A corporate minimum tax is needed to provide tax relief to the working and middle class, Department of Treasury Secretary Janet Yellen said.
“Over the past several decades, the burden of taxation – in the United States and globally – has shifted away from corporations and on the middle class,” Secretary Yellen said January 21 during the World Economic Forum’s Virtual Davos Agenda conference. “A significant reason for this shift is tax competition among nations. This competition has created a race to the bottom in corporate tax rates on footloose capital.”
She said this race-to-the-bottom has incentivized large multinational corporations to ” stash profits in their low-taxed subsidiaries around the world,” which “depletes governments of the resources they need for the complex challenges they face.”
A 2021 deal on the corporate minimum tax was struck by 137 countries representing almost 95 percent of the world’s gross domestic product. The United States had included language in the Build Back Better Act to set the corporate minimum tax rate at 15 percent, consistent with the international agreement, but the legislation stalled in the Senate after passing the House of Representatives. Its fate remains unknown. There has been no further action on the social spending bill since Sen. Joe Manchin (D-W.Va.) announced in December 2021 that he would not support the bill. He voiced his dissent on a corporate minimum tax among other concerns with the bill.
Despite this, Yellen continued to promote the concept, suggesting it is not dead yet.
A new system for a global minimum tax on corporate earnings “will improve productivity by incentivizing businesses to allocate capital to its most productive use, rather than to the use that produces the best tax result,” Yellen said.