Biden sells G-7 on global tax, but U.S. Congress is a hurdle

Jun 11, 2021, 9:16 PM | Updated: 9:57 pm
President Joe Biden speaks with French President Emmanuel Macron and European Commission President ...

President Joe Biden speaks with French President Emmanuel Macron and European Commission President Ursula von der Leyen after posing for the G-7 family photo with guests at the G-7 summit, Friday, June 11, 2021, in Carbis Bay, England. (Kevin Lamarque/Pool via AP)

(Kevin Lamarque/Pool via AP)

President Joe Biden might have persuaded some of the world’s largest economies to hike taxes on corporations, but the U.S. Congress could be a far tougher sell.

White House press secretary Jen Psaki said Friday that leaders of the Group of Seven — which also includes the United Kingdom, France, Canada, Germany, Italy and Japan — agreed with Biden on placing a global minimum tax of at least 15% on large companies. The G-7 leaders, participating in a three-day summit in England, affirmed their finance ministers who earlier this month endorsed the global tax minimum.

“America is rallying the world to make big multinational corporations pay their fair share so we can invest in our middle class at home,” Jake Sullivan, the president’s national security adviser, said Friday on Twitter.

A minimum tax is supposed to halt an international race to the bottom for corporate taxation that has led multinational businesses to book their profits in countries with low tax rates. This enables them to avoid taxes and encourages countries to slash rates. The minimum rate would make it tougher for companies to avoid taxes, and could possibly supplant a digital services tax that many European nations are imposing on U.S. tech firms that pay at low rates.

Biden administration officials believe the use of overseas tax havens has discouraged companies from investing domestically, at a cost to the middle class. The president hopes a G-7 endorsement can serve as a springboard for getting buy-in from the larger Group of 20 complement of nations.

The agreement is not a finished deal, as the terms would need to be agreed upon by countries in the Organization for Economic Cooperation and Development and implemented by each of them. The president needs other countries to back a global minimum tax to ensure that his own plans for an enhanced one in the U.S. don’t hurt American businesses.

“It has the potential to stop the race to the bottom,” said Thornton Matheson, a senior fellow at the Tax Policy Center. “It would be a huge sea change in the way things have been going in corporate taxes for the last three decades.”

The idea of an enhanced global minimum tax is also an integral part of Biden’s domestic agenda, but it faces resistance in Congress.

The president has proposed using a global minimum tax to help fund his sweeping infrastructure plan. His budget proposal estimates it could raise nearly $534 billion over 10 years, but Republicans say the tax code changes would make the United States less competitive in a global economy.

Treasury Secretary Janet Yellen framed the agreement as a matter of basic fairness after the finance ministers’ meeting.

“We need to have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises and ensure that all citizens and corporations fairly share the burden of financing government,” she said.

Texas Rep. Kevin Brady, top Republican on the House Ways and Means Committee, said GOP lawmakers would fight “tooth and nail” against the tax. Republicans view lower taxes as encouraging companies to invest and hire, putting little stock in Biden’s argument that improved infrastructure and better-educated workers would help increase growth.

“It is an economic surrender,” Brady said Friday. “President Biden has managed to do the impossible — he has made it better to be a foreign company and a foreign worker than an American company and an American worker.”

Senate Republican Leader Mitch McConnell of Kentucky has repeatedly said his party will oppose any measures that undo the 2017 tax cuts signed into law by President Donald Trump.

The 2017 overhaul did create a new way to tax companies’ foreign profits with what is known as “global intangible low-taxed income.” Congressional Democrats said that framework encouraged firms to invest in foreign countries, instead of at home.

Biden has proposed raising that rate to 21% among other changes to the code. The administration views the G-7’s 15% as a floor rather than a ceiling for rates. But the G-7’s plan varies from what Biden has proposed and there are details to be finalized, with tax experts noting that there appear to be gaps in rates and the treatment of assets such as buildings and equipment.

Democrats want to dig into the fine print of any agreement before giving their full-throated approval of what comes out of the G-7, which means that Biden will have to keep making the sale to U.S. voters and their representatives.

Senate Finance Committee Chairman Ron Wyden of Oregon favors the general idea of a global minimum tax. But Wyden said in a statement with House Ways and Means Committee Chairman Richard Neal of Massachusetts that they need to dig into the agreement to see if Americans would really benefit.

