šŸ¤  Ridinā€™ with Biden - Global Corporate Taxes

by Sreetama

The big fat corporate tax debateā€¦ The Biden admin just rolled out with its $2.3T infrastructure proposal. So, where do they expect the dollars to come from after spending a year and ~$5T on the pandemic? Taxes! Janet Yellen, the secretary of the treasury of the US has been consistently pushing for a global minimum corporate tax rate. Last week the G20 also agreed to come to a decision (a positive one of course) by mid-2021.


Wait, but why a ā€˜globalā€™ tax rate?



Let’s quickly crunch the 2.3T dollars. Americaā€™s old infrastructure needs a major revamp. It was recently graded as a ā€˜C.ā€™ The plan proposed to spend $621B for transportation projects (10K bridges, 20K miles of highways, airports, 500K EV chargers, etc); $400B for long-term care facilities for the elderly and disabled; $300B to make the US less China-reliant by boosting manufacturing and supply chain; $213B to build affordable housing; $100B for schools; and finally $100B for high-speed broadband.


This is one of the biggest federal investments: ā€œThe American Jobs Plan will invest in America in a way we have not invested since we built the interstate highways and won the Space Race.ā€


How is America going to recover the costs of this massive stimulus that is spread over 8 long years?


Corporate Taxes. In 2017, the corporate taxes were slashed to 21% from a whopping 35% by the Trump admin. Republicans werenā€™t your regular tax fans. But Biden is bumping them up to 28% now. The stimulus would be paid over a period of 15 years with the help of these taxes. Biden has been targetting corporations and the wealthy.


The Proposals. Letā€™s go hiking?


– Raising the corporate tax rate to 28% from 21%.


– Raising the income tax rate on people earning $400K+ per year (less than 10% of total taxpayers).


– Raising the capital-gains tax rate (what you pay when you sell investments at a profit) for people earning at least $1M/year.


– A minimum 15% tax on whatā€™s known as ā€œbook incomeā€ ā€” the profits that firms report to investors but that are not used to calculate tax liability. (the sums lost to exchequers around the world have risen as high as Ā£311bn annually)


Two Sides, Same Coin. Higher taxes means lower profits for companies. Theyā€™ll have fewer dollars for the growth and investment. This could result in lost wages and a decline of growth in a lot of sectors. But on the other side, the stimulus could boost investment and economic growth and help reduce inequality.


A tiny 11.3%. American corporations and giants paid as little as 11.3% tax on 2018 profits. As a matter of fact, Amazon even got a $129M tax rebate for the year 2018. Such are the tax loopholes…But for some reason, billionaires are ā€œvery, very quietā€ about these proposals.


It is relatively easy for a billionaire to say they support higher taxes. More is on the line if they are asked to do something about it.


Bidenā€™s promises. To pay for “Build Back Better”: Biden pledged $2T to clean energy innovation, and trillions more to building a modern infrastructure (think: roads, bridges). That could cost ~$7T. Higher taxes could help pay for BBB, without adding to the USā€™ $28T debt.


Now, why is Yellen pushing for a ā€œglobalā€ tax rate? In 2000, more than 55 countries had corporate tax rates above 30%. But soon they realized the importance of corporate investments and foreign multinationals. By 2018, less than 20 countries have rates above 30% – with the global average being 24%. But if the US raises its taxes to 28%, it could lose tremendous economic activity.


Hence the push for a ā€œglobalā€ minimum corporate tax rate.


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Never miss a shot at introducing crazy taxes!


šŸ” Austrian alps are perfect for skiing & even more perfect for breaking bones! For this reason, the government decided to include a special tax on medical services into its regular tourist tax.


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