Democrats prepare plan to raise taxes on MNCs | Economic Times

Sen. Ron Wyden, D-Ore., who is in charge of writing tax legislation, will release a new plan Monday to overhaul the way the United States taxes multinational corporations, in what could be a blueprint for how lawmakers will finance President Joe Biden’s infrastructure plan.The proposal could raise hundreds of billions of dollars from companies that operate across international borders, according to analyses of similar proposals by congressional scorekeepers. Sens. Sherrod Brown, D-Ohio, and Mark Warner, D-Va., both signed on as co-authors.In addition to raising revenue, the plan seeks to discourage companies from shifting profits and jobs to low-tax countries to avoid paying taxes in the United States. It also creates new incentives through the tax code for companies to invest in research and manufacturing in the country.The proposal would tweak several aspects of President Donald Trump’s signature 2017 tax law, which created a series of new mechanisms for how the United States taxes multinational companies. It would increase the rate of a global minimum tax that was included in that legislation and change how it is applied to income that corporations earn in various countries overseas. It would also alter two other parts of the 2017 law in ways that the senators say would better encourage investment in America.Those measures mirror the Biden administration’s ambitions on international taxation. Separately on Monday, Treasury Secretary Janet Yellen called for global coordination on an international tax rate that would apply to multinational corporations regardless of where they locate their headquarters. Such a global tax could help prevent the type of “race to the bottom” that has been underway, Yellen said, referring to countries trying to outdo one another by lowering tax rates in order to attract business.“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen said. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”Last week, Biden proposed spending $2 trillion on an infrastructure package, financed over 15 years by higher corporate taxes. That includes raising the corporate tax rate to 28% from 21% and a variety of changes to international tax rates.On Monday, Biden continued to press for those tax increases, saying that companies need to pay their fair share and that there was “no evidence” behind concerns from Republicans that raising tax rates would drive investment out of the United States.“You’re talking about companies in the Fortune 500 that haven’t paid a single penny in tax for 3 years. Come on man,” he said.The president is expected to detail as much as $2 trillion more in education, health care and other spending initiatives later this month, much of which would be financed by raising taxes on high-earning individuals. Biden’s aides have estimated that his international tax proposals could raise more than $600 billion over the course of 10 years.Wyden, in a news release, said that the senators tax plan would “not only generate critical revenue to pay for President Biden’s infrastructure package,” but would also “encourage additional investment in the United States and its workers.”The Senate drafters do not specify the exact new tax rates associated with their plan or how much additional tax revenue it would raise, choosing instead to wait and set rates to match Democrats’ spending ambitions later this year. “I’m going to start rolling out specific proposals so that people can have ideas about how they might proceed,” Wyden said last month.The presence of Brown, one of the most progressive Democrats in the Senate on tax issues, and the more centrist Warner as co-authors suggests the Wyden plan could attract widespread support in a Democratic caucus that most likely cannot afford to lose a single vote for Biden’s infrastructure plan.Brown said in a statement on the plan that “corporations should pay their fair share, just like Ohio families do, and they shouldn’t get a tax break for shipping workers’ jobs overseas.”Warner argued that the proposal would provide an incentive to invest in the United States, saying “we need an international tax system that rewards companies making investments here in the U.S., particularly in cutting-edge technologies that will dictate the future success of our economy and ability to create good-paying jobs.”