Democrats are focused on raising the corporate tax rate from the current 21% to 28% to generate new revenue for an infrastructure package.
The big picture: While many senators are signaling that President Biden’s next big bill must provide a way to pay for it, the White House and its Democratic allies are increasingly confident that they can get there in part by increasing corporate taxes.
- “We should pay for this one-time infrastructure package,” said Senator John Hickenlooper (D-Colo.) To Axios. “I look forward to working with my colleagues to achieve this goal, including setting the corporate tax rate responsibly.”
Driving messages: White House begins telegraphing Biden’s priorities for new revenue – with no preview of the full strategy.
- “If only we would reduce the (individual) tax rate back to what it was when Bush was president – The top tax rate was 39.6 percent of federal taxes – that would raise $ 230 billion, “the president told ABC News.
- And Bharat Ramamurti, deputy director of the National Economic Council, told Bloomberg TV on Tuesday, “The president firmly believes that the biggest companies and those that have done very well over the past few decades should pay a little more.”
Ike Brannon, Senior Fellow at the Jack Kemp Foundation, Democrats may feel politically isolated, at least in the short term, because “rising corporate tax rates don’t seem to upset too many people and their biggest drawback – reduced economic growth and jobs – is not readily apparent.”
Flashback: Before the Trump administration, the business world pushed for the corporate rate to drop from 35% to 25%.
- Trump dropped it to 21%.
- Biden and his allies believe that much of Trump’s corporate cuts are due to share buybacks rather than new hires.
Between the lines: Democrats suspect that after the negotiations, Congress will set a corporate tax rate between 25% and 26%, less than the 28% proposed by Biden. That would bring in up to $ 500 billion.
- “Biden believes we need to make critical investments in infrastructure and research and development,” said Sarah Bianchi, who advised him during the campaign. “Some of our largest companies can pay a little more to do this.”
The other side: “Democrats may think that 24% to 25% is low hanging fruit,” said Rohit Kumar, co-chair of PwC’s national tax office. “But the battle is not yet connected.”
- The Business Roundtable “will actively speak out against corporate tax hike efforts,” CEO Joshua Bolten told reporters last week.
- “Everyone loves infrastructure until you have to figure out how to pay for it,” said Caroline Harris, vice president of tax policy at the Chamber of Commerce.