U.S. Treasury Secretary Janet Yellen on Monday urged the adoption of a minimum global corporate income tax, an effort to offset any disadvantages that might arise from the Biden administration’s proposed increase in the U.S. corporate tax rate.
Citing a “thirty-year race to the bottom” in which countries have slashed corporate tax rates in an effort to attract multinational businesses, Yellen said the Biden administration would work with other advanced economies in the G20 to set a minimum.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen said in a virtual speech to the Chicago Council on Global Affairs. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods.”
President Joe Biden has proposed hiking the corporate tax rate to 28 per cent from 21 per cent, partially undoing the Trump administration’s cut from 35 per cent in its 2017 tax bill. The increase would help pay for the White House’s ambitious $2.3 trillion infrastructure proposal.
According to the Tax Foundation, the Trump administration’s reduction took the U.S. corporate tax rate from the highest among the 37 advanced economies in the Organization for Economic Cooperation and Development to the 13th highest. Many analysts have argued, however, that few large U.S. multinationals paid the full tax.
Yellen also said the United States will step up its efforts at home and overseas to fight climate change, “after sitting on the sidelines for four years.”
Treasury will work to “promote the flow of capital toward climate-aligned investments and away from carbon-intensive investments,” Yellen said. That approach has raised the ire of GOP members of Congress, who say it threatens the ability of the U.S. oil and gas industry to access needed lending.