Janet Yellen will use her first major speech as Treasury secretary to argue for a global minimum corporate tax rate, Axios learned, while she defends President Biden’s plan to raise US corporate taxes to finance his $ 2 infrastructure plan trillion +.
Why does it matter: Convincing other countries to impose a global minimum tax would reduce the likelihood that companies will move abroad, as Biden seeks to increase the corporate rate from 21% to 28%.
- “Competitiveness is more than how companies based in the United States fare against other companies in global merger and acquisition offers,” Yellen will say today in a speech at the Chicago Council on Global Affairs, according to an excerpt from his prepared comments obtained by Axios.
- “It is about ensuring that governments have stable tax systems that generate enough revenue to invest in essential public goods and respond to crises, and that all citizens share fairly the burden of financing the government.
- “We are working with the G20 countries to agree on a minimum global corporate tax rate that could prevent the race to bottom.”
The big picture: President Trump lowered the US rate from 35% to 21%, arguing that American companies were at a global disadvantage and were being encouraged to move abroad.
- The average corporate rate in the G7 is 24%, with about nine countries recently reducing their corporate rates, according to the Tax Foundation, a conservative tax group.
- Biden’s plan would also raise the minimum international rate for foreign profits for American companies from 10.5% to 21%, which would still be lower than the domestic corporate rate of 28%.
Driving the news: Biden hired five cabinet secretaries to explain – and sell – his plan to the American public, including transport secretary Pete Buttigieg, energy secretary Jennifer Granholm, housing and urban development secretary Marcia Fudge, labor secretary Marty Walsh and trade secretary Gina Raimondo.
- Yellen’s task is to make the case international. His speech also aims to set the tone for the annual spring meetings of the International Monetary Fund and the World Bank in Washington, which will begin almost this week.
Between the lines: Biden has been counting on Yellen to convince the business community and reassure Wall Street that his $ 2 trillion + infrastructure proposal, in addition to his $ 1.9 trillion stimulus package, will not lead to inflation.
- Now he is employing it to convince international finance ministers and central bankers that the world’s largest economies need to act together on corporate rates to avoid a race to the bottom.
Go deeper: Yellen will also challenge the world’s economic powers to focus on climate change and ways to improve access to vaccines for the world’s poorest countries.
- It will ask for $ 650 billion in new “Special Drawing Rights” – essentially IMF credit lines that can help developing countries access more US dollars.
- The Trump administration was skeptical of the new SDR allocations and many Republicans in Congress are still opposed.
The final result: In trying to convince other countries to impose a global minimum tax, Yellen is recognizing the risks to the American economy if he acts alone in raising corporate rates.
- “Together, we can use a global minimum tax to ensure that the global economy thrives on the basis of a more equitable playing field in the taxation of multinational corporations and stimulates innovation, growth and prosperity,” she will say.