Treasury nominee Janet Yellen speaks after President-elect Joe Biden announced his economic team at the Queen Theater in Wilmington, Delaware on December 1, 2020.
Chandan Khanna | AFP | Getty Images
Janet Yellen, Joe Biden’s election as Secretary of the Treasury, testified Tuesday that the US could afford a higher corporate tax rate if it coordinated with other economies around the world.
“We look forward to actively working with other countries [Organization for Economic Cooperation and Development] Negotiating taxes on multinational corporations in an attempt to stop a destructive global race for corporate taxation, “she responded to a question from Senator Mike Crapo, R-Idaho.
“In this context, we would ensure the competitiveness of American companies even with a slightly higher corporate tax rate,” she added, referring to possible coordinated efforts to support corporate rates.
During his presidential campaign, Biden suggested increasing the corporate rate from the current 21% to 28%. Before the 2017 tax cuts, the U.S. corporate rate was 35%.
Still, Yellen was quick to warn that any plan to aim for a higher corporate rate could only begin after the government believed the US had overcome the coronavirus.
Yellen’s comments came during her testimony before the Senate Finance Committee, which will debate whether she should be confirmed for the Cabinet role. If this were approved by the Senate, Yellen would be the first woman to head the finance department.
Biden “has said that as part of a larger package that would include significant spending and investment proposals – not now while the pandemic is really depressing the economy – he wants to reverse portions of the 2017 tax cuts that benefited the highest. Income Americans and big corporations, “Yellen said.
“He wants to reverse the law’s incentives for offshore operations and profits, but has made it very clear that he does not support a full repeal of the 2017 Tax Act,” she added.
Yellen, 74, also pledged to lawmakers to prioritize the needs of ordinary workers and ensure that the US can offer well-paying jobs to workers in urban and rural areas.
With that in mind, she defended Biden’s $ 1.9 trillion stimulus plan, saying the bill would provide relief to struggling households and businesses and “bang for the buck” for the US economy. The move includes another round of control, expanded and improved unemployment benefits, university funding and the creation of a nationwide vaccination program.
The former Federal Reserve chairman said higher corporate rates would be part of a broader plan to reverse portions of President Donald Trump’s tax bill for 2017 when the economy is strong enough to bear higher taxes.
A key goal of Trump’s Tax Cuts and Jobs Act was to encourage US companies to bring foreign profits into the US and outside of low-tax areas like Ireland and Bermuda. Prior to the bill, many multinational corporations established subsidiaries in low-tax havens to protect US collectors’ profits through back doors.
For example, an American manufacturer could buy goods from its Ireland-based subsidiary, book the profits at a lower rate, and sell the goods in the United States. This is what Yellen called the global “race to the bottom” of the corporate tax ladder, a global competition to attract companies at ever lower rates.
The OECD has been looking for a solution to the downward spiral for years. At the end of 2019, the panel proposed a global minimum tax to apply to companies with income from cross-border activities that pay taxes below a certain level.
What Yellen may have suggested Tuesday is working with other nations to increase corporate rates around the world. That way, if the US wanted to generate more revenue from a corporate rate hike, it could do it more effectively, as corporations wouldn’t have a far more attractive option.