Seeking to break a deadlock with Republicans in funding infrastructure improvements, President Biden suggests a possible compromise of a 15 percent minimum corporate tax and the possibility of revenue from increased enforcement by the IRS.
The offer was made Wednesday to Republican Senator Shelley Moore Capito of West Virginia as part of bipartisan negotiations and did not reflect any change in Biden’s overall vision for infrastructure funding.
White House press secretary Jen Psaki said Biden was investigating possible tax law changes to his plans that Republicans could support. The President concluded that a minimum corporate tax could provide a common basis.
“He’s been trying to see a way forward with his Republican counterparts in this particular negotiation,” Psaki told reporters at a briefing Thursday. “This is part of what he is proposing for payment that he raises as a question of whether they could agree to it.”
Biden has proposed raising the corporate tax rate from 21 percent to 28 percent to fund his plans for roads, bridges, electric vehicles, and broadband internet, and this remains one of his preferred approaches. But the rate hike is a no-starter for Republicans because it would reverse the 2017 tax cuts that President Donald Trump decided to take.
By introducing an alternative – there is now no minimum corporate tax on profits – Biden sought to give Republicans a way to support infrastructure without breaking their own red line of keeping corporate tax rates at their current levels. The Washington Post first reported on the offer.
On Thursday, Senate Republican chairman Mitch McConnell said he spoke with Capito after the meeting and “still hopes” to reach an agreement with the government. But he prefers the GOP approach, which has a scaled-down package paid for by tapping unspent COVID-19 aid funds instead of taxes.
“Let’s reach an agreement on smaller, yet significant, infrastructure that is fully paid for,” he said in Paducah, Kentucky.
The president essentially establishes the principle that profitable companies should pay income taxes. Many businesses can avoid taxes or minimize their bills through a variety of credits, deductions, and other ways to structure their income and expenses.
The president has insisted that the middle class shouldn’t bear the cost of higher infrastructure spending. But there is a gap in the negotiations because Republicans say the corporate tax hike will stifle economic growth.
The idea of a minimum corporate tax is not new to Biden, who proposed the policy in last year’s presidential campaign, and that might put some Republicans off. The Center-Right Tax Foundation estimates that a minimum tax would deduct 0.21 percent from long-term U.S. gross domestic product.
“He’s been pushing it since the primaries over a year ago,” said George Callas, executive director of government affairs for Steptoe law firm and former Republican tax advisor. Callas said the minimum tax would primarily hit companies like electricity utilities and telecommunications companies that make significant capital investments, as well as companies that rely on paying their employees with stocks.
At the same time, both Democrats and Republicans have their sights set on revenue that could come from increased enforcement of unpaid taxes by the IRS. House spokeswoman Nancy Pelosi, D-California, has suggested it could run to around $ 1 trillion, but others say the estimate is far lower.
Biden is targeting infrastructure spending of around $ 1 trillion, up from an initial pitch of $ 2.3 trillion. The Republicans have so far countered just $ 257 billion in additional infrastructure spending as part of a $ 928 billion package. The GOP’s new spending on infrastructure would be a fraction of what the president says to compete globally and fuel economic growth.
Transportation Secretary Pete Buttigieg said during a visit to Memphis, Tennessee, Thursday that both sides “appeared to uphold the principle that something on the order of $ 1 trillion is appropriate about transportation.”
Talks on Biden’s top legislative priority are slow, a daunting undertaking given the massive infrastructure investment, and the time for an agreement is running out. The government has set a deadline for Monday to see clear direction and signs of progress.
Biden and Capito will meet again on Friday, although it is not clear whether the meeting will take place in person.
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