Senior Democratic senators have laid out detailed plans for a minimum tax on corporate profits for 200 of America’s biggest companies, as lawmakers from Joe Biden’s party scramble to salvage a deal on his ambitious Build Back Better agenda.
Elizabeth Warren, the progressive Democratic senator from Massachusetts; Angus King of Maine; and Ron Wyden, the Democratic senator from Oregon who chairs the Senate finance committee, published a new proposal on Tuesday evening intended to close tax loopholes and raise revenue for the Treasury.
The lawmakers said the measure would require companies that report more than $1bn in profits to shareholders pay at least 15 per cent of those back in taxes. They added that the proposal would apply to about 200 corporations. King later told reporters the plan would raise between $300bn and $400bn in revenue over a 10-year period.
The changes, which would limit firms’ ability to use tax loopholes and claim deductions to reduce their tax base, are designed to offset the cost of Biden’s legislative plans to pour federal funds into early childhood education, public healthcare and clean energy.
The White House originally proposed a sweeping $3.5tn investment in America’s social safety net. But Democratic lawmakers have for weeks been engaged in tense talks over how to whittle down the package to satisfy the demands of two conservative Democratic senators — Joe Manchin of West Virginia and Kyrsten Sinema of Arizona — who wield outsized influence given that Democrats control the Senate, 50-50. Kamala Harris, vice-president, is able to cast a tiebreaking vote.
Senators Warren, King and Wyden said their plan was designed to prevent America’s largest corporations from avoiding paying federal taxes. The senators cited the example of Amazon, which despite reporting $45bn in profits over the past three years paid an effective tax rate on its profits of 4.3 per cent — compared to the current corporate tax rate of 21 per cent.
In an important endorsement of the proposal, Sinema issued a statement calling the planned tax changes a “common sense step toward ensuring that highly profitable corporations — which sometimes can avoid the current corporate tax rate — pay a reasonable minimum corporate tax on their profits”.
Sinema had previously proved a thorn in the side of the Biden administration when she made it clear earlier this month that she opposed the White House’s proposals to increase America’s corporate tax rate from 21 per cent to 25 per cent, along with increases in individual income and capital gains taxes for the country’s richest households.
The White House had initially suggested increasing the corporate tax rate to 28 per cent, in a partial reversal of Donald Trump’s 2017 tax cuts, but subsequent negotiations on Capitol Hill initially made a 25 per cent benchmark seem more feasible.
Manchin, who had also raised concerns about raising the corporate tax rate, did not immediately comment on Tuesday. But Warren told reporters she expected he would sign on to the proposal.
The apparent agreement among senators marks a significant breakthrough for Democratic lawmakers as they rush to clinch a wider deal on Biden’s legislative agenda before the president flies to Europe for the G20 and COP26 meetings on Thursday.
Any deal will need to be approved by both the Senate and the House of Representatives, which Democrats control by a narrow margin. House progressives have made clear that they will not support a separate $1.2tn bipartisan infrastructure package unless they are satisfied with the revised Build Back Better Plan.
Nancy Pelosi, the Democratic Speaker of the House, has said lawmakers need to find compromise before Saturday, when annual federal funding for highways and other infrastructure is due to run out. Biden told reporters on Monday that he hoped a deal could be reached before he leaves the country.
Wyden is separately expected to publish details on Wednesday of a proposed tax increase for between 600 and 700 of America’s billionaires. The senator has suggested imposing a new tax on billionaires’ assets, in another effort to rake in revenue for the Treasury to offset the cost of the increase in social spending. It remains unclear whether Wyden’s “billionaire tax” proposal would receive unanimous support among Democrats on Capitol Hill.