How Joe Biden and Janet Yellen want to transform global taxes

AP572454742114Manuel Balce Ceneta/APTreasury Secretary Janet Yellen.
  • Treasury Secretary Yellen is set to argue for a global minimum tax in a speech today, Axios reports.
  • Yellen has been working to keep multinational corporations from shopping for the lowest international rate.
  • The Biden White House wants to raise the corporate tax rate but needs the rest of the world onboard.
  • See more stories on Insider’s business page.

Treasury Secretary Janet Yellen has been clear since her confirmation hearing and subsequent press appearances that the Biden administration needs to raise new tax revenues. It’s a key part of the administration’s ambitious agenda, which includes a $1.9 trillion stimulus and now potentially a two-part, $4 trillion infrastructure package.

At the same time, Yellen has warned of the difficulties of implementing a wealth tax, which is favored by the progressive wing of the Democratic Party.

Part of the solution is reforming the corporate tax rate – not just in the US but far beyond its borders.

To that end, Yellen has been in active talks with other countries about setting a global minimum rate for corporate taxes, The Washington Post’s Jeff Stein first reported. And today, Axios reports, she’s set to give a speech calling for a global minimum tax rate.

The announcement will come during a speech to the Chicago Council on Global Affairs, her first major public address in her new role; according to Axios, she’ll be advocating for President Joe Biden’s proposed tax increases to fund his $2 trillion American Jobs Plan.

Yellen has been holding talks with more than 140 international counterparts via the Organization for Economic Cooperation and Development (OECD), where countries are looking at global tax issues, with a particular focus on tech.

Nobel Prize-winning economist Joseph Stiglitz, a mentor of Yellen’s, told the Post that if she succeeds in these talks, it would be “a little like the Paris climate accord of taxes.”

The goal for now is a nonbinding consensus on a minimum tax rate within the OECD, with the thinking that the US could move off the Trump-era 21% without fear of multinationals leaving to pay taxes at a lower rate somewhere else.

Mathias Cormann, the incoming secretary-general of the OECD, told the Financial Times that he’s “optimistic” about reaching a global minimum. It’s a high-priority measure, he told the FT, saying he’s “confident a deal could be speedily secured to enable governments to collect more tax from multinational companies.”

The push for more tax revenue

In the background of Yellen’s push for a global minimum is the Biden administration’s current push to raise taxes in an effort to subsidize an infrastructure package. President Joe Biden would raise the corporate tax rate to 28% with the Made In America Tax Plan, which calls for a 21% global minimum tax.

The US was long an outlier on corporate taxation, with a rate of 35% versus the international average of 24%, until former President Donald Trump’s 2017 tax cut slashed the corporate rate to 21%. But even that hasn’t stopped other countries from lowering their rates to attract multinationals. The Post noted that nine countries lowered their corporate tax rate just last year.

The right-leaning Tax Foundation found that, since 1980, the “worldwide average statutory corporate tax rate has consistently decreased,” with the biggest drops coming in the early 2000s. According to the Tax Foundation, “the worldwide average statutory corporate income tax rate” is 23.85%.

Biden also just said this week that Americans earning over $400,000 could see an increase in their taxes, a measure he acknowledged may not win any Republican support.

There could be a complicated path forward for Yellen’s corporate minimum, per the Post. Congress may need to be involved in approving new tax rules, and it could take the countries involved years to enact the tax, if they even choose to adopt it.

As the Post reports, if the complex measure is successful, it would be a huge accomplishment for both Yellen and Biden’s presidency – and maybe the world. It could also help pay for a $2 trillion infrastructure package.

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