WASHINGTON, April 7 (Reuters) - U.S. Treasury Secretary
Janet Yellen on Wednesday fleshed out the details of a corporate
tax hike plan linked to President Joe Biden's infrastructure
investment proposal, aiming to raise $2.5 trillion in new
revenues over 15 years by deterring tax avoidance.
Yellen's plan relies on negotiating a 21% global minimum
corporate tax rate with major economies and a separate 15%
minimum tax on 'booked' income aimed at the largest U.S.
corporations. Dozens of big U.S. companies have used complex tax
strategies to reduce their federal tax liabilities to zero.
Yellen said that promised boosts in U.S. capital investment
by corporations and turbocharged growth failed to materialize
after Republican tax legislation in 2017 cut the corporate rate
to 21% from 35%.
Instead, the Trump-era cuts halved U.S. corporate tax
collections as a share of economic output to 1% from its
long-term 2% average, according to data from the Organization
for Economic Cooperation and Development. The average for the 37
OECD member countries is 3.1%.
"Our tax revenues are already at their lowest level in a
generation. And as they continue to drop lower we will have less
money to invest in roads, bridges, broadband and R&D," Yellen
The bulk of U.S. tax collections https://www.reuters.com/article/us-usa-trump-taxes-revenue-explainer/explainer-the-4-trillion-u-s-government-relies-on-individual-taxpayers-idUSKBN26J30F
are deducted from the regular paychecks of individual wage
earners, but Biden has pledged not to raise any taxes on
Americans earning less than $400,000 a year.
The Treasury plan seeks to end provisions in the 2017 tax
cuts that Democrats say provide continued incentives for
companies to shift investments, intellectual property and
profits to lower-tax countries.
Its biggest target is revamping the 2017 tax act's first
stab at a minimum tax, the 10.5% Global Intangible Low-Taxed
Income tax (GILTI). Treasury would eliminate a U.S. deduction
for the first 10% of income from foreign assets and raise the
GILTI minimum rate to 21%.
GILTI, which acts as a kind of "top-up" tax to offset lower
rates in other countries, would be applied on a
country-by-country basis, rather than a global average rate,
which Democrats say encourages some use of tax havens. This
change alone could raise $500 billion in revenue over a decade,
Treasury would also replace a separate 10% Base Erosion and
Anti-abuse Tax (BEAT), aimed at preventing shifting profits to
entities in tax havens, with a new 21% tax that aims to deny
deductions on income from countries that do not agree to a
global minimum tax. It is rebranding this as the SHIELD tax, for
"Stopping Harmful Inversions and Ending Low-Tax Developments."
A Treasury official told reporters that this new tax would
act as an incentive for countries to agree to a global minimum
tax by denying companies the benefits of using tax havens.
FOSSIL FUEL BREAKS
The Treasury plan also would eliminate a range of tax breaks
for the fossil fuel industry, a move it said would raise
revenues by $35 billion over 10 years. It will replace these
with new clean energy tax incentives including for electric
vehicles and efficient electric appliances.
Treasury also is proposing a new 15% alternative minimum tax
for large corporations, based on booked income reported to
shareholders, to ensure that they cannot use complex tax
avoidance schemes to pay no taxes.
Treasury said it estimates that some 45 corporations would
have seen an average $300 million additional annual tax
liability under the proposed minimum, raising some $13.5 billion
in new revenues.
(Reporting by David Lawder, David Shepardson, Jarrett Renshaw
and Tim Gardner; Editing by Heather Timmons, Andrea Ricci and