Biden’s Minimum Corporate Tax Gains Steam
One of Joe Biden’s priorities for his first presidential term is a major international tax overhaul. He has proposed a global minimum corporate tax rate of 15%. That proposal has met with success from international allies. It was endorsed by the Group of 20 (G-20) following a summer meeting in Italy.
This tax will help the United States and the world to slow a “race to the bottom.” This race to reduce taxes helps companies protect their bottom line, but it hurts citizens. Ultimately, the global minimum tax will improve the US economy and accelerate progress, though its implementation will never be perfect.
Slowing the race to the bottom
According to Italian Finance Minister Daniele Franco, the proposal will “grant greater tax certainty and stop the race to the bottom with respect to corporate tax rates.” Without a global minimum corporate tax rate, countries are competing for corporate presence by reducing taxes.
This race to the bottom incentivizes corporate presence at the expense of revenue stability and the country’s citizens. Social and infrastructure programs run on tax revenue. Thus, slowing the race to the bottom will benefit citizens and communities by enabling more government spending to improve lives.
Improving the US economy
In the US, a global corporate minimum tax will reduce the number of businesses moving their headquarters overseas. This will immediately increase tax revenue. The minimum tax rate could also generate more revenue from profitable companies based in the US that have historically paid little in taxes.
To achieve Biden’s ambitious policy goals, the United States must generate more tax revenue. Increased corporate tax revenue would not only be a policy win on its own, but would pave the way for more progress.
Pursuing progress, not perfection
Despite international support for Biden’s proposal, progress will be slow and imperfect. And there are still details to work out, including determining ways developing economies can compete with rich countries for corporate presence.
Still, any progress will be beneficial. Most corporations and their shareholders can afford to profit less for the benefit of communities in which they operate.