for wealthy companies. It is the other components of the proposal that cause conflict between the two parties.
International companies will also be hit with higher taxes, specifically increased Global Intangible Low-Taxed Income (GILTI), for the profits they make outside the United States. Foreign affiliates of US companies will pay 21%, opposed to the previous 10.5%. That being said, each country will be assessed individually before being required to pay the increased tax rate. To encourage companies to remain in the United States, President Biden has combined the 21% GILTI with a 10% “made in America” tax credit.
Regardless of these efforts, there are mixed reviews regarding the tax plan, even among Democrats. CNBC states that while conservative Democrat Senator Joe Manchin advocates increasing the corporate tax to 25%, he disapproves immediately raising it to 28%. However, a majority of Democrats tend to agree that the corporate tax should be above 21%. Many Republicans are concerned that the increase will dissuade companies from staying in the United States, especially those who benefitted from the previous tax cuts.
Those who make less than $400,000 will not be expected to pay increased taxes, and small companies will have the opportunity to earn tax credits to offset the cost. For example, small businesses can earn tax credits if they implement workplace retirement saving plans. The Manufacturing Communities Tax Credit would reduce taxpaying obligations for companies vulnerable to significant layoffs or government shutdowns. According to the Tax Foundation, tax credits will be offered to companies who adopt green practices. Some examples are “carbon capture, use, and storage, as well as credits for residential energy efficiency, and a restoration of the Energy Investment Tax Credit (ITC) and the Electric Vehicle Tax Credit.” The plan will also cease giving subsidies to companies who use fossil fuels.
Whether the 28% corporate tax will become law is yet to be seen. The New York Times reports, “…Democrats would need to secure total consensus in their caucus to pass the legislation and use a fast-track budget process known as reconciliation to bypass the 60-vote threshold”. If this plan gets approved, wealthier companies will be funding most of the 2 trillion dollars to be raised for infrastructure and other programs.
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