Several top U.S. CEOs say they fully support President Joe Biden‘s proposal to raise the corporate tax rate to help pay for his estimated $2 trillion infrastructure plan, a move White House allies say is intended to reverse the GOP’s 2017 tax breaks that didn’t “pay for themselves” as promised.
Republicans have joined forces with Washington business lobbyists to quash Biden’s proposal to raise the corporate tax rate from 21 percent to 28 percent. The plan would generate about $850 billion toward his infrastructure package and seeks to find a halfway point after former President Donald Trump signed the GOP-led Tax Cuts and Jobs Act, which reduced the corporate tax rate from 35 percent to 21 percent. Amazon CEO Jeff Bezos, one of 91 Fortune 500 companies Biden said didn’t pay “a single solitary penny” in federal taxes last year, announced that he supports Biden’s 28 percent benchmark. Lyft President and co-founder John Zimmer told CNN on Wednesday he also supports the corporate tax hike.
More than a dozen corporate leaders and White House officials who spoke to Reuters this week said they expect Biden to compromise at a 25 percent corporate tax rate. “Debate is welcome. Compromise is inevitable. Changes are certain,” Biden said during a speech at the White House on Wednesday.
Although that move would reduce revenue to under $500 billion, moderate Democrats including West Virginia Senator Joe Manchin have said they could get behind that number and likely ensure the infrastructure bill passes.
“We don’t like it, but we expect to be at 25 percent,” a lobbyist at a top U.S. energy firm told Reuters in a report published Thursday. “If so, we are going to consider that a win.”
Trump’s corporate tax break did revamp international codes in an attempt to lure firms back home to the U.S., but only a small number of U.S. companies actually put that extra cash toward worker wages or investment. Instead, dozens of top U.S. companies simply rewarded shareholders and gave bonus payouts to top executives. A Treasury Dept. and Office of Management and Budget report released in 2019 found that Trump’s tax cuts caused the U.S. deficit to skyrocket 26 percent in just one year. In addition to Trump’s massive increases in military spending, lost revenue is the primary cause, stemming from the GOP’s tax breaks for the wealthiest corporations and individuals.
“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.”
Biden’s corporate tax plans foresee an increase of the US corporate tax rate from 21% to 28%. But this would not even bring it back to levels under Obama. Graph by @JustinWolfers
More significant: plans for a 21% global minimum tax rate, which would hit tax havens hard. pic.twitter.com/tKEOzgVbGf
— Philipp Heimberger (@heimbergecon) April 3, 2021
Biden campaigned on not raising taxes on anyone making less than $400,000, which would severely limit Democrats’ ability to fund the infrastructure plan should the GOP and lobbyists convince Congress to squash a corporate tax hike. Biden criticized 55 of the largest U.S. companies this week for using “various loopholes where they pay not a single solitary penny in federal income tax,” in contrast to middle-class families who pay tax rates of more than 20 percent.
“It’s just not fair. It’s not fair to the rest of the American taxpayers,” the president said, citing a study by the Institute on Taxation and Economic Policy.
White House aides said they aren’t concerned with Republicans‘ incessant attacks on Biden’s plan to raise the corporate tax rate in order to pay for his $2 trillion infrastructure package. They believe they have enough corporate support as well as that of Americans themselves.
“I think it’s important to make investments again in the country and the economy. And as the economy grows, so too does jobs and so too does people’s needs to get around,” Lyft co-founder Zimmer told MSNBC on Friday.
But Chamber of Commerce and Business Roundtable groups have overwhelmingly rejected the corporate tax rate payment plan as ludicrous, having benefitted tremendously from the GOP’s 2017 move that reduced the corporate tax rate.
Federal government tax receipts on corporate income have also steadily fallen since the mid-1950s, with collections dropping from about 4 percent of the GDP compared to less than 1 percent today, recent U.S. Bureau of Economic Analysis data shows.
Newsweek reached out to several business lobby groups in Washington as well as the White House on Thursday for additional remarks.