(The Center Square) – As Democrats struggle to finalize details of their reconciliation spending bill, a newly released tax proposal is getting attention and has the endorsement of a key swing Democrat.
U.S. Sens. Elizabeth Warren, D-Mass., Angus King, I-Maine, and Ron Wyden, D-Ore., released an updated corporate minimum tax plan that has gotten attention and some traction among Democrats. U.S. Sen. Kyrsten Sinema, D-Ariz., helped propel the tax forward with her reported support of the tax. She has been hesitant to back other corporate tax hike proposals.
The plan in question would impose a minimum 15% tax on corporation profits. While details of the plan have not been confirmed, Democrats claim the tax would raise “hundreds of billions” of dollars over the next decade by affecting “roughly 200 companies that report over $1 billion in profits.”
“In 1965, corporations paid roughly 4% of the nation’s GDP in state and federal income tax. Today, that rate is only 1%,” King said. “This massive decline has contributed to the nation’s rising debt and threatened basic public sector services Americans rely upon. Corporations should not be able to access America’s wealthy consumer market, talented labor pool, and other benefits without paying to support the conditions that make the U.S. the world’s premier place to do business – but many profitable, U.S.-based corporations pay zero federal corporate income tax.”
Democrats say the plan would “preserve the value of business credits – including R&D, clean energy, and housing tax credits – and include some flexibilities for companies to carry forward losses, utilize foreign tax credits, and claim a minimum tax credit against regular tax in future years.”
It’s unclear how much revenue the tax would generate, and Democrats are working furiously to cobble together enough tax hikes to fund their reconciliation spending, which is now expected to come in around $2 trillion, down from $3.5 trillion. There is debate, though, over the actual cost of the plan by critics who say it would actually be much more expensive over time.
Warren, a more liberal member of her party known for aggressive stances on corporations, is getting renewed momentum with Sinema’s support.
“Giant corporations have been exploiting tax loopholes for too long, and it’s about time they pay their fair share to help run this country, just like everyone else,” Warren said. "The Corporate Profits Minimum Tax would end corporate double dealing and ensure companies pay something in taxes when they report billions in profits to their shareholders.”
Warren points to the tax code, arguing the wealthiest corporations have the resources to avoid paying significant tax bills in a way regular Americans cannot.
“Currently, the U.S. tax code allows large corporations to pay little or no tax because they are able to exploit a host of loopholes, deductions, and exemptions to drive down their tax liability,” Warren’s office said in a statement. “While these companies report billions in profits, they often pay no income tax to the IRS and leave hardworking families holding the bag.”
Several of Democrats’ other proposed funding mechanisms, such as an aggressive IRS auditing more Americans, or raising the corporate tax rate from 21% to 28%, have not gained much traction. U.S. Sen. Joe Manchin, D-W.V., addressed the Biden administration's controversial plan to require banks to turn over Americans' account information to the IRS, saying it likely would be “gone” during a talk with the Economic Club of Washington, D.C.
“Do you understand how messed up that is?” Manchin said. “It’s screwed up. I think that one’s going to be gone.”
Republicans remain opposed to the plan, warning of the high debt spending, rising inflation, and the economic fallout of tax hikes.
“Just to take you back to 2017, we lowered taxes for virtually all Americans,” Senate Republican Leader Mitch McConnell told reporters. “The corporate tax reduction produced a gusher of revenue, a stunning amount of increase in revenue as a result of lowering the taxes on corporations. Look, the country is awash in inflation. The last thing we need to do is pile on with another massive, reckless tax and spending spree.”
President Joe Biden and Congress' approval ratings have steadily declined as the year has progressed. McConnell argues Americans want the $1 trillion infrastructure bill, but not the additional trillions in tax hikes and social spending.
He also stressed the lack of details of the plan.
"[Democrats] do not have a mandate to do this,” he said. “They're acting like this is the New Deal. [President Franklin] Roosevelt had massive majorities. This is a 50-50 Senate, a three-seat majority in the House. The American people are not asking for any of this."