The plan also endorses Biden’s proposal to change the way companies calculate tax so that they cannot average their GILTI tax accounts across all their overseas operations, which tends to reduce their tax accounts. But while Biden proposed to require companies to calculate tax on a country-by-country basis, senators suggested allowing companies to split their accounts between countries with high taxes and countries with low taxes, on the theory that it would be easier to manage.
And while Biden proposed to explode another tax known as the Base Erosion and Anti-Abuse Rate and eliminate an export incentive known as Foreign-Derived Intangible Income, tax writers would retain both, but would make a number of changes.
“The international tax system should focus on rewarding companies that invest in the US and their workers, stop encouraging companies to change jobs and investments abroad and ensure that large corporations are paying their fair share,” says the structure nine pages.
“These reforms would not only make our international tax system better, but they could also increase the revenue needed to invest in America.”
The plan comes at a time when Democrats are leaning towards tax increases on large corporations to generate revenue to pay for your infrastructure plan.
Biden started the debate last week, with a proposal to raise corporate taxes to offset the cost of his infrastructure plan. Congress will make many changes to the plan, with the House’s top tax drafter suggesting last week that it will come up with alternative proposals.
It is also possible that lawmakers will end up discarding some or all of the tax increases and adding the cost of their spending package to the deficit.
The proposal released on Monday is notable for representing a large swath of the political spectrum within the Democratic Senate bench, with Brown on the progressive side and Warner being more moderate.
Their structure does not yet have many numbers – it does not propose a specific rate for GILTI, for example. That’s because Democrats predict they will adjust rates according to the amount of money they decide they need to raise.
Like the government, Senate Democrats are working within the international tax system established by Republicans as part of their 2017 tax law, although they want to make it much more rigid. Democrats’ proposals would bring it closer to a pure “worldwide” tax system, in which the United States tries to tax companies regardless of where they are operating.
Senators want to rewrite BEAT to restore tax incentives for things like solar energy and affordable housing that companies can now lose with the tax. They are also proposing a second higher BEAT tax range, along with the current 10%.
“BEAT must be reformed to capture more revenue from companies that are eating away at the US tax base and using that revenue to support companies that are actually investing in America, ”says the plan.
Lawmakers also want to grant FDII benefits to companies based on how much they spend on things like research and development and worker training in the United States.