Leading Democrats on the Senate Finance Committee on Monday proposed major changes to former President Trump’s 2017 tax reform to eliminate what they say is an incentive for companies to relocate operations overseas and remit profits to tax haven countries.
Some elements of the plan, proposed by Democratic Senators Ron Wyden, Sherrod Brown and Mark Warner, are similar to the proposals to raise corporate taxes announced last week by President Joe Biden to fund $ 2 trillion in US infrastructure investments.
The senators intend to amend the provisions of the 2017 law that regulate the taxation of corporate income abroad. The law regulates the return of deferred offshore income of companies to the United States at lower tax rates, where the profits could be invested in job creation. But in practice, Democrats said, the law created new incentives for companies to invest more overseas in order to take advantage of the incentives.
“Many companies have not even returned their profits. Those who did so spent most of the profits on share buybacks, ”Senator Warner told reporters during a teleconference.
The Democratic plan does not abolish these taxes, but changes them to equalize their rates and bring them closer to the main corporate rate. In addition, the plan will create new incentives for investment in research and jobs at company headquarters in the United States.
The proposal is likely to face strong opposition from Republicans, who have criticized Biden’s plan to backtrack on the Trump-era legislative advances they have adopted, as they put American companies at a competitive disadvantage. 50 votes are enough to make the necessary changes.
The proposed changes will also restore tax breaks for domestic investment in clean energy and low-income communities, while adding a higher rate.
Biden’s plan includes raising the corporate tax rate from 21% to 28%, as well as approving a minimum global tax that will be agreed with other major economies.
Senator Wyden believes that such a global minimum corporate tax under the Biden plan could work alongside the reforms proposed by Democratic senators, provided Treasury Secretary Janet Yellen can achieve “a good multinational agreement with the Organization for Economic Cooperation and Development.”
On Monday, Yellen called for a minimum global tax during her first spring meetings with the International Monetary Fund and the World Bank as US Treasury Secretary.
Regarding the demand from fellow Democratic Senator Joe Manchin for a 25% corporate tax rate, Wyden, chairman of the finance committee, said the final rate would be the result of discussions within the Democratic faction and the committee. Wyden also said he believed all Senate Democrats would support proposals for international tax reform.