Democratic Senator Elizabeth Warren on Monday proposed paying part of the Liberal Senators’ $ 3.5 trillion spending package by closing corporate tax loopholes that allow profitable corporations not to pay Uncle Sam anything.
Ms. Warren of Massachusetts said the proposal would raise $ 700 billion over the next decade.
But while Ms. Warren put her proposal to force corporations to pay their “fair share,” a center-right tax policy group warned that by lowering corporate profits, the move would cost jobs and lower Americans’ wages would.
Still, Ms. Warren and Senator Angus King, an independent Maine sitting down with the Democrats, called for a rethinking of taxation on the country’s most profitable corporations.
“Now is the time to put revenue on the table to pay for our investments in childcare and climate protection,” said Ms. Warren on Monday. “I believe the revenue should come from billionaires and huge corporations that have evaded taxes for too long,” she said.
Mr King said it was unclear whether the proposal could get the unanimous support it needs from Senate Democrats to be included in the package.
The Democrats plan to pass the $ 3.5 trillion “human infrastructure” bill without Republican support through a process called budget reconciliation.
However, all 50 Senate Democrats would have to participate, including moderate Senator Joe Manchin III from West Virginia and Kyrsten Sinema from Arizona. Mr. King said he had received no commitments from either of them. The spokesmen for the two moderates did not immediately respond to inquiries.
However, Mr. King and Mrs. Warren were optimistic. “I would be surprised if there is a lot of resistance,” King said of his Democrats. “For me, that’s common sense.”
Ms. Warren said President Biden made a similar proposal during the campaign. “Democrats across the board think we should get companies to pay their fair share.” Currently, she said, federal tax credits and loopholes allow businesses to avoid taxes, including the money they spend on research and development and the profits they make overseas.
Companies calculate how much profit they make to impress the public and investors, but report a much smaller amount to the IRS because of the tax breaks, she said.
“They tell their shareholders that they made billions in profits, then tell the IRS that they didn’t make any money and don’t have to pay their taxes,” Ms. Warren said.
The Liberal Institute of Taxes and Economic Policy, in March, examined the amount of taxes paid by 258 companies that were profitable every year from 2008 to 2015% of their revenues, taking into account tax breaks.
The study found that 18 companies, including Netflix, General Electric, International Paper, Priceline.com, and PG&E, didn’t pay any federal income tax at all in the eight years.
One-fifth of the companies, 48, paid an effective tax rate of less than 10% during this period. Amazon’s tax rate was only 9.4%, the study found.
According to Ms. Warren’s proposal, tax loopholes would be eliminated. Instead, companies would be exempt from paying tax on the first $ 100 million in profit they disclose to investors, but would pay 7% tax on any excess income. Ms. Warren said the tax would affect 1,300 public companies and an unknown number of private companies. Spokespeople for Netflix, General Electric, International Paper, Priceline.com, and PG&E did not return requests for comment.
Amazon’s senior vice president of policy, Jay Carney, an Obama administration spokesman in the White House, said in March that Congress had repeatedly ruled that the research and development exception was warranted.
“If the R&D tax credit is a ‘loophole’, this is certainly a Congress that is strongly intended. The R&D tax credit has been in place since 1981, renewed 15 times with bipartisan support, and made it permanent in a law signed by President Obama in 2015, ”he tweeted.
An adviser to the House of Representatives Republican Trade Committee denied the idea that corporations are not paying their fair share.
While Mr Trump’s tax cuts cut the corporate tax rate from 35% to 21% in 2017, the adviser cited a forecast by the Congressional Budget Office that companies will pay $ 379 billion in taxes in 2023, a record high, less than the $ 395 billion the CBO had forecast for the year before Trump’s cut.
The Center-Right Tax Foundation determined that Ms. Warren’s tax increases would come at a cost. In an April study, the foundation said the higher taxes would make investors less willing to invest. About 454,000 jobs would be lost and wages would fall by 1.5%. It would also reduce gross domestic product by 1.9%.
The study also questioned how much money the proposal would make. The foundation estimated that companies would pay $ 872 billion more in taxes between 2020 and 2029. But because of the loss of jobs and wages, the federal government would only pull in an additional $ 476 billion over the decade.
“The Real Corporate Profits Tax would distort investment decisions by subjecting corporate investments to additional taxation,” the study concluded. “As such, that tax would fall on US workers in the form of lower wages.”
Democrats are looking for ways to pay for the spending package, a wish list of Democratic priorities like subsidized childcare, paid vacation, toll-free community college, climate change initiatives, and expansions of Medicaid and Medicare.
Some of the revenue proposals include lifting the 2017 tax cuts, forcing pharmaceutical companies to lower the prices they charge for Medicare, and increasing corporate and international taxes and high earning rates. The Democrats also plan to expand the power of the IRS to crack down on tax offlaws and introduce a “carbon polluter import fee”.
Mr Biden has proposed increasing the corporate tax rate from 21% to 28% in order to pay for the reconciliation proposal.