Evan Vucci/AP Photo
First100-040821
Treasury Secretary Janet Yellen issued more detail on the Biden corporate tax plan yesterday.
It’s April 8, 2021 and welcome to First 100. You can sign up to have First 100 delivered to your email by clicking here.
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The Chief
Right off the top, because when you start writing about revenue offsets and “paying for” spending, you get a lot of pushback: I don’t make the rules, and at least in this case, Joe Manchin does. He gets a readout of the national debt every morning. I don’t agree with him, and I agree that what matters is whether we have the physical resources to accommodate the building in the American Jobs Plan—the employees, the steel, the various inputs. Until Joe Manchin agrees with that, we’re going to get tax offsets in this bill. And if he truly won’t agree to anything unless it’s bipartisan, we won’t get a bill at all.
The Treasury Department just released an updated version of the administration’s plan for tax offsets, entirely on the corporate side, which would raise $2.5 trillion over 15 years. There’s a reason to do this beyond acquiring revenue; the 40 percent reduction in the corporate tax rate from the Trump tax cuts boosted capital over labor, allowed businesses to hoard excess profits, and increased inequality. It’s worth trying to reverse that. Eliminating fossil fuel subsidies and extending clean energy tax breaks, another part of the plan, has obvious benefits for our energy transition, an example of doing policy through the tax code.
President Biden has been saying repeatedly that he’d be happy to negotiate any parts of his bill. Judging from the Treasury paper, he’s already started by negotiating with himself. Many of the features of the paper mirror what Biden already announced: a 28 percent nominal corporate tax rate, a new minimum tax on foreign earnings that includes none of the loopholes of the Trump plan, a new emphasis on IRS enforcement with more resources, and a minimum “book tax” on the income companies disclose on financial statements, to end the spectacle of multi-billion-dollar corporations paying nothing in taxes.
But it’s the book tax where things have been changed. This 15 percent tax would only apply to companies with net income of $2 billion or more. Just 45 companies would have paid it in recent years.
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During the campaign, Biden set that net income threshold at $100 million. It narrows the universe of companies eligible for the book tax from 1,100 to 180. It also increases the number of exemptions companies would get to the book tax, allowing them to keep their tax credits for research, renewable energy, and low-income housing. Certainly Biden wants to encourage those practices, but any time you add exemptions you give a bunch of corporate accountants a lot of ideas. And the book tax is only 15 percent, meaning that you could encourage these measures and still maintain a threshold where large corporations pay some tax. If there are other corporate tax breaks that Biden doesn’t want to encourage, he can eliminate them.
Combine these changes with Commerce Secretary Gina Raimondo yesterday backpedaling on the just-released plan, suggesting that the plan could pay out over more years, or the corporate tax could be lower than 28 percent. “We want to compromise,” Raimondo said.
The Biden administration is under pressure to negotiate because Democrats in Congress are out in front of them. As Reuven Avi-Yonah writes for us today, an international tax plan pushed by Sen. Ron Wyden (D-OR) actually comes out of a 2004 Republican plan. It puts a lower rate on foreign-derived profits, and creates incentives to shift earnings to lower-tax countries. It does not try to crack down on corporate inversions, where a company moves its on-paper headquarters to qualify for lower corporate taxes. It allows domestic tax credits to offset foreign income.
So Biden has narrowed the domestic book income tax, while his colleagues in Congress are trying to narrow the international taxes. Among other things, this really hampers Treasury Secretary Janet Yellen’s ability to get a global agreement on a minimum tax, to prevent tax havens once and for all. Right now, the Biden plan says that foreign companies in countries not signed on to a global minimum lose their tax deductions. The Wyden plan undermines that.
It also invigorates the business community to keep pushing against any changes to corporate taxes. Sure, a couple high-profile CEOs have supported a rise in the nominal rate, but they oppose everything else, and when you pay nothing, whether the nominal rate is 21 or 25 or 28 percent doesn’t matter. Overall, big business is whining about global competitiveness and economic shrinkage, and Democrats weakening the tax plan just feeds that.
Executive (Lack of) Power
I’m certainly the last person to diminish executive action, as I’ve been talking it up for a couple years. But there just isn’t that much you can do on guns under current authority. The Biden administration tried its best with a series of executive actions today, that’s really about the creativity of gun owners as much as anything.
One rule will aim to prevent the sale of “ghost gun” kits which are untraceable and can be assembled within minutes. Another proposes to prevent sales of an arm brace that “effectively turns a pistol into a short-barreled rifle.” These are outgrowths of the massive gun problem in the U.S., but if they were eradicated tomorrow, would there really be fewer guns around?
The rest of the actions involve publishing “red flag” legislation that states would then have to pass; issuing a report on gun trafficking; touting community violence intervention funding in the not-yet-passed American Jobs Plan; a webinar (really) for states on how to increase federal funding for violence intervention programs; and nominating a gun safety advocate to run the Bureau of Alcohol, Tobacco, and Firearms.
There’s just not a lot here. I’m all for using the power of the presidency, but this is an issue where Congress must give the president some more laws to implement.
What Day of Biden’s Presidency Is It?
Day 79.
Today I Learned
- I was on Michael Moore’s podcast, Rumble, talking about the infrastructure package. Listen here. (Apple Podcasts)
- Next Wednesday, April 14th, 7pm EST we're doing a sort of live version of our latest print issue, that will cover three of its main subjects: Climate change, corporate monopolies, and immigration. Register here. (TAP)
- 500,000 signups at HealthCare.gov in the last 6 weeks. (HuffPost)
- We’re at 20 years in Afghanistan and we’re still not pulling out. (Associated Press)
- The administration has given no details on its ending of support for the war in Yemen. (The Intercept)
- No migrant families separated under Trump have been reunited. (Axios)
- No OSHA temporary protective standard, either. This is a real mistake. (Wall Street Journal)
- A CFPB rule that was never promulgated could help American move their money out of big banks. (HuffPost)
