- Kyrsten Sinema backed a minimum corporate tax on Tuesday, giving new life to Biden’s spending plans.
- The proposal would tax large firms’ profits at 15% and is estimated to raise between $US300 ($AU400) billion and $US400 ($AU534) billion.
- Democrats are scrambling to finalize new tax proposals as they near an October 31 deadline for their infrastructure proposal.
After weeks of haggling over President Joe Biden’s spending ambitions, Senate Democrats might have reached a breakthrough on Tuesday afternoon.
Sen. Kyrsten Sinema of Arizona threw her support behind a minimum corporate tax rate, a key source of funding as Democrats scramble to pass a major spending package that is funded through tax increases.
Biden’s plan is expected to cost between $US1 ($AU1).5 ($AU2) trillion and $US2 ($AU3) trillion, and Sinema has emerged as a key holdout, along with fellow centrist Sen. Joe Manchin of West Virginia, particularly on tax policy. The minimum that Sinema supports is 15%, which is below the technical minimum of 21% established in President Donald Trump’s tax reform, but is designed to prevent some large corporate firms from paying nothing through legal loopholes.
“This proposal represents a commonsense step toward ensuring that highly profitable corporations – which sometimes can avoid the current corporate tax rate – pay a reasonable corporate tax on their profits,” Sinema wrote on Twitter, adding that she looks forward to “continuing discussions with the White House and colleagues” on the matter.
Senate Democrats had rolled out this minimum corporate tax proposal earlier on Tuesday. Penned by Sens. Elizabeth Warren, Angus King, and Ron Wyden, the plan targets roughly 200 companies that report more than $US1 ($AU1) billion in profits.
The measure is forecasted to raise “hundreds of billions in revenue over 10 years,” according to the document detailing the proposal. King told Politico’s Burgess Everett that the tax would raise between $US300 ($AU400) billion and $US400 ($AU534) billion.
The plan aims to collect taxes from companies that dodge most of the 21% corporate tax rate. Companies including Amazon, Nike, and FedEx have avoided paying federal taxes for years through a collection of loopholes, tax breaks, and rebates, according to the Institute on Taxation and Economic Policy.
Sinema’s support gives Democrats a key avenue to raise funds for their social-spending plan. The Arizona senator previously said she wouldn’t back efforts to raise taxes on corporations and individuals, effectively cutting off many of the ways Democrats could pay for their package.
This minimum corporate tax is all but certain to be included in the final plan, since Joe Manchin is also “behind” it, Sen. Warren told Politico’s Everett on Tuesday.
The minimum corporate tax is set to join a spate of new pay-fors as Democrats rush to finalize the package. Party members had originally aimed to raise taxes on multimillionaires, large corporations, and investors. Sinema’s opposition to such measures forced the party to look elsewhere for tax revenue, and recent negotiations suggest the party will continue to target the country’s richest individuals.
Sinema has not disclosed whether she supports the “Billionaires’ Income Tax” proposal being drafted by Wyden. That tax is set to target unrealized gains on assets, or in other words wealth increases on paper that haven’t been sold yet. Currently, assets like stocks and bonds are only taxed when an owner sells them.
House Speaker Nancy Pelosi backed the proposal on Sunday, telling CNN the final package will “probably have a wealth tax,” referring to Wyden’s proposal, although Wyden himself has clarified that it is technically an income tax and not a tax that targets wealth per se.
The minimum corporate tax and Wyden’s billionaires’ tax are unlikely to fully offset the package’s entire price tag. But with Democrats rushing to finalize a plan before November, Sinema’s support marks critical progress for the ambitious package.