Treasury Secretary Janet Yellen on Wednesday unveiled a plan to hike corporate taxes that would raise $2.5 trillion over 15 years — to pay for the $2.3 trillion infrastructure overhaul proposal introduced last week by President Biden.
The plan is underpinned by an increase of the corporate tax rate from 21 percent to 28 percent, and it also features a global minimum tax rate of about 21 percent and a “minimum book tax” of 15 percent that all big companies would pay, Yellen said.
Biden last week proposed a $2.3 trillion infrastructure plan that would largely be funded by an increase in the corporate tax rate to 28 percent and an expanded global minimum tax set at 21 percent.
Yellen said the plan would double-down on workers’ skills and traditional infrastructure such as roads and bridges as well as modern infrastructure such as broadband. The increases would produce roughly $2.5 trillion in revenues over 15 years, enough to cover the eight years’ worth of infrastructure investments being proposed.
Addressing reporters on a conference call, Yellen disputed the idea that tax hikes have to come at the expense of everyday Americans.
“Tax reform is not a zero-sum game,” she said. “Win-win is an overused phrase, but we have a real win in front of us now.”
Part of the Biden administration’s pitch on the tax hikes is that they would restore corporate tax revenues to historic levels seen prior to Trump-era cuts, not raise them to new highs.
Yellen argued that former President Donald Trump’s 2017 cuts to the corporate tax rate failed in their stated purpose of jump-starting the economy, while contributing to a global “race to the bottom” as other nations moved to lower their own corporate tax rates to stay competitive on big business.
The tax hikes are designed to offset the cost of a sweeping $2.3 trillion spending package Biden introduced last week, which includes allocations for both traditional infrastructure projects and a slew of other improvements, such as national access to broadband internet, overhauls to the nation’s water supply and updates to public transit systems.
But the proposal has drawn criticism from business groups such as the U.S. Chamber of Commerce and the Business Roundtable, which argue that higher taxes would hurt U.S. companies operating worldwide and the wider economy.
The Penn-Wharton Budget Model issued a report Wednesday saying the combined spending and taxes would cause government debt to rise by 2031 and then decrease by 2050. But following the plan, GDP would be lower by 0.8% in 2050.
The measure is also expected to encounter fierce Republican, and some Democratic, resistance in Congress due to its eye-popping price tag, tax hikes and details of what is and what is not being spent on.