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April 8, 2021

Biden Rolls Back His Corporate Tax Plan

Plus: a bunch of minor executive actions on guns

 

Treasury Secretary Janet Yellen issued more detail on the Biden
corporate tax plan yesterday. (Evan Vucci/AP Photo)

The Chief

**** Right off the top, because when you start writing about
revenue offsets and "paying for" spending, you get a lot of
pushback: I don't make the rules, and at least in this case, Joe
Manchin does. He gets a readout of the national debt every morning. I
don't agree with him, and I agree that what matters is whether we have
the physical resources

to accommodate the building in the American Jobs Plan-the employees,
the steel, the various inputs. Until Joe Manchin agrees with that,
we're going to get tax offsets in this bill. And if he truly won't
agree to anything

unless it's bipartisan, we won't get a bill at all.

The Treasury Department just released an updated version

of the administration's plan for tax offsets, entirely on the
corporate side, which would raise $2.5 trillion over 15 years. There's
a reason to do this beyond acquiring revenue; the 40 percent reduction
in the corporate tax rate from the Trump tax cuts boosted capital over
labor, allowed businesses to hoard excess profits, and increased
inequality. It's worth trying to reverse that. Eliminating fossil fuel
subsidies and extending clean energy tax breaks, another part of the
plan, has obvious benefits for our energy transition, an example of
doing policy through the tax code.

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**** President Biden has been saying repeatedly

that he'd be happy to negotiate any parts of his bill. Judging from
the Treasury paper, he's already started by negotiating with himself.
Many of the features of the paper mirror what Biden already announced: a
28 percent nominal corporate tax rate, a new minimum tax on foreign
earnings that includes none of the loopholes of the Trump plan, a new
emphasis on IRS enforcement with more resources, and a minimum "book
tax" on the income companies disclose on financial statements, to end
the spectacle of multi-billion-dollar corporations paying nothing in
taxes.

But it's the book tax where things have been changed. This 15 percent
tax would only apply to companies with net income of $2 billion or more.
Just 45 companies would have paid it in recent years.

During the campaign, Biden set that net income threshold at $100 million
.
It narrows the universe of companies eligible for the book tax from
1,100 to 180. It also increases the number of exemptions companies would
get to the book tax, allowing them to keep their tax credits for
research, renewable energy, and low-income housing. Certainly Biden
wants to encourage those practices, but any time you add exemptions you
give a bunch of corporate accountants a lot of ideas. And the book tax
is only 15 percent, meaning that you could encourage these measures and
still maintain a threshold where large corporations pay some tax. If
there are other corporate tax breaks that Biden doesn't want to
encourage, he can eliminate them.

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Combine these changes with Commerce Secretary Gina Raimondo yesterday
backpedaling

on the just-released plan, suggesting that the plan could pay out over
more years, or the corporate tax could be lower than 28 percent. "We
want to compromise," Raimondo said.

The Biden administration is under pressure to negotiate because
Democrats in Congress are out in front of them. As Reuven Avi-Yonah
writes for us

today, an international tax plan

pushed by Sen. Ron Wyden (D-OR) actually comes out of a 2004 Republican
plan. It puts a lower rate on foreign-derived profits, and creates
incentives to shift earnings to lower-tax countries. It does not try to
crack down on corporate inversions, where a company moves its on-paper
headquarters to qualify for lower corporate taxes. It allows domestic
tax credits to offset foreign income.

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So Biden has narrowed the domestic book income tax, while his colleagues
in Congress are trying to narrow the international taxes. Among other
things, this really hampers Treasury Secretary Janet Yellen's ability
to get a global agreement on a minimum tax, to prevent tax havens once
and for all. Right now, the Biden plan says that foreign companies in
countries not signed on to a global minimum lose their tax deductions.
The Wyden plan undermines that.

It also invigorates the business community to keep pushing against any
changes

to corporate taxes. Sure, a couple high-profile CEOs have supported a
rise in the
nominal rate, but they oppose everything else, and when you pay nothing,
whether the nominal rate is 21 or 25 or 28 percent doesn't matter.
Overall, big business is whining about global competitiveness and
economic shrinkage, and Democrats weakening the tax plan just feeds
that.

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**Executive (Lack of) Power**

I'm certainly the last person to diminish executive action, as I've
been talking it up for a couple years. But there just isn't that much
you can do on guns under current authority. The Biden administration
tried its best with a series of executive actions

today, that's really about the creativity of gun owners as much as
anything.

One rule will aim to prevent the sale of "ghost gun" kits which are
untraceable and can be assembled within minutes. Another proposes to
prevent sales of an arm brace that "effectively turns a pistol into a
short-barreled rifle." These are outgrowths of the massive gun problem
in the U.S., but if they were eradicated tomorrow, would there really be
fewer guns around?

The rest of the actions involve publishing "red flag" legislation
that states would then have to pass; issuing a report on gun
trafficking; touting community violence intervention funding in the
not-yet-passed American Jobs Plan; a webinar (really) for states on how
to increase federal funding for violence intervention programs; and
nominating a gun safety advocate

to run the Bureau of Alcohol, Tobacco, and Firearms.

There's just not a lot here. I'm all for using the power of the
presidency, but this is an issue where Congress must give the president
some more laws to implement.

What Day of Biden's Presidency Is It?

Day 79.

We Can't Do This Without You

Today I Learned

* I was on Michael Moore's podcast, Rumble, talking about the
infrastructure package. Listen here
.
(Apple Podcasts)

* Next Wednesday, April 14th, 7pm EST we're doing a sort of live version
of our latest print issue, that will cover three of its main subjects:
Climate change, corporate monopolies, and immigration. Register here
.
(TAP)

* 500,000 signups at HealthCare.gov in the last 6 weeks. (HuffPost)

* We're at 20 years in Afghanistan and we're still not pulling out
.
(Associated Press)

* The administration has given no details
on
its ending of support for the war in Yemen. (The Intercept)

* No migrant families separated under Trump have been reunited
.
(Axios)

* No OSHA temporary protective standard
,
either. This is a real mistake. (Wall Street Journal)

* A CFPB rule that was never promulgated could help American move their
money

out of big banks. (HuffPost)

Prospect LIVE April 14
Join the

**Prospect** at 7pm EDT Wednesday, April 14, for a discussion on three
topics from our recent print issue: Climate change, corporate
monopolies, and immigration during COVID
CLICK HERE TO REGISTER

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