President Joe Biden has suggested to Republicans the idea of a 15% minimum tax on US businesses and increased efforts to enforce the IRS as a way to fund a bipartisan infrastructure package, according to a person familiar with the discussions.
The proposal sets aside the Biden administration’s proposal to increase the corporate income quota from 21% to 28% – a non-starter for Republican lawmakers – although this could be pursued elsewhere, the person said.
Under the pitch for the Republicans, companies that have lots of tax credits and withholding would have to pay at least 15%. The plan would also increase tax revenues by conducting more audits on wealthy taxpayers.
These two financing measures were already included in Biden’s tax plans. The thought is that they could raise money without hitting tax rates or taking back President Donald Trump’s 2017 tax cuts, which Republicans have referred to as a red line in the negotiations, said the person who requested anonymity to the private conversation to discuss. The Washington Post had previously reported on the offer.
Biden met with Senator Shelley Moore Capito, the West Virginia Republican who leads infrastructure talks for the GOP, on Wednesday in the latest attempt at compromise. The discussion did not result in an agreement on how much to spend or pay, but the two are due to speak again on Friday. Kelley Moore, a spokeswoman for Capito, declined to comment.
The offer does not mean that Biden will abandon his larger ambitions to raise taxes for corporations and wealthy individuals, the person said, characterizing the proposal merely as an attempt to find common ground in the Capito talks. The Democrats could pursue these plans later this year in a law on the reconciliation of the parties.
The 15% minimum tax is targeted at situations where large tech companies like Amazon.com Inc., Netflix Inc., and Zoom Video Communications Inc. were largely able to avoid paying federal income taxes despite making a profit in a few years by using legal maneuvers , including depreciation on business expenses to reduce their tax bill.
The measure was incorporated into Biden’s American Jobs plan announced in March. It would impose a tax of at least 15% on company profits, also known as book revenues, reported in their financial statements. The change would undo decades of differences in how companies calculate their finances for tax purposes and limit the amount of statutory tax breaks that companies could take advantage of.
The rule has been criticized by Republicans and some economists as an inefficient way to raise taxes. Critics say that introducing a minimum profit tax would mean companies would have less incentive to spend money on things Congress wants to promote, like research and development or renewable energy, as they would not be able to take advantage of those tax breaks.
Biden has also proposed a $ 80 billion investment in the Internal Revenue Service, which the White House says could raise another $ 700 billion in a decade. The plan would speed up enforcement by the IRS, which has declined in recent years, and give the IRS more insight into some taxpayers’ bank accounts.
The White House has argued that the additional enforcement is supported by both parties. A Data for Progress report published last month found that 60% of Americans – including 40% of Republicans – support increased enforcement of the IRS.
Republican lawmakers have said they are funding additional funding for exams, but some have criticized the Biden plan for going too far.
Before it’s here, it’s at the Bloomberg Terminal.