President Joe Biden has outlined a corporate tax rate hike to 28% in order to fund his $2tn infrastructure and economic recovery package.
If introduced, the 7% tax rise from 21% will work alongside stricter regulation to stop offshoring profits in an attempt to gain the $2tn funds within 15 years.
In what the White House called “key steps toward a fairer tax code”, the measures are intended to “end the race to the bottom around the world” for low corporate tax rates.
The “made in America tax plan” will directly reverse the 2017 tax bill passed under former President Donald Trump’s administration, which cut corporate tax rate at the time from 35%.
Since the bill’s inception, the White House said that the average tax paid by corporations has halved from 16% to under 8% in 2018, with 91 fortune 500 companies paying $0 in federal corporate taxes on US income in the same period.
The White House added: “The President’s tax plan will ensure that corporations pay their fair share of taxes. A minimum tax on US corporations alone is insufficient.
“That can still allow foreign corporations to strip profits out of the United States, and US corporations can potentially escape US tax by inverting and switching their headquarters to foreign countries. This practice must end.”
By both raising and keeping hold of corporation tax within the US, Biden’s investment proposal will supposedly cover $621bn in transportation infrastructure, $300bn for improving drinking water, and $300bn to build affordable housing.