President Joe Biden backed off a campaign promise ensuring all companies that earn more than $100 million and avoid most tax obligations would pay at least 15% in taxes.
President Joe Biden’s Made In America Tax Plan would introduce a minimum tax rate of 15% on corporations with $2 billion in book income, but report little or no taxable income. The plan, released Wednesday by the Treasury Department, differs from Biden’s campaign proposal, which proposed the same minimum tax rate, but on tax-avoiding companies that report more than $100 million in book income.
“Large corporations that report sky-high profits to shareholders would be required to pay at least a minimum amount of tax on such out-sized returns,” the president’s plan said. “Under this proposal, there would be a minimum tax of 15 percent on book income, the profit such firms generally report to the investors.” (RELATED: Biden Administration Calls For Global Minimum Corporate Tax Rate)
During his presidential campaign, Biden promised to impose a “a 15% minimum tax on book income so that no corporation gets away with paying no taxes,” his website said. But the Made In America Tax Plan would allow many corporations that currently exploit tax code loopholes to continue avoiding federal taxes.
The minimum tax on book income would affect just 45 companies, according to the Treasury Department. Those companies would pay an average of $300 million in federal taxes under the administration’s plan.
Roughly 1,100 U.S. corporations would meet the $100 million threshold, according to S&P Global Market Intelligence, the Wall Street Journal reported.
“This minimum book tax is a targeted approach to ensure that the most aggressive tax avoiders are forced to bear meaningful tax liabilities,” the plan continued.
Book income is the figure corporations provide on annual reports to shareholders, according to the Tax Foundation. Corporations’ taxable income is the figure that factors in credits and loopholes and is provided to the tax authorities.
Companies often reduce taxable income by deducting the amount they spent on new technology, equipment, research and other investments, according to the Tax Foundation.
At least 55 Fortune 500 corporations paid $0 in federal taxes last year even as they made billions in profits, an Institute on Taxation and Economic Policy (ITEP) report released Friday found. Amazon alone received $7.2 billion in federal tax subsidies between 2018 and 2020 by exploiting tax code loopholes, according to ITEP.
Biden’s plan would raise the federal corporate tax rate to 28%. The Tax Cuts and Jobs Act of 2017, passed by the Republican-controlled Congress and signed into law by former President Donald Trump, lowered the corporate tax rate from 35% to 21%.
“The plan revamps a flawed corporate tax code that incentivizes off-shoring and, instead, rewards companies that invest in America’s workers,” Treasury Secretary Janet Yellen said in a statement last week. “It ends the global race to the bottom for lower and lower tax rates.”
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