Janet Yellen will use her first major address as Treasury Secretary to advocate for a global minimum corporate tax rate, Axios has learned, as she advocates for President Biden’s plan to raise taxes US companies to fund its more than $ 2 trillion infrastructure plan.
Why is this important: Convincing other countries to impose a global minimum tax would reduce the likelihood of companies relocating overseas, with Biden seeking to raise the corporate tax rate from 21% to 28%.
- “Competitiveness is not limited to how well headquartered companies in the United States relative to other companies in global M&A offerings,” Yellen will say today in a speech delivered to the Chicago Council on Global Affairs, according to an excerpt from its prepared remarks obtained by Axios.
- “This is to ensure that governments have stable tax systems that generate sufficient income to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government. ”
- “We are working with the G20 countries to agree on a global minimum corporate tax rate that can stop the race to the bottom.”
The big picture: President Trump lowered the US rate from 35% to 21%, arguing that US companies were at a global disadvantage and had an incentive to relocate abroad.
- The average corporate rate in the G7 is 24%, with some nine countries recently lowering their tax rates, according to the Tax Foundation, a conservative tax group.
- Biden’s plan would also increase the international minimum rate for foreign profits of U.S. companies from 10.5% to 21%, which would still be lower than the rate for domestic companies of 28%.
Driving the news: Biden brought in five Cabinet secretaries to explain – and sell – his plan to the American public, including Transportation Secretary Pete Buttigieg, Energy Secretary Jennifer Granholm, Housing and Urban Development Secretary Marcia Fudge, Labor Secretary Marty Walsh and Commerce Secretary Gina Raimondo.
- Yellen’s task is to defend the international cause. His speech is also intended to set the tone for the annual spring meetings of the International Monetary Fund and the World Bank in Washington, which will begin virtually this week.
Between the lines: Biden leaned on Yellen to convince the business community and reassure Wall Street that his more than $ 2 trillion infrastructure proposal, in addition to his $ 1.9 trillion stimulus package, will not result in no inflation.
- Now he’s deploying it to convince international finance ministers and central bankers that the world’s biggest economies must act in concert on corporate rates to avoid a race to the bottom.
Go further: Yellen will also challenge global economic powers to focus on climate change and on ways to improve access to vaccines for the world’s poorest countries.
- It will ask for $ 650 billion in new “special drawing rights” – essentially lines of credit from the IMF that can help developing countries access more US dollars.
- The Trump administration was skeptical of the new SDR allocations and many Republicans in Congress still oppose them.
The bottom line: In trying to convince other countries to impose a global minimum tax, Yellen recognizes the risks to the US economy if he acts alone by raising corporate rates.
- “Together, we can use a global minimum tax to ensure that the global economy thrives on a more level playing field in the taxation of multinational corporations, and drives innovation, growth and prosperity,” said she does.