New York: President Joe Biden vowed Wednesday to make companies like Amazon pay their fair share in taxes to fund his ambitious, $2 trillion infrastructure plan.
He said it was not about “retribution” against the wealthy and successful, but the fact that Amazon pays zero in taxes is “just wrong.”
Biden on Wednesday unveiled the far-reaching plan to shore up the nation’s highways, bridges and ports, as well as fund telecommunications upgrades plus research and development to boost competitiveness, especially compared to China.
A key source of the financing would come from increasing the corporate tax rate from 21 per cent to 28 per cent, and cracking down on the use of tax havens to avoid paying US taxes.
The package already is drawing condemnation from corporations that balk at reversing the tax cuts signed in late 2017 by then-president Donald Trump.
That measure slashed the corporate rate from 35 per cent, although with various deductions and loopholes, the average rate companies actually pay was, and remains, much lower.
Companies in the United States pay an average tax rate of just eight per cent compared with 16 per cent prior to 2017, according to a recent analysis by the Joint Committee on Taxation.
In his speech in Pittsburgh, Biden expressed outrage over the imbalance between taxes paid by the wealthiest corporations and the burden for middle-class workers.
He cited a 2019 study showing 91 Fortune 500 companies, “the biggest companies in the world, including Amazon ... pay not a single, solitary penny of federal income tax.
“That is just wrong.”
“A fireman and a teacher paying 22 per cent and Amazon and 90 other major corporations paying zero in federal taxes? I am going to put an end to that,” the president said.
Even if Congress approves Biden’s proposed increase, a corporate tax rate of 28 per cent still would be the lowest since World War II, with the exception of the past three years.
First enacted in 1909 in the United States, the corporate tax rate got as high as 52.8 per cent in 1968 before a series of cuts in the 1970s and 1980s.
Among members the OECD, the United States has a relatively high official tax rate after France and Colombia at 32 per cent, and Australia, Mexico and Portugal at 30 per cent.
But the average US rate after deductions trails far behind many advanced economies, according to OECD data.
“This is not about penalizing anyone. I have nothing against millionaires and billionaires,” Biden said.
The eight-year investment plan “builds a fairer economy that gives everybody a chance to succeed,” he said, noting it would “create millions of jobs, good-paying jobs.”
Business groups have sent early signs of their opposition to the Biden plan.
“We believe the proposal is dangerously misguided when it comes to how to pay for infrastructure,” the powerful Chamber of Commerce said in a statement.
And the Business Roundtable said it “strongly opposes” a generic corporate tax increase.
However, the group noted it “has long supported user fee models, which includes business paying its share, to provide sustainable support for infrastructure investment.”
Transportation Secretary Pete Buttigieg floated a fee-based measure, but later backtracked.
The Biden plan also aims to crack down on tax havens used by multinationals and raise the global minimum tax to boost revenue collection, according to a White House handout.
Other changes include the elimination of subsidies for fossil fuel development and stiffening tax enforcement on large companies.
The White House estimates the changes would raise more than $2 trillion over the next 15 years and pay for the infrastructure plan.
Dean Baker, economist at the Center for Economic and Policy Research, said Biden’s proposal “is not a big jump into the unknown,” but is merely a compromise between the current rate and the level before Trump took office.
Baker noted proponents of the Trump tax cuts said lowering rates would curtail the use of tax havens and boost capital investment, but neither of those things have happened in a meaningful way.
Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a progressive think tank, defended the proposed tax hike as a practical way to finance the investment.
“Multinational corporations and their shareholders will benefit from improving infrastructure that have been harmed by decay,” Marr said.
“Calling for a partial reasonable reversal of Trump tax cuts to pay for rebuilding our nation’s infrastructure is a very good trade for our economy.”