Politics White House Sees GOP’s Corporate Tax-Cut Defense as a Big Loser
Louisiana Legislature prepares to enter tax-heavy session
"Tax reform" means different things to different people, but a lot of people across the political spectrum seem to think Louisiana needs it. © Provided by Washington Examiner As usual during odd-numbered years, the regular legislative session that starts Monday is focused on taxes and spending, though lawmakers can propose up to five nonfiscal bills each. Gov. John Bel Edwards, who saw his own attempt at a comprehensive tax overhaul rebuffed in 2017, did not include any tax measures in his legislative agenda.
(Bloomberg) -- The White House views Republican attacks on President Joe Biden’s proposal to use corporate tax hikes to pay for a vast infrastructure program as a losing argument in the battle for public opinion, aides and allies of the administration say.
The GOP -- which successfully painted the Obama-Biden administration’s initial spending programs as economically ineffective and wasteful in the run-up to the 2010 congressional elections -- has joined with the business lobby in the past week to assail Biden’s proposed tax increases. The plan, its opponents argue, will hobble American corporate competitiveness and hold back the recovery from Covid-19.
Why some of the most liberal Democrats in Congress want to bring back a tax break for the rich
Democrats want to raise taxes. So why are they debating cutting them for some well-off taxpayers?In their 2017 tax bill, Republicans partially closed a tax loophole that mainly affected higher-income people in high-tax areas — i.e., relatively well-off people in blue states. They capped the state and local tax deduction (SALT) people can take when calculating their federal income tax at $10,000. People can still deduct state and local taxes from their federal tax bill, but only up to that point.
Biden and his team are confident, however, that they’re on the winning side of the debate. The president on Wednesday made his second public appeal in a week for his $2.25 trillion spending plan, funded by higher levies on both domestic and overseas corporate income.
“The tax cuts that were passed in 2017 provide a really important case study,” Heather Boushey, a member of the White House Council of Economic Advisers, said in an interview. “Looking back at the Tax Cuts and Jobs Act, which did not catalyze that private-sector investment, that’s what we’re trying to reverse.”
President Donald Trump’s tax overhaul cut the U.S. corporate tax rate to 21% from 35%, while revamping international codes in an effort to encourage firms to bring income back home. Many, however, deployed their added cash to reward shareholders -- not to bolster wages or investment.
Jeff Bezos endorsed higher corporate tax rates. But it won't cost him much
A year ago, Joe Biden, then the presumptive Democratic nominee for president, was picking a fight with Amazon over how little it paid Uncle Sam. Now Biden is president, and Amazon CEO Jeff Bezos is on a lonely island supporting the White House's plan -- to raise corporate taxes. © Saul Loeb/AFP/Getty Images Jeff Bezos, founder and CEO of Amazon, speaks during the Economic Club of Washington's Milestone Celebration event in Washington, DC, on September 13, 2018. Hardly any other company leaders have come out in support of Biden's plan.
Government data show that, outside of housing, private-sector investment averaged 4% annualized growth over the eight quarters of 2018 and 2019 -- while the Trump tax regime was in place but before Covid-19. That’s little different from the 3.8% average of the previous five years, and well below the 6.8% pace of the 1990s -- when tax rates were higher.
Pre-pandemic polls found that only a minority of Americans approved the Trump tax reductions, which also brought down individual marginal rates, as individuals reported little impact on their wallets.
Fighting to keep the Trump tax overhaul in place is both bad politics and bad policy, the White House and its allies say. The winning argument is the “American Jobs Plan,” which they contend will boost U.S. businesses even with the higher taxes -- by rebuilding roads and bridges, or making a worker with, say, an ailing parent more productive by funding elder care.
Biden releases full tax plan to raise $2.5TRILLION in 15 years
President Joe Biden will tackle Republican criticism of his infrastructure plan as his administration released his plan to overhaul the corporate tax code, whin would raise $2.5 trillion over15 years.His speech comes as his Treasury Department unveiled its plan to overhaul the corporate tax code, which, if enacted, would raise $2.5 trillion in revenue over 15 years to pay for the infrastructure package.
“These are all the kinds of things that are going to actually grow the economy,” Boushey said.
Biden in his Wednesday speech said the pre-2017 top corporate rate of 35% was “too high” and Trump’s 21% rate too low. “What I am proposing is that we meet in the middle -- 28%.”
Treasury Secretary Janet Yellen said separately that the proposed tax program would prove more effective in addressing incentives for companies to shift profits and investments abroad. She and Biden argued that the plans -- including a 15% minimum levy on profits reported on financial statements -- would make the code more fair.
