Watch CBS News

Biden's tax plan will fully pay for infrastructure proposal, Treasury Department says

Democrats face infrastructure roadblocks
As Biden pushes infrastructure plan, some Democrats differ on corporate tax rates 07:00

The Made in America Tax Plan would fully pay for the administration's more than $2 trillion infrastructure proposal over a 15-year period, according to an in-depth Treasury Department report released Wednesday. 

President Biden aims to make American companies and workers more competitive by eliminating incentives to move investments overseas, cutting profit shifting, pushing back on what administration officials have called a "tax race to the bottom" and refocusing preferences on clean energy production, as his administration prioritizes the fight against climate change. 

Republican lawmakers and some business groups have already come out against the plan, arguing that raising corporate tax rates puts the U.S. at a competitive disadvantage around the world and would slow economic growth as the nation works to dig out of the economic crisis caused by the pandemic. Meanwhile, at least two Democratic senators and a number of House members have already expressed opposition to some of the hikes, making it virtually impossible to pass without additional changes. 

Biden says definition of infrastructure is "evolving" and urges action on his plan 32:26

The report comes as Mr. Biden promotes his infrastructure plan, which he introduced last week. The tax plan would direct 1% of GDP to the infrastructure provisions over eight years. According to the in-depth report, the tax plan would raise the necessary funds and continue to generate revenue on a permanent basis. 

"By choosing to compete on taxes, we've neglected to compete on the skill of our workers and the strength of our infrastructure. It's a self-defeating competition which is why we're proposing this Made in America Tax Plan. It changes the game we play," said Treasury Secretary Janet Yellen. "American will compete on our ability to produce talented workers, cutting-edge research and state-of-the-art infrastructure — not on whether we have lower tax rates than Bermuda or Switzerland."

According to Treasury officials, labor incomes as a share of the national income have declined relative to capital in recent decades. At the same time, U.S. companies are the most profitable in the world, but the U.S. is collecting less in corporate tax revenues as a share of GDP than almost any other advanced country in the Organization for Economic Co-operation and Development. The report also says the federal income taxes U.S. multinational companies actually pay is just 7.8%. The goal is to refocus corporate tax revenue away from what the report called "historic and international norms."

"America's corporate tax system has long been broken. So too has been the way we think about corporate taxation," said Yellen, who called the plan a "win-win" for corporations and the government. 

As part of the proposal, Biden has called for the corporate tax rate to be raised to 28%, up from the 21% enacted under President Trump's tax plan. To ensure companies "pay their fair share," the plan also would impose a 15% book income minimum tax on large corporations with incomes of $2 billion or more that report high incomes but show low taxable income.  According to the report, about 45 corporations would have paid a minimum tax under the president's proposal in recent years if other changes are factored in.

President Biden on Wednesday said he's willing to negotiate ways to pay for his infrastructure plan, including a lower corporate tax rate than his proposed 28% amid pushback from some lawmakers and business, but he said they must find a way to pay for it.

"I'm open to ideas about how to pay for this plan with one exception. I will not impose any tax increases on people making less than $400,000 a year. If others have ideas out there on how to pay for this investment, without violating that rule, they should come forward. There's all kinds of opportunities," Biden said in his remarks.

The president argued his proposal on the corporate tax rate of 28% meets in the middle between the old tax rate of 35% and the current one of 21%. He also blasted corporations for avoiding paying taxes, saying that  it's not fair to the American taxpayers. Mr. Biden shamed critics of his tax plan, asking where their outrage was when tax cuts implemented under President Trump went to the wealthy.

"I'm not trying to punish anybody, but damn it — maybe it's because I come from middle-class neighborhood. I'm sick and tired of ordinary people being fleeced," he added.

At the same time, the plan would calculate the global minimum tax on U.S. multinational corporations on a country-by-country basis and would increase the current minimum from 10.5% to 21% while also ending the tax exemption for the first 10% return on foreign assets. This, officials claim, would help eliminate the incentive to offshore factories and other assets. 

The proposal also calls for a global minimum tax to end what Secretary Yellen has called a "race to the bottom." According to the report, the proposal will include strong incentives to get countries to join the agreement and implement the rules through the denial of U.S. deductions on payments to foreign corporations located in countries that do not implement the tax in an effort to level the playing field between foreign and U.S. companies. 

Meanwhile, the Biden administration is also pushing to change course toward clean energy production with resources and new research. The tax plan would end subsidies for fossil fuels as well as provide targeted tax incentives for green technologies — such as electric vehicles and solar and wind power.  The Treasury Department Office of Tax Analysis estimates suggest eliminating subsidies for fossil fuel companies would increase revenues by more than $35 billion over ten years. However, it remains unclear what incentive changes would cost as the administration aims to set the country on a path to 100% carbon pollution-free electricity by 2035 when coupled with other non-tax initiatives, like the Energy Efficiency and Clean Electricity Standard. 

Additionally, the administration aims to provide the IRS with resources to pursue large corporations that do not meet their tax obligations. The IRS enforcement budget has fallen 25% over the last decade. While Treasury officials did not provide a specific dollar figure for the effort as the administration writes its budget, they said the goal was to reverse the audit rates in recent years.

The report comes as Democrat Senate members released their own framework to overhaul the international tax system. Treasury officials said they have been working with the Senate Finance Committee in developing proposals and do not see a lot of differences, as they move toward the same goals in passing an infrastructure and tax plan. 

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.