The coming corporate tax hike
Democrats are zeroing in on raising the corporate tax rate from its current 21% to 28% as one of the easiest ways to find new revenue for an infrastructure package.
The big picture: While many senators are signaling that President Biden’s next big-ticket bill must come with a way to pay for it, the White House and its Democratic allies are growing confident they can get there, in part, by increasing corporate taxes.
- “We should pay for this once-in-a-generation infrastructure package, “ said Sen. John Hickenlooper (D-Colo.) told Axios. “I’m eager to work with my colleagues on how to achieve this goal, including responsibly setting the corporate tax rate.”
Driving the news: The White House is starting to telegraph Biden’s priorities for new revenue — without previewing the full strategy.
- “If we just took the (individual) tax rate back to what it was when Bush was president — top rate paid 39.6% in federal taxes — that would raise $230 billion," the president told ABC News.
- And Bharat Ramamurti, deputy director of the National Economic Council, told Bloomberg TV on Tuesday: “The president believes strongly that the biggest corporations and those folks who have done extremely well over the last several decades should pay a bit more.”
Ike Brannon, a senior fellow at the Jack Kemp Foundation, said Democrats may feel politically insulated, at least in the short term, because “increasing corporate tax rates doesn't seem to anger too many people, and their major downside — reduced economic growth and jobs — aren't readily apparent.”
Flashback: Prior to the Trump administration, the business community was pushing to lower the corporate rate from 35% to 25%.
- Trump dropped it to 21%.
- Biden and his allies are convinced much of Trump’s corporate cuts went to share-buybacks rather than new hiring.
Between the lines: Democrats suspect that after negotiations, Congress will settle on a corporate tax rate between 25% and 26%, less than Biden's proposed 28%. That would raise as much as $500 billion.
- “Biden believes that we need to make critical investments in infrastructure and research and development,” said Sarah Bianchi, who advised him during the campaign. “Some of our largest companies can pay a little more to help make that happen.”
The other side: “Democrats may think that 24% to 25% is low-hanging fruit,“ said Rohit Kumar, co-leader of PwC’s national tax office. “But the battle is not yet joined.”
- The Business Roundtable “will be actively opposing efforts to raise corporate taxes,” CEO Joshua Bolten told reporters last week.
- "Everyone loves infrastructure until you have to figure out how to pay for it,” said Caroline Harris, vice president of tax policy at the Chamber of Commerce.