As Democrats ponder how big a second major legislative package should be this year, they are faced not only with questions of what to include, but also how to pay for it.
Some of these questions could be answered next week when President Joe Biden gives a speech in Pittsburgh to provide some details on his plans for an infrastructure PAVE (+ 2.93% package).
However, different options are offered on Capitol Hill, some new and some old.
Senate Finance Chairman Ron Wyden, a Democrat from Oregon, held an international tax hearing Thursday and said that he and colleague, Senator Mark Warner from Virginia and Senator Sherrod Brown from Ohio, would have a future setting days will be set for the taxation of US multinational corporations. “
“Our new framework is based on a few simple suggestions. First, multinational corporations have to pay a fair share, just like Americans who make a living. Before the Trump Tax Act, there were too many corporate loopholes and gambling opportunities, and the Trump Tax Act only made things worse, ”he said, referring to the 2017 tax overhaul.
He also said it should reward businesses for job creation in the United States rather than overseas.
Wyden’s comments seemed in line with the ideas Biden had put forward during his presidential campaign. He then proposed raising the corporate tax rate to 28%, setting a tax rate of at least 21% on profits made by multinational companies overseas, imposing taxes on companies that “send jobs overseas to sell products back to America,” and a 15% tax on book income to ensure that every business pays at least a portion of the tax.
Wyden, as chairman of the Senate Tax Writing Committee, will spearhead the search for payment options for an allegedly $ 3 trillion package, but Senator Bernie Sanders, chairman of the Senate Budgets Committee, was not stopped. of two marks of his own Thursday.
Sanders unveiled his corporate tax increase bill, which would raise $ 2.3 trillion, ahead of his own tax panel hearing on Thursday.
Sanders’ bill would raise the corporate tax rate to 35%, higher than Biden’s proposed 28%. This would also make it harder for companies to lower their tax rates by channeling profits through low-tax territories, and it would tax corporate inversions – if a company sets up an offshore subsidiary to benefit from lower tax rates, but its headquarters and business remain in place USA – to the same extent as US companies.
The bipartisan Joint Tax Committee said only the anti-offshoring portions of the bill would raise $ 1.021 trillion over an 11 year period. Sanders also unveiled a corporate tax increase bill that would increase the estate tax by reducing the size of a tax-exempt estate and raising more than $ 400 billion.
While the overhaul of the corporate tax system and the removal of some of its more favorable provisions from the 2017 Republican tax cut could bring big revenue, the Democrats are also exploring smaller-bore ideas like a revival of Barack Obama-era Build America Bonds.
House spokeswoman Nancy Pelosi mentioned bonds in her weekly press conference Thursday as a way to “pay for all of this”. In 2020, when the House Democrats passed a large but largely unpaid infrastructure bill, it included the reinstatement of Build America Bonds, a program favored by House Ways and Means Chairman Richard Neal.
The bonds were similar to local government bonds in that they could be used for investments, working capital, and refinancing old bonds. They were attractive to investors because, despite taxable interest income, investors received a tax credit that could reduce both the regular tax burden and the alternative minimum tax.
Any proposal for higher taxes will cause Democrats political trouble, making the other obvious way of paying for infrastructure more attractive: simply borrowing and adding $ 28 trillion in national debt.
With interest rates near historic lows as a result of the coronavirus pandemic, some economists believe the time is right to borrow and invest for long-term priorities like infrastructure. It’s a suggestion that Pelosi has sounded likable with lately.
At a press conference in early March, Pelosi said former President Trump said he wanted infrastructure but was vague about the details.
“Just when it was time to pay for it, he stormed out the door. But we have to pay part of it. We need to find ways to cover fees, etc. It’s all a discussion that needs to take place now, ”she said.