US president Joe Biden has proposed raising the country’s corporate tax rate to 28 per cent, up from 21 per cent, under his budget plans for 2024.
The White House said on Thursday that the president’s budget proposals would seek to reform the international tax system. It aims to reduce the incentives to book profits in low-tax jurisdictions, stop corporate inversions to tax havens and raise the tax rate on US multinationals’ foreign earnings from 10.5 per cent to 21 per cent.
“These reforms will ensure that profitable multinational corporations pay their fair share.”
The White House said the new budget proposals would “build on” the recent global tax framework agreed to try halt “a race to the bottom” as countries “competed for multinational business by slashing tax rates at the expense of having adequate revenues to finance core services”.
The White House proposals will not be accepted by Republicans, who currently control the House of Representatives, inevitably leading to further tension over spending as the US moves towards a deadline in June for dealing with the current federal borrowing limit.
However, the proposals may set out a platform on which the president can campaign if, as expected, he announces shortly that he will run again for the presidency in 2024.
Overall, the 180-page document suggests the US federal government would spend $6.9 trillion (€6.5 trillion) next year, boosting investments in childcare, education, housing and healthcare. It proposes increasing the child tax credit from $2,000 to $3,000 per child over six years old, and to $3,600 for children under that age.
There would also be a $26 billion rise in spending on defence, bringing it to over $840 billion next year.
The White House said the budget proposals would fully pay for investments set out in the programme while at the same time reducing the US deficit by nearly $3 trillion over the next decade.
It said it would do this by “making the wealthy and big corporations pay their fair share and cutting wasteful spending on big pharma and big oil and other special interests”.
It said it would also ensure that “no one making less than $400,000 per year will pay a penny more in new taxes”.
The Biden budget also proposes a new 25 per cent minimum tax on billionaires. It would eliminate the tax treatment of “carried interest” that allows private equity and hedge fund executives to pay lower tax rates than many of their employees and would stop the very wealthy from using retirement savings accounts as tax shelters.
The proposed budget would also seek to row back some of the tax cuts put in place by Republicans under Donald Trump in 2017. Mr Biden’s budget would raise the top tax rate back to 39.6 per cent from 37 per cent for individuals who earn more than $400,000 and keep capital gains tax at the same rate as income tax for those with more than $1 million in income.
“While the wages and salaries that everyday Americans earn are taxed as ordinary income, billionaires make their money in ways that are taxed at lower rates, and sometimes not taxed at all.
“This special treatment, combined with sophisticated tax planning and giant loopholes, allows many of the wealthiest Americans to pay lower rates on their full income than many middle-class households pay. To finally address this glaring problem, the budget includes a 25 per cent minimum tax on the wealthiest 0.01 per cent,” the White House said.
The president’s budget also proposes quadrupling the tax on stock buybacks from 1 per cent to 4 per cent “to address the continued tax advantage for buybacks and encourage corporations to invest in productivity and the broader economy”.
The budget also aims to generate billions of dollars in savings by boosting the scope for health authorities to negotiate with the pharmaceutical industry on the price of drugs and by cracking down on waste and fraud in other areas.
Republicans condemned the president’s budget proposals. The republican House speaker Kevin McCarthy said the budget was “ “completely unserious”.
“He [Biden] proposes trillions in new taxes that you and your family will pay directly or through higher costs. Mr President: Washington has a spending problem, NOT a revenue problem,” Mr McCarthy said in a tweet on Thursday.
