Biden Urges Passage Of Deal With 15% Corp. Minimum Tax
President Joe Biden on Thursday urged Congress to pass legislation that would impose a 15% corporate minimum tax as part of a larger package to address tax, energy, and health care costs.
Biden said he supports the agreement to add the package, dubbed the Inflation Reduction Act of 2022, to the fiscal year 2022 budget reconciliation bill. The proposal, negotiated by Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., and released Wednesday of last week, includes key parts of Biden's stalled domestic agenda such as investing in renewable energy and lowering the cost of health insurance. The Senate can pass the bill with a simple majority.
"Some of you will see a lot of similarities between the beginning of the Build Back Better initiative — it's not all of it, but we've moved a long way," Biden said. "For the first time in a long time, [we can] begin to restore fairness to the tax code by making the largest corporations in America pay their fair share without any new taxes on people making under $400,000 a year."
Biden said the bill would tackle the climate crisis and promote energy security while reducing the burdens faced by working-class and middle-class families.
"Pass it for the American people," he urged.
The 15% corporate alternative minimum tax proposal would apply to adjusted financial statement income for corporations with profits in excess of $1 billion, effective for tax years beginning after December 2022, according to a summary of the bill's tax proposals. Corporations would generally be eligible to claim net operating losses and tax credits against the AMT, and would be eligible to claim a tax credit against the regular corporate tax for AMT paid in prior years, to the extent the regular tax liability in any year exceeds 15% of the corporation's adjusted financial statement income.
The proposal comes after 55 of the Fortune 500 companies paid no federal income tax in 2020, Biden said.
"This bill ends that," he added.
Biden said that the bill, if passed, would reduce inflationary pressures on the economy, lower the cost of living and lower the federal budget deficit. According to the bill summary, revenue from the tax proposal would be used to cut the federal deficit by about $300 billion and invest $369 billion in energy security and climate change programs over the next decade. The funding also would lower health care premiums by $64 billion and provide the IRS with an additional $80 billion. Approximately $15 million of the IRS funding would be used to study the creation of a free electronic filing program for low- and moderate-income taxpayers.
Manchin, during a press conference last week on Thursday, responded to arguments that the bill would mark a tax hike for Americans.
"We don't raise taxes on anybody," he said, adding that imposing a minimum 15% corporate tax on the largest corporations shouldn't be inflammatory.
"If someone's upset they weren't paying anything, please come forward and tell us why you were able to have this great country protect you and give you these opportunities [and] you don't have to pay anything into it," Manchin said.
There remain open questions about how the 15% corporate minimum tax proposal would be accounted for in the global minimum tax regime, dubbed Pillar Two, designed by the Organization for Economic Cooperation and Development.
The book income tax has some surface-level similarities with the Pillar Two design — they would both establish a 15% minimum rate and are based on adjusted financial statement income — but key differences remain in the scope of the measures and how the two levies would treat certain business tax incentives.
The bill also includes several energy-related tax changes, including providing 10 years of consumer tax credits to make heat pumps, rooftop solar, electric HVAC and water heaters more affordable, according to a summary of the bill's energy and climate proposals. A $4,000 consumer tax credit would be available for lower- and middle-income individuals to buy used clean vehicles, and a $7,500 tax credit would be available to purchase new clean vehicles.
The legislation would provide production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines and batteries, as well as processing of critical minerals, and a $10 billion investment tax credit to build clean technology manufacturing facilities, according to the bill summary. Biden said the provisions would "create thousands of good-paying jobs."
The measure also aims to decarbonize the economy by providing tax credits for clean sources of electricity and energy storage, including about $30 billion in target grant and loan programs for states and electric utilities to transition more quickly to clean electricity, according to the bill summary. The bill would also provide tax credits for clean fuels and clean commercial vehicles and credits to reduce emissions from industrial manufacturing processes.
Additionally, the bill would provide tax credits to support the domestic production of biofuels, according to the bill summary.
Senate Finance Committee Chair Ron Wyden, D-Ore., told reporters Thursday that the proposal marks an opportunity to transform the American economy and create more high-skill, high-wage jobs.
"This package is not nibbling at the edges," he said.
However, House Democrats, while supportive, voiced concerns with the legislation. Rep. Bill Pascrell, D-N.J., told reporters that the proposal won't get more Democrats in the House or Senate during the November elections, adding that he'd like to see the $10,000 cap on state and local tax deductions addressed within final legislation. He said he was happy with the bill's provision changing the tax treatment of carried interest, which would bring in about $14 billion, according to the bill summary.
"I'm glad we're having some tax reform," Pascrell said. "I'm leaning yes, but not there yet."
He added that he's going to continue to fight to include child-related tax breaks such as expanding the child tax credit within the bill.
Rep. Pramila Jayapal, D-Wash., also raised an issue with the lack of provisions to expand or increase the earned income tax credit and child tax credit.
"We passed what we thought should be passed, but we need 50 votes in the Senate," Jayapal told Law360, referencing the House's passage of the Build Back Better Act, or H.R. 5376, late last year. The bill includes a one-year extension of the expanded child tax credit for families earning up to $150,000 per year. In addition, an expanded earned income tax credit for childless workers would be extended for an additional year.
"I'm not OK with it, but I believe that we should do whatever we can get done and then do another reconciliation package, hopefully with a few more Democrats in the Senate," Jayapal said.
The bill also garnered support from outside the Capitol, with Amy Hanauer, executive director of the Institute on Taxation and Economic Policy, saying in a statement Thursday that the bill marks a transformational change for federal tax and energy policy.
"The bill restores sorely needed and long-overdue accountability to our tax code," Hanauer said. "By ensuring that all corporations pay at least 15% of their profits in taxes, providing funding to the IRS to improve tax enforcement and reduce tax evasion, and funding clean energy and emission reductions, this bill would begin creating a more equitable America and a more sustainable planet."
The agreement with Schumer followed comments Manchin made during a West Virginia radio interview July 15 that he wouldn't support the tax proposals in Biden's economic plan and that a significant increase in inflation led to his decision. Manchin said his support for a slimmed-down version of the Build Back Better Act had depended on a consumer price index report that showed a 9.1% increase in June over the prior year.
Manchin has featured prominently in the debate on the Build Back Better Act. In December, he opposed the measure, saying he was concerned about its effect on inflation and the national debt. He ultimately said he couldn't support the proposal, and pointed to other concerns like the pandemic as issues Congress should focus on.
It is unclear whether Arizona Sen. Kyrsten Sinema, another Democrat who Senate leaders worked with to negotiate support for Biden's stalled domestic agenda, will support the proposal. Manchin said Thursday that he hasn't spoken with her, but he hopes she will be receptive.
"She fought … to keep taxes from going up — there's no tax increases except the 15% [corporate minimum tax]," Manchin said. "I don't know how anyone can be opposed when we think they should be paying 21[%]."
Under current law, the statutory corporate rate is 21%, but about 200 large corporations use tax loopholes to avoid paying that rate, according to the summary of the bill's tax provisions.
Representatives for Democratic and Republican leaders in the House and Senate didn't immediately respond to requests for comment Thursday. Published on August 02, 2022