CEO group says Biden should stick to ‘real infrastructure’ and ‘leave the rest of the stuff for something else’

Joe Biden
President Joe Biden.

  • Business Roundtable’s CEO told Bloomberg that Biden’s infrastructure plan should stick to roads and bridges.
  • The lobbying group also opposes raising the corporate tax to 28% as a way to fund the plan.
  • Biden expressed willingness to work with Republicans on negotiating the size of the tax hike.
  • See more stories on Insider’s business page.

President Joe Biden’s $2.3 trillion infrastructure plan is ambitious. It includes funding for things like climate change and research initiatives, and an influential business lobbying group wants Biden to scale things way back.

Josh Bolten, chief executive officer of Business Roundtable, which represents CEOs of the largest US companies, said in an interview with Bloomberg TV on Thursday that the organization wants Biden to limit the scope of the package to mainly address roads and bridges and “leave the rest of the stuff for something else.”

Bolten, who was former President George W. Bush’s chief of staff for almost three years, did not clarify what he was referring to as “something else.”

“It’s the real infrastructure that can attract bipartisan support,” Bolten said, adding that “more modern infrastructure” also needs investment, citing broadband as an example. In this regard, Bolten is slightly more positive on Biden’s plan than Republican leadership, which has argued that very little of Biden’s plan fits the definition of infrastructure. In fact, Bolten said the Business Roundtable favors a “substantial amount” of what Biden has proposed. For his part, Biden has argued that infrastructure has always periodically undergone reinventions, in step with technology.

Biden’s plan also includes a proposed corporate tax rate increase to 28%, and Bolten said the group, which includes the CEOS of Apple and Amazon, is “strongly against” that proposal. Former President Donald Trump’s 2017 tax cut slashed the rate from 35% to 21%.

“It’s a massive tax increase on US business, which is really damaging, not just to the shareholders of all those businesses but to the employees and customers as well,” he said. The hike, he added, “would make us once again the least competitive in the developed world.”

Earlier this week, Bolten issued a statement criticizing Treasury Secretary’s related efforts to establish a global corporate minimum tax rate, saying it “threatens to subject the U.S. to a major competitive disadvantage.”

Insider reported on Thursday that while 65% of voters support corporate tax hