Thread by @ChuckCBPP

President Biden’s #AmericanJobsPlan will make the economy stronger & the tax code fairer by raising the corporate tax rate & limiting the ability of corporations to shift profits & investments overseas and using the revenue to finance a 21st century infrastructure.

Thread

Raising taxes on corporate profits by partially reversing the 2017 tax cuts won’t hurt the economy & the investments they finance will strengthen it and broaden opportunity. The costly 2017 law slashed the corporate tax rate to 21% w/little discernible effect on the economy.

Here’s the evidence: @JasonFurman told Ways & Means in Feb 2020: “GDP growth did not increase following the 2017 tax law”

bit.ly/3sFs5ib

More from @jasonfurman: “The major private domestic components of GDP slowed in the two years since the 2017 tax law, including slowing consumption growth, business fixed investment growth and residential investment growth.”

A report from the nonpartisan Congressional Research Service dismantled the Trump claim of a $4,000 worker windfall & highlighted that despite the 2017 tax cut law – and a near full employment economy – wages grew at a slower rate than overall output:
bit.ly/3czSF6T

The real windfall of the Trump corporate tax cut went to shareholders – who according to CBO, JCT, TPC, and AEI – receive at least 75% of the benefit of corporate tax cuts. Shareholders are predominantly high-income people & many are foreign investors.

Goldman Sachs: “The wealthiest 0.1% and 1% of households now own about 17% and 50% of total household equities, respectively, up significantly from 13% and 39% in the late 1980s.”

on.mktw.net/3wdRMbY

This paper from TPC’s Steve Rosenthal & Theo Burke highlights that foreign investors now own 40% of U.S. equities, compared to 11% in 1980. That means that a sizable share of the benefits of a corporate tax cut goes to foreign investors.

bit.ly/39uA89U

The 2017 Trump corporate tax package also left a playing field tilted in favor of overseas investments, creating new incentives to locate profits and investments in tax havens.

Treasury’s Kim Clausing recently told the Senate Finance Committee the 2017 law encouraged profit shifting “by exempting from U.S. taxation the first ten percent return on foreign assets, and by taxing foreign profits at half the rate of U.S. profits” bit.ly/3cDH86I

.@dashching added that the 2017 law “leads to the striking outcome that the U.S. can be the least attractive place for a multinational to invest or place its profits, from a tax perspective,” compared to both high & low tax countries.

bit.ly/3uam39A

The Biden plan takes important steps to discourage profit shifting. It ends the 2017 tax law’s 10% exemption for foreign profits, raises the min. tax rate on foreign profits to 21% & calculates the min. tax on a per-country basis (so companies can’t “blend” away the tax).

The plan also includes a provision that would encourage other countries to adopt strong minimum taxes. This would position the U.S. to play a leadership role in the OECD’s effort to reform global taxation by discouraging what Secretary Yellen has called a “race to the bottom.”

Asking corporations to pay a fairer share recognizes that corporations accrue enormous benefits from federal investments in everything from infrastructure to education to medical research.

Opponents of raising taxes on highly profitable corporations often ignore the benefits of the investments financed with the revenues. Rebuilding our infrastructure & addressing climate change are critical to our nation’s economy.

A prior CBO analysis showed that investments in infrastructure (and an expanded Child Tax Credit which will come separately) have a higher bang-for-the buck when the economy has slack than corporate tax changes:

Opponents will also say that raising corporate taxes will hurt workers:

But corporate taxes are largely borne to wealthy shareholders and the small portion borne by “workers” skews to high income workers (corporate executives), while benefits of infrastructure/care economy investments will be more broadly shared.

When opponents profess concern about workers, it is important to see if that concern extends to policies like a higher minimum wage, child care and paid leave, and an expansion of the Child Tax Credit and EITC – which directly help people in low-paid jobs.

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