- The Washington Post reports that Treasury Secretary Yellen is working on a global minimum tax rate.
- The suggested rate would apply to multinationals as it tries to discourage them from shopping for the lowest area.
- Yellen and Biden want to raise the corporate tax rate, but need the rest of the world on board.
- You can find more articles on Insider’s business page.
Treasury Secretary Janet Yellen has made it clear since her confirmation hearing and subsequent press appearances that the Biden government must generate new tax revenues. At the same time, she warns of the difficulties in introducing a wealth tax, which is preferred by the progressive wing of the Democratic Party.
Part of the solution is corporate tax reform – not just in the US, but well beyond its borders.
To this end, Yellen is in active discussions with other countries about setting a global minimum tax rate for corporate taxes, reported Jeff Stein of the Washington Post for the first time.
The U.S. has long been an outlier with a corporate tax rate of 35% versus the international average of 24% until former President Donald Trump’s 2017 tax cut lowered the corporate tax rate to 21%. But that, too, hasn’t stopped other countries from lowering their rates to attract multinational corporations. The Post found that nine countries only lowered their corporate tax rate last year.
Nobel Prize-winning economist Joseph Stiglitz, a mentor to Yellen, told the Post that if she succeeds in these talks it would be “a bit like the Paris climate agreement on taxes.” Yellen is in discussions with more than 140 international partners through the Organization for Economic Co-operation and Development (OECD), a group in which countries deal with global tax issues, with a special focus on technology.
The goal for now is a non-binding consensus on a minimum tax rate within the OECD, with the idea that the US could exit the Trump era by 21% without fear of multinational corporations having to pay taxes elsewhere at a lower rate .
Against the background of Yellen’s quest for a global minimum stands the current drive of the Biden government to generate more tax revenue. President Joe Biden is planning the first major federal tax hike in nearly three decades, according to Bloomberg. One of the proposals on the table is a corporate tax hike, which Biden is campaigning for. He has proposed raising the corporate tax rate to 28%.
The right-wing tax foundation found that “the global average statutory corporate tax rate has steadily declined” since 1980, with the largest declines occurring in the early 2000s. According to the tax foundation, “the worldwide average statutory corporate tax rate” is 23.85%.
Biden also just said this week that Americans who earn more than $ 400,000 could see their taxes increase, a measure he recognized, may not win Republican support.
According to the Post, there could be a complicated path forward for Yellen’s business minimum. Congress may need to be involved in passing new tax rules, and it could take years for participating countries to pass the tax, if they choose to pass it at all.
As the Post reports, a successful successful move would be a tremendous accomplishment for both the Yellen and Biden presidencies – and perhaps the world as a whole. Paying for a $ 2 trillion infrastructure package could also help.