Democrats are focusing on increasing the corporate tax rate from the current 21% to 28% as one of the easiest ways to find new revenue for an infrastructure package.
The big picture: While many senators signal that President Biden’s next expensive bill must come with a way to pay it, the White House and its Democratic allies are increasingly confident that they can get there, in part, by raising corporate taxes.
- “We must pay for this unique infrastructure package in a generation,” Senator John Hickenlooper (D-Colo.) Told Axios. “I look forward to working with my colleagues on how to achieve this goal, including responsible definition of the corporate tax rate.”
Driving the news: The White House is beginning to telegraph Biden’s priorities for new revenue – without envisioning the full strategy.
- “If we just took the (individual) tax rate back to what it was when Bush was president – the maximum rate pays 39.6% in federal taxes – that would raise $ 230 billion, “the president told ABC News.
- And Bharat Ramamurti, deputy director of the National Economic Council, told Bloomberg TV on Tuesday: “The president firmly believes that the biggest corporations and those people who have done extremely well in the past few decades should pay a little more.”
Ike Brannon, a senior member of the Jack Kemp Foundation, he said Democrats may feel politically isolated, at least in the short term, because “rising corporate tax rates don’t seem to irritate many people, and their main drawback – reduced economic growth and jobs – is not immediately apparent”.
Flashback: Before the Trump administration, the business community was pushing to reduce the corporate rate from 35% to 25%.
- Trump fell to 21%.
- Biden and his allies are convinced that much of Trump’s corporate cuts were for share buybacks, rather than new hires.
Between the lines: Democrats suspect that, after the negotiations, Congress will set a corporate tax rate between 25% and 26%, less than the 28% proposed by Biden. This would generate up to $ 500 billion.
- “Biden believes that we need to make critical investments in infrastructure and research and development,” said Sarah Bianchi, who advised him during the campaign. “Some of our biggest companies can pay a little more to help make that happen.”
The other side: “Democrats may think that 24% to 25% is an easy fruit to achieve,” said Rohit Kumar, co-leader of PwC’s national tax office. “But the battle has not yet started.”
- The Business Roundtable “will actively oppose efforts to raise corporate taxes,” CEO Joshua Bolten told reporters last week.
- “Everyone loves infrastructure until you need to figure out how to pay for it,” said Caroline Harris, vice president of tax policy at the Chamber of Commerce.