President Biden on Monday defended his push to raise corporate taxes to pay for trillions of dollars in infrastructure spending, while Treasury Secretary Janet L. Yellen said she is working with G-20 countries to create a global minimum tax that would discourage U.S. companies from moving overseas to avoid higher taxes at home.
But the president’s plan suffered a blow Monday when a key Senate Democrat, Sen. Joe Manchin III of West Virginia, said he won’t go along with the full amount of Mr. Biden’s proposed corporate tax increase. He said the proposal “needs to be changed.”
Mr. Biden, returning to Washington from a weekend at Camp David, told reporters he’s “not at all” worried that a higher tax rate will drive companies out of the U.S.
“There’s no evidence of that,” Mr. Biden said. “You’re talking about companies in the Fortune 500 that haven’t paid a single penny in tax for three years. Come on, man.”
Ms. Yellen on Monday called for global coordination on an international tax rate that would apply to multinational corporations regardless of where their headquarters are located. She said such a global tax could halt the “30-year race to the bottom” in which countries have competed against each other by lowering their corporate tax rates, as the U.S. did under President Trump.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Ms. Yellen told 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 and respond to crises, and that all citizens fairly share the burden of financing government.”
She said Mr. Biden understands “it is important to work with other countries to end the pressures of tax competition and corporate tax base erosion.”
“We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom,” she said. “Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity.”
The president wants to raise the corporate tax rate from 21% to 28% to help pay for his $2.25 trillion infrastructure plan. In 2017, President Trump cut the U.S. corporate rate from 35% to 21%, saying America needed to be more competitive with other countries.
“I’m going to push as hard as I can, to compete with the rest of the world,” Mr. Biden said Monday. “Everybody else in the rest of the world is investing billions and billions of dollars in infrastructure and we’re going to do it here.”
Congressional Republicans oppose the plan. Mr. Biden criticized them as hypocritical, saying they favored infrastructure spending before he became president.
“When the Republicans put forward an infrastructure plan, they thought everything from broadband to other things were worth paying for infrastructure,” Mr. Biden said. “They know we need it.”
Mr. Manchin told a West Virginia news outlet on Monday that he wouldn’t support raising the corporate tax rate from 21% to 28% to pay for increased infrastructure and social-welfare spending. The lawmaker said he favors closing tax “loopholes” for the wealthy and could support an increase in the corporate rate to 25%, calling that level with the global average.
“As the bill exists today it needs to be changed,” Mr. Manchin said on WVMetroNews radio. “This bill will not be in the same form you’ve seen it introduced or see people talking about it.”
Mr. Biden would impose a 21% tax on profits that U.S. companies earn in each country where they operate and would prevent them from blending the rate they pay across all nations. Companies currently pay as little as 10.5% on foreign earnings.
A U.S. Treasury official told reporters that it was important to have the world’s biggest economies endorse a global minimum tax to make it effective, but didn’t say how many countries were needed.
The U.S. has been discussing a minimum tax with about 100 other nations, including members of the Organization for Economic Cooperation and Development, a 37-nation group of the world’s developed countries. OECD finance ministers discussed such a plan in 2019 that would discourage companies from shifting profits to low-tax countries, but the proposal was not implemented.
Ms. Yellen also said she would use meetings this week of the International Monetary Fund and the World Bank to advance talks on climate change and improving COVID-19 vaccine access for poor countries.
“We will fare better if we work together and support each other,” she said.
Senate Minority Leader Mitch McConnell has said the GOP will fight the president “every step of the way” on his infrastructure and tax proposals. Mr. Biden said Republicans’ view of infrastructure has “changed.”
“When you’re in a situation where you can’t turn on the water fountain in school, and worry you’re going to drink polluted water that affects your health, replacing all those pipes is infrastructure,” Mr. Biden said. “When I’m talking about making sure that you take that asbestos out of schools, that’s infrastructure. When I’m talking about building high-speed rail, that’s infrastructure. When I’m talking about making sure you’re in a situation where we can re-do some of the federal buildings that are just absolutely leaking energy every single day, that’s infrastructure. And it gets to the roads and bridges and highways and broadband.
“So it’s interesting how their definition of infrastructure has changed.”