Biden said at least 55 of the largest U.S. companies paid no federal corporate income taxes in their most recent fiscal year.
“It’s just not fair. It’s not fair to the rest of the American taxpayers,” the president said. He was citingby the left-leaning Institute on Taxation and Economic Policy.
The administration is also expected to propose raising the top rate on Americans making more than $400,000 a year to 39.6% from 37% -- a trickier issue for Democrats representing wealthier communities -- to fund new spending on education and health care.
Are you thinking of moving soon? Here are the best cities for taxes
The previous few weeks have been a maelstrom of higher costs for families as both New York and the federal government weigh hefty new taxes. Facing massive budget deficits in coming years, the Empire State passed a raft of new taxes targeting the wealthy; some high-earning New York City residents will see their marginal tax rate skyrocket to over 50 percent. Meanwhile, the White House weighs hefty new federal taxes on businesses and the wealthy.
Republicans warn that reversing the Trump tax cuts will be deeply damaging to the economy. Senate Minority Leader Mitch McConnell has led the charge, calling the president’s plan a “Trojan horse” masking “massive tax increases on all the productive parts of our economy.”
“At the end of the day, we are going to see slower hiring, less investment in the U.S. and I predict we will see a second wave of U.S. companies inverting or moving their headquarters in the long run,” Representative Kevin Brady, the Texas Republican who led the 2017 tax overhaul efforts in the House, said Tuesday on CNBC.
The Biden team doesn’t think those critiques will play well with the public.
Republicans “promised it would pay for itself and that there would be this huge increase in the growth rate and none of that happened,” said Austan Goolsbee, a former chairman of the White House Council of Economic Advisers under President Barack Obama and now an economics professor at the University of Chicago. “There’s this basic feeling that it did not go down in the way they said it would and they are in the uncomfortable position of defending that it did.”
Americans had a net-negative view of the 2017 tax cuts in surveys conducted in April 2019, with a Pew Research Center poll showing just 36% of Americans said they approved of the law while 49% disapproved. Ashowed 40% approved and 49% disapproved. Gallup also found that nearly seven in 10 Americans believed corporations paid too little in taxes -- a figure that’s stayed relatively constant in nearly two decades of its polling.
Biden’s infrastructure plan takes aim at Trump’s biggest economic achievement
While Democrats cast the tax increases as a matter of fairness, they also hope it will make good politics. The coming fight promises to reignite a debate over how much corporate taxes matter for the health of the economy, not to mention the political fortunes of lawmakers.“This bill is about both highways and highway robbery of our Treasury,” said Rep. Lloyd Doggett of Texas, a senior Democrat on the tax-writing House Ways and Means Committee.
By contrast, just before Biden laid out his plan, a Morning Consult-Politico poll found that 54% of registered voters supported federal infrastructure spending financed with tax increases on corporations and the wealthy, while 27% preferred the spending without the tax hikes. Independent voters were similarly divided. Some 32% of Republicans said they supported the spending being paired with tax increases.
“It seems to me to be political malpractice for Republicans to jump into bed with these giant corporations that are either paying no taxes or engaged in these outrageous stock buybacks,” Democratic pollster Geoff Garin said. “If it were me, it’s not the kind of company I would want my candidates to be keeping.”
Republican pollster Whit Ayres said that “as a general rule, tax increases on everybody but me are popular, so corporate-tax increases are always popular because voters don’t perceive themselves as paying that tax even though they do indirectly.”
Even so, “you can’t look at public opinion to make considered judgments about those economic consequences,” Ayres said, reiterating the Republican view that corporate tax increases will drive American business overseas.
Biden’s proposals still face months of negotiations in Congress, with moderate Democrats expected to reshape whatever tax reforms do get passed.
Commerce Secretary Gina Raimondo said Wednesday that the administration is open to compromise.
“What we cannot do and what I am imploring the business community not to do is to say, ‘we don’t like 28, we’re walking away, we’re not discussing.’ That’s unacceptable. Come to the table and problem solve with us to come up with a reasonable, responsible plan,” she said at a White House press briefing.
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Could Joe Biden's tax plan hit Ireland’s economy? .
US investment in Ireland could dry up if President Biden leads a major change to global tax rules. Irish tax advantage under threatIn among those tech company HQs in Dublin's docklands, you will also find the offices of the lawyers and accountants who help US firms use Ireland's tax system to reduce their global tax bills.For the last 20 years Ireland has had a simple message: invest here and you will pay just 12.5% tax on your Irish profits.That compares favourably to headline corporation tax rates of 19% in the UK, 30% in Germany and 26.5% in Canada.It is an article of faith in Irish politics that the 12.