“We are optimistic that a strong multilateral agreement can be reached to harmonize our international tax rules, end the race to the bottom and put a stop to digital services taxes,” the two Democratic lawmakers said. “We look forward to working with the administration and evaluating the outcome of these negotiations for American workers, businesses and taxpayers.”

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

FILE - Actor Jussie Smollett arrives Tuesday, Nov. 30, 2021, at the Leighton Criminal Courthouse fo...
Associated Press

EXPLAINER: Jussie Smollett’s turn to testify. Will he?

CHICAGO (AP) — After two brothers spent hours telling a jury how Jussie Smollett paid them to carry out a fake racist and anti-gay attack on himself in downtown Chicago, the big question when the actor’s trial resumes Monday will be whether or not he will tell his side of the story. Attorneys rarely announce […]
7 hours ago
Associated Press

Senegal registers first case of coronavirus omicron variant

DAKAR, Senegal (AP) — Senegal has recorded its first case of the omicron variant, becoming the third West African nation to detect the new coronavirus variant after Nigeria and Ghana. The announcement was made by the Institute for Health Research, Epidemiological Surveillance and Training (IRESSEF), which is one of the laboratories approved by Senegal for […]
7 hours ago
Demonstrators march during a protest against coronavirus measures in Brussels, Belgium, Sunday, Dec...
Associated Press

Hundreds march against COVID-19 restrictions in Belgium

BRUSSELS (AP) — Hundreds of people marched through central Brussels on Sunday to protest tightened COVID-19 restrictions imposed by the Belgian government to counter the latest spike in coronavirus cases. Marchers came to protest the measures that were announced Friday, the third week in a row that the government has tightened its rules as the […]
7 hours ago
FILE - A group of anti-abortion protesters pray together in front of the U.S. Supreme Court, Dec. 1...
Associated Press

Both sides planning for new state-by-state abortion fight

WASHINGTON (AP) — As the Supreme Court court weighs the future of the landmark 1973 Roe v. Wade decision, a resurgent anti-abortion movement is looking to press its advantage in state-by-state battles while abortion-rights supporters prepare to play defense. Both sides seem to be operating on the assumption that a court reshaped by former President […]
7 hours ago
Israeli Prime Minister Naftali Bennett, center, chairs a weekly cabinet meeting, at the prime minis...
Associated Press

Israel urges hard line against Iran at nuclear talks

TEL AVIV, Israel (AP) — Israeli Prime Minister Naftali Bennett on Sunday urged world powers to take a hard line against Iran in negotiations aimed at reviving an international nuclear deal, as his top defense and intelligence officials headed to Washington to discuss the flailing talks. Israel has been watching with concern as world powers […]
7 hours ago
Many people wait outside a swimming pool where booster shots against Corona are given in Bad Krozin...
Associated Press

Germany: incoming minister advises against Christmas travel

BERLIN (AP) — Germany’s incoming transport minister is advising people against traveling over Christmas as the country tries to stem a wave of coronavirus infections. Federal and state leaders on Thursday announced tough new restrictions that largely target unvaccinated people, preventing them from entering nonessential stores, restaurants, sports and cultural venues. In a longer-term move, […]
7 hours ago

Sponsored Articles

(Facebook Photo/NHTSA)...
Sweet James

Upcoming holiday season is peak time for DUI arrests

The holiday season may be the most wonderful time of the year, but it’s also the most dangerous time of the year to be driving. That’s why it’s important to remember to call Sweet James Accident Attorneys if you’re injured or arrested because of a DUI accident.
...
Day & Night Air Conditioning, Heating and Plumbing

Why fall maintenance is important for your heating system and A/C

It’s easy to ignore your heater and air conditioner when they’re working but the moment something breaks, you will likely regret not keeping up with maintenance. After all, if something goes wrong, you may be stuck with a repair that will take longer and be more expensive than simple maintenance.
...
PNC Bank

3 cool tips to turn everyday moments into learning experiences for your child

Early brain development has a crucial impact on a child’s ability to learn and succeed in school and life. Research has shown that 90% of a child’s brain is developed by age five.
Biden sells G-7 on global tax, but U.S. Congress is a hurdle