WASHINGTON (AP) — U.S. Treasury Secretary Janet Yellen on Monday urged the adoption of a minimum global corporate income tax, an effort to offset any disadvantages that might arise from the Biden administration’s proposed increase in the U.S. corporate tax rate.
Citing a “30-year race to the bottom” in which countries have slashed corporate tax rates in an effort to attract multinational businesses, Yellen said the Biden administration would work with other advanced economies in the Group of 20 to set a minimum.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen said in a virtual speech to the Chicago Council on Global Affairs. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods.”
The speech was Yellen’s highest profile so far on international affairs, and came just as the spring meetings of the World Bank and International Monetary Fund began in a virtual format.
“It is important to work with other countries to end the pressures of tax competition and corporate tax base erosion,” Yellen said.
Sen. Pat Toomey, R-Penn., said that Yellen’s proposal was unlikely to make much progress overseas. He also said Republicans should reverse any corporate tax hike if they regain a congressional majority in upcoming elections.
President Biden has proposed hiking the U.S. corporate tax rate to 28% from 21%, partially undoing the Trump administration’s cut from 35% in its 2017 tax legislation. Biden also wants to set a minimum U.S. tax on overseas corporate income, and to make it harder for companies to shift earnings offshore. The increase would help pay for the White House’s ambitious $2.3 trillion infrastructure proposal.
Also on Monday, Biden said he is “not at all” concerned that a higher corporate tax rate would cause some U.S. companies to relocate overseas, though Yellen’s global minimum corporate tax is intended to prevent that from happening.
According to the Tax Foundation, a right-leaning think tank, the Trump administration’s corporate tax reduction lowered the U.S. rate from the highest among the 37 advanced economies in the Organization for Economic Cooperation and Development to the 13th highest. Many analysts have argued, however, that few large U.S. multinationals paid the full tax.
“We have 51 or 52 corporations from the Fortune 500 who haven’t paid a single penny a day for three years?” Biden said. “Come on.”