“Minimum corporate tax” fundamentally clashes with Democrats’ view of the tax code

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TThe Biden administration opposes a much-touted Democratic “minimum business tax”, and the administration will win. Indeed, for the Democrats in Washington, the purpose of the tax code is to exert influence over businesses and to obtain favors from lobbyists.

To be fair, Republican politicians appreciate these aspects of the tax code as well. And “the minimum corporate tax” defeats this objective.

The corporate minimum tax is an idea developed by tax authorities across the country with the aim of “leveling the playing field” and avoiding tax competition. This is the corporate equivalent of the alternative minimum tax: corporations would calculate their taxes as usual, but no matter what, they would pay a federal corporate tax bill of at least 15% of their “accounting income”. It is a brutal attempt to ensure that companies “pay their fair share”.

The idea that companies are paying their fair share is complex, but these attempted fixes are all political spasms reacting to the fact that a complex tax code sets a roadmap for large corporations with a thousand tax lawyers to find. their way to low rates or zero tax.

So how do businesses get their taxes so low? This is largely the complexity of the tax code.

Why is the tax code so complex? Part of the reason is the complexity of the idea of ​​”profit”. But a big part of the problem is that politicians create a million exclusions, credits, and deductions for the behaviors they want to encourage. The tax code is a soft way to influence business activity.

Democrats have one wish expressed: to ensure that every business pays at least its fair share. They have another wish fulfilled: let’s use the tax code to control how companies invest their capital. These two ideals are in contradiction.

Earlier this month, the Washington post reported that “officials from the Treasury Department’s tax policy office have raised concerns internally in recent weeks that the new 15% minimum tax could have unintended consequences, such as limiting investment in clean energy “.

Here. Democrats rigged the tax code to subsidize “investment in clean energy,” and a tax code that simply says “you pay taxes on your profits” would necessarily eliminate these special interest tax breaks.

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