Treasury Secretary Janet Yellen will reportedly call for a global minimum corporate tax rate to prevent U.S. companies from relocating offshore in response to the Biden administration’s forthcoming tax hikes, Axios reported on Monday.
The news outlet made clear that “by trying to convince other countries to impose a global minimum tax, Yellen is acknowledging the risks to the American economy if it acts alone in raising corporate rates.”
The administration has proposed initiating the largest tax hike in almost 30 years to pay for President Biden’s more than $2 trillion American Jobs Act — a bill slated to fund America’s “infrastructure” but that also finances major policy progressive policy initiatives such as climate research, green energy, and free education in addition to highways, bridges, and roads.
The tax changes include raising the country’s corporate tax rate from 21% to 28%, a move that conservatives and moderate congressional Democrats have argued could be devastating for the American middle class.
In a speech to the Chicago Council on Global Affairs on Monday, Yellen is expected to push for all other industrialized nations to raise their corporate tax rates to a minimum standard, as well, to ensure economic “competitiveness” worldwide. However, she will reportedly argue that the tax rate minimum is for the main purpose of ensuring those foreign countries have enough revenue to maintain their own governments.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” the secretary plans to say, according to an excerpt of her prepared remarks obtained by Axios. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
“We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom,” she will state.
During Donald Trump’s presidency, the business-minded Republican slashed the U.S. rate from 35% — a global high — to 21%, arguing the previous rate put American companies at a global disadvantage and resulted in many of them moving their businesses abroad.
According to the Tax Foundation, a conservative tax group, the worldwide average corporate tax rate is just under 24%.
Axios reported that Biden has tasked Yellen with convincing the business community that the massive infrastructure proposal and subsequent tax increases won’t lead to inflation, a tall order by all accounts. Apparently, in the face of pressure, Yellen will look for significant international assistance.