What’s in Biden’s Tax Plan?

The White House wants to impose a 15 percent minimum tax on what’s known as “book income” — the profits that firms report to investors but that are not used to calculate tax liability. Such income can make a company appear very profitable, rewarding shareholders and company executives, even as the firm pays little or no tax.

“Large corporations that report sky-high profits to shareholders would be required to pay at least a minimum amount of tax on such outsized returns,” the Treasury Department said. The administration would require that companies with annual income of $2 billion or more pay a minimum 15 percent on their book income. It estimated that 45 corporations would have paid such a tax if the proposal had been in place in recent years.

The proposal is narrowed from the version Mr. Biden proposed in the campaign, which would have applied to companies with $100 million or more in book profits per year.

Strengthen the global minimum tax

The plan aims to strengthen a global minimum tax that was imposed on U.S. companies as part of the Trump administration’s 2017 tax package by raising the tax rate and eliminating some exemptions that weakened its impact.

The Treasury Department would double the so-called global intangible low-taxed income (or GILTI) tax to 21 percent, which would narrow the gap between what companies pay on overseas profits and what they pay on earned income in the U.S.

And it would calculate the GILTI tax on a per-country basis, which would have the effect of subjecting more income earned overseas to the tax than under the current system.

Punish U.S. companies that headquarter in low-tax countries

A provision in the plan known as SHIELD (Stopping Harmful Inversions and Ending Low-tax Developments) is an attempt to discourage American companies from moving their headquarters abroad for tax purposes, particularly through the practice known as “inversions,” where companies from different countries merge, creating a new foreign firm.

Article source: https://www.nytimes.com/2021/04/07/business/economy/tax-plan-biden.html