WASHINGTON – New details on a Democratic plan to enact a 15% minimum corporate tax on the reported income of large businesses were released Tuesday by three senators, Elizabeth Warren, D-Mass., Angus King, I-Maine and Senate Finance Committee Chairman Ron Wyden, D-Ore.
Senators will propose that the tax be included as a revenue stream to help fund the massive “Build Back Better” bill that Democrats are currently negotiating.
Shortly after the plan was released, a key senator in those negotiations, Arizona Democrat Kyrsten Sinema, announced that she would support the corporate minimum tax, thus boosting the proposal.
According to a press release from senators, the minimum corporate tax would have:
- Only applies to companies that publicly report more than $ 1 billion in profits per year for a period of three years.
- Create a general minimum tax of 15% on these profits.
- Preserve “the value of business credits – including tax credits for R&D, clean energy and housing – and include certain flexibilities that allow businesses to defer losses, use foreign tax credits and to claim a minimum tax credit against ordinary tax in the years to come ”.
The tax proposal received new attention this week after Sinema announced it would not support increasing the current corporate tax rate, which was Democrats’ original plan to increase income. of their social spending plan.
The tax would likely apply to about 200 U.S. companies, senators said.
Democrats did not specify which business credits within the tax code would be preserved. The details of these credits would likely make a huge difference to companies that are at risk of having to pay tax.
According to legislative language published by Warren’s office, the Treasury Department would be responsible for determining which companies would be subject to tax and the finer details of its taxation.
“The country’s most profitable companies are often the worst offenders when it comes to paying their fair share. Year after year, they bring in record profits to shareholders and pay little or no tax. Our proposal would tackle the most egregious corporate tax evasion by ensuring the largest corporations pay minimum tax, ”Wyden said in a statement.
They specifically referred to Amazon, which they said brought in $ 45 billion in profits over the past three years, but paid an “effective tax rate of just 4.3 percent – well below the rate of ‘21% corporate tax’.
The proposal has yet to receive formal approval from House and Senate leaders. But Warren said she and her colleagues are “fully engaged” with the Senate Finance Committee, the White House and the Treasury Department to develop this updated proposal for inclusion in the Build Back Better bill.
The current proposal is similar to that presented by President Joe Biden earlier this year as part of the White House’s broader “Made In America” tax agenda.
In March, the administration demanded a minimum tax of 15% on the income that companies use to report their profits to investors, known as “accounting” income.
The White House said at the time that such a provision “would only apply to very large companies” and would ensure that large companies cannot “exploit tax code loops to get by without paying. corporate tax in the United States ”.
The Biden proposal differed from the current Senate proposal in a few ways. The first is that the Biden plan set the income threshold at $ 2 billion, not $ 1 billion. The Senate proposal would therefore apply to more companies.
Biden’s plan also did not contain a three-year rule, where the tax only applies to companies that earn income of $ 1 billion or more for three consecutive years.
To read the legislative language, Click here.
Clarification: This story has been updated to better reflect the role of the Treasury Department in implementing the future tax.