Through a series of complex and arcane provisions, the Biden administration would essentially treat profits earned abroad more like those earned at home — raising rates and requiring that taxes be paid on time rather than pushed far into the future. It would also establish what would in effect be a minimum tax on foreign income.
The proposals hew closely to what Mr. Biden promised on the campaign trail, and the immediate reactions mostly fell along predictable lines. Republicans, business groups and conservative economists said they worried that the rate increases would discourage investment. Progressive groups and liberal economists hailed the announcement, saying it would fix some glaring loopholes.
Wall Street has been wary of possible tax increases since the presidential election and has hoped that gridlock in Washington would moderate Mr. Biden’s agenda. On Wednesday, a spokesman for JPMorgan Chase said the bank’s chief executive, Jamie Dimon, believed that “the corporate tax rate for companies in the U.S. has to be competitive globally, which it is now.”
Supporters countered that the changes would do much more to promote growth and go a long way in curbing excesses of the 2017 tax legislation. Democrats have argued that the low-tax approach has failed to deliver broad economic gains, with only those at the very top benefiting. Targeted government spending on workers, students and infrastructure, they argue, would offer much more bang for the buck. What’s more, businesses base their decisions on a range of factors besides tax rates.
Even economists favoring low rates on business acknowledge that the 2017 tax cuts did not produce much of an increase in investment. Gross domestic product grew at a rate of 2.4 percent in the two years leading up to the law and 2.4 percent in the two years after it passed.
“There’s essentially no evidence that the tax change boosted investment,” said William Gale, co-director of the Urban-Brookings Tax Policy Center. He argued that investment went up in 2018 only because oil prices rose. And while the tax law favored investments in equipment and structures, it turned out that the biggest investments were not in those areas but in intellectual capital.
Article source: https://www.nytimes.com/2021/03/31/business/economy/biden-tax-plan.html