A weakened international tax overhaul.
The Biden administration has led a global effort to crack down on profit shifting by companies that locate their headquarters in countries with low rates to reduce their tax bills. The measure unveiled by House Democrats on Monday waters down some of what the White House has been pushing for, including the rate that companies would pay on their overseas profits.
The legislation calls for a tax rate of 16.6 percent on corporate foreign earnings. That would be an increase from the current rate of about 10.5 percent, which Republicans enacted as part of their 2017 tax legislation, but less than the 21 percent that the Biden administration proposed. The tax would be calculated on a country-by-country basis.
The House proposal also offers more generous exclusions than what the White House envisioned. Companies could exclude 5 percent of their foreign tangible assets, such as property and equipment, from the minimum tax. While that is less than the current 10 percent, the Biden administration wanted to cut that benefit entirely.
Still, the House proposal would put the United States more closely in line with the rest of the world, which has been coalescing around an agreement that would set a global minimum tax rate of at least 15 percent. Critics have argued that a rate of 21 percent in the United States would put American companies at a competitive disadvantage.
The Committee for a Responsible Federal Budget, a fiscal watchdog, called the Ways and Means Committee international tax proposal “less aggressive” than what the White House proposed and projected it would raise about $360 billion in revenue compared with the $1 trillion that the White House plan would raise.
The 2022 fiscal year for the federal government begins on October 1, and President Biden has revealed what he’d like to spend, starting then. But any spending requires approval from both chambers of Congress. Here’s what the plan includes:
-
- Ambitious total spending: President Biden would like the federal government to spend $6 trillion in the 2022 fiscal year, and for total spending to rise to $8.2 trillion by 2031. That would take the United States to its highest sustained levels of federal spending since World War II, while running deficits above $1.3 trillion through the next decade.
- Infrastructure plan: The budget outlines the president’s desired first year of investment in his American Jobs Plan, which seeks to fund improvements to roads, bridges, public transit and more with a total of $2.3 trillion over eight years.
- Families plan: The budget also addresses the other major spending proposal Biden has already rolled out, his American Families Plan, aimed at bolstering the United States’ social safety net by expanding access to education, reducing the cost of child care and supporting women in the work force.
- Mandatory programs: As usual, mandatory spending on programs like Social Security, Medicaid and Medicare make up a significant portion of the proposed budget. They are growing as America’s population ages.
- Discretionary spending: Funding for the individual budgets of the agencies and programs under the executive branch would reach around $1.5 trillion in 2022, a 16 percent increase from the previous budget.
- How Biden would pay for it: The president would largely fund his agenda by raising taxes on corporations and high earners, which would begin to shrink budget deficits in the 2030s. Administration officials have said tax increases would fully offset the jobs and families plans over the course of 15 years, which the budget request backs up. In the meantime, the budget deficit would remain above $1.3 trillion each year.
Tobacco and nicotine could face new taxes.
House Democrats included legislative language that would double the existing excise tax on cigarettes, small cigars and roll-your-own tobacco, as well as imposing taxes on any non-tobacco nicotine products, like e-cigarettes.
That proposal could run afoul of Mr. Biden’s pledge to not raise taxes on families making less than $400,000. In negotiations over the $1 trillion bipartisan infrastructure package, Mr. Biden and his main deputies refused to consider raising the gas tax to help pay for the plan, largely because such a tax would affect anyone who buys gas, regardless of income level. That same problem would accompany an increased tax on tobacco and nicotine as well.
Article source: https://www.nytimes.com/2021/09/13/us/politics/democrats-tax-plan.html
Speak Your Mind
You must be logged in to post a comment.