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Analysis: White House, U.S. companies could agree on 25% tax rate, officials, business groups say

PoliticsApr 07, 2021 05:45PM ET
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© Reuters. President Biden speaks about jobs and the economy from the White House in Washington

By Jarrett Renshaw

(Reuters) - President Joe Biden has championed raising the U.S. corporate tax rate to 28% from 21% as the main way to fund his $2 trillion infrastructure plan, but few people in Washington, including inside the White House, really think the rate will land there.

Biden made it clear on Wednesday that he is open to compromise, after a reporter asked if he would be willing to agree on a tax rate below 28%.

"I'm willing to listen to that, I'm wide open to it," Biden said.

Reuters interviewed more than a dozen corporate and White House officials engaged in the infrastructure push. Most expect the White House and business groups to compromise on a 25% corporate tax rate - a level neither side would have chosen, but both can live with.

"We don't like it, but we expect to be at 25 percent," a lobbyist at a top U.S. energy firm said, requesting anonymity. "If so, we are going to consider that a win."

The U.S. corporate tax rate dropped to 21% from 35% after the 2017 tax cut pushed by former President Donald Trump and his fellow Republicans, but many big U.S. companies pay much less. Increasing what companies pay into the more than $4 trillion federal budget is an important part of Democrat Biden's plan to restructure the U.S. economy to reduce inequality and try to counter China's rise.

U.S. multinational companies including Alphabet (NASDAQ:GOOGL) Inc's Google, Facebook Inc (NASDAQ:FB) and Merck & Co are among several that have been adept at reducing their taxes, tax and legal experts said.

Amazon.com Inc (NASDAQ:AMZN) supports a hike in the corporate tax rate https://www.reuters.com/article/idUSKBN2BT30J as part of an infrastructure overhaul, Jeff Bezos, chief executive of the largest U.S. retailer, said on Tuesday. Biden said last week that Amazon was one of 91 Fortune 500 companies that "use various loopholes where they pay not a single solitary penny in federal income tax," in sharp contrast to middle class families paying over 20% tax rates.

Biden's infrastructure and investment package includes roads and bridges and funding for affordable housing and elder care workers, among other items.

In addition to raising the corporate tax rate, the White House is pushing a minimum U.S. and global tax for companies, and increasing enforcement of tax laws, Treasury Secretary Janet Yellen said on Wednesday.

OPPOSITION

Trade groups, including the U.S. Chamber of Commerce, and U.S. Senator Joe Manchin, a Democrat from West Virginia who is a moderate on some issues, have said the 28% rate is too high. However, Manchin, whose support is crucial to any bill passing in the 50-50 Senate, said he could support a rate of 25%.

The White House knew that proposing an increase to 28% would face opposition, including from some Democrats. It is prepared to discuss alternatives - including setting the rate to 25%, three administration officials familiar with the discussions told Reuters.

Unlike the coronavirus pandemic relief bill passed by Congress and signed into law by Biden in mid-March, where expiring unemployment benefits created a sense of urgency, the White House believes the infrastructure plan can be debated, and expects Congress will play a more pivotal role.

In 2013, then Vice President Biden and President Barack Obama proposed cutting the corporate tax rate to 28% from 35% and to 25% for manufacturers, but Republicans in Congress blocked the plan https://www.reuters.com/article/us-usa-obama/obama-offers-grand-bargain-on-corporate-tax-rate-infrastructure-idUSBRE96T0F820130730. So far, Republicans have voiced no support for raising corporate taxes, and criticized the plan for being too large.

"Debate is welcome. Compromise is inevitable. Changes are certain," Biden said during a speech at the White House on Wednesday. He said he would soon invite Republican lawmakers to the White House and that the administration is "open to good ideas and good-faith negotiations."

Increasing the corporate tax rate to 28% from 21% is expected to generate $850 billion, a significant chunk of Biden's proposal, according to the non-profit Committee for a Responsible Federal Budget public policy organization.

At 25% a little under $500 billion would be generated, the committee said, forcing Democrats to search for additional revenue streams or cut spending.

That effort will be made more complicated by Biden’s campaign pledge to not raise taxes on any American earning less than $400,000, making items such as raising the gas tax or establishing a per-mile tax politically toxic.

"It’s a very difficult tax pledge and promise," said the committee's president Maya MacGuineas.

Analysis: White House, U.S. companies could agree on 25% tax rate, officials, business groups say
 

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Comments (9)
Carlos Escobar
SELLxTHExTOP Apr 08, 2021 4:32AM ET
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Biden is ridicolous. Will transform America into another italy. Full of debt and money spent for get only his friends and supporters rich. Please, someone make the kennedy move
Konstantin Belyavskiy
Konstantin Belyavskiy Apr 08, 2021 2:44AM ET
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America should introduce VAT (in Europe 19-24%) while reducing other taxes. VAT protects local production from cheap imported goods. Defense spending cut is another option.
George Jetson
George Jetson Apr 07, 2021 11:39PM ET
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agreess to a flat tax of 25 percent and the government will let me park my money on a island with no taxes .
Roger Miller
Roger Miller Apr 07, 2021 10:09PM ET
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Did they also consult with the millions of entrepreneurs aspiring to grow their business’, or just the ones who’ve already made it, the corporations with big bank accounts?
Nick Glaser
Nick Glaser Apr 07, 2021 9:47PM ET
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We the people eventually pay corporate taxes. Either in lost US jobs or higher prices for goods and services
Roger Miller
Roger Miller Apr 07, 2021 9:47PM ET
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Your bang on... money is never just sitting idle, corporations (or people for that matter) don’t keep it under the bed in shoe boxes, it’s mostly always already invested in the economy. Government just takes a bigger share to waste.
Gabriel Watson
Galaxybane Apr 07, 2021 8:23PM ET
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Let me understand here... so first you block all sun from the lawn (lockdowns), then you give less water all over, so truly the smaller businesses won't thrive at all.
Tru Gfu
Tru Gfu Apr 07, 2021 6:10PM ET
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25% is nothing. this is after huge loopholes and tax credits and subsidies and bailouts...
danny Levine
danny Levine Apr 07, 2021 6:10PM ET
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I don't understand why you would want to pay more taxes. the government never spend it efficiently
danny Levine
danny Levine Apr 07, 2021 5:59PM ET
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I no longer blame companies moving out of America. the establishment just want to rob the people
danny Levine
danny Levine Apr 07, 2021 5:57PM ET
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daylight robbery.
 
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