One of President Biden’s oft-repeated promises from the campaign trail and his first year in office is that he will raise the corporate tax rate.
The rate stood at 35% until the 2017 Tax Cuts and Jobs Act slashed it to 21%. That was too much, Biden and other Democrats have said over and over. The Biden campaign promised to move it halfway back to 28% and the numbers bandied about this year have often hovered in the mid-20s.
The United States has the 85th highest corporate tax rate in the world (with a combined federal and state statutory rate of 25.77%). Countries like Ireland – with a corporate tax rate of 12.5% – are known for their very business-friendly tax environments, while many developed regions like Asia (with an average tax rate of 20.06%) and Europe (19.99%) also provide lower-cost options for businesses.
Now, amid opposition to tax hikes from both Republicans but also moderate Democratic Senators like Kyrsten Sinema (D., Ariz.), the latest twist is that a higher corporate rate is likely to fall out of economic package entirely.
The White House reportedly told Democratic lawmakers this week that the proposed hike is unlikely to make it into the final bill.
The constantly evolving plan appears likely to leave the rate at 21% and focus instead on other things like a corporate minimum tax and increases on wealthy individuals to pay for the bill, which is likely to include less than $2 trillion in new spending.
The opposition among some lawmakers – all Republicans as well as some moderate Democrats – to raising taxes on wealthy individuals is "almost religious fervor," said Secretary of Commerce Gina Raimondo at the 2021 Milken Institute Global Conference this week.
While nobody wants corporate taxes to make companies uncompetitive, Raimondo said she's heard from many business leaders that a 25%, 26% corporate tax rate "is absolutely in the realm of what they could live with.”
‘We have to come to our senses’
Raimondo said “at some point we have to come to our senses” on tax policy simply to pay for the priorities lawmakers want.
Corporate taxes may be off the table but other revenue generators like a corporate minimum tax, tax increases on the wealthy, and possibly what’s being described as a more modest version of the wealth tax championed by Sen. Elizabeth Warren, are still reportedly being discussed.
During the conversation with Yahoo Finance’s Andy Serwer, Raimondo pivoted away from corporate taxes to these other potential income sources, noting that we currently have “about 60 large profit businesses in America last year that paid nothing in taxes,” an issue that would be addressed by a corporate minimum tax.
Here’s the deal: If you spent $3 on your coffee this morning, that’s more than what 55 major corporations paid in taxes in recent years.
It’s wrong — and it’s got to change.
— President Biden (@POTUS) October 20, 2021
“I've heard almost unanimously,” she said of her conversations with business leaders, that “they would not oppose increases in income taxes on high earners. They understand that we need the revenue to make investments.”
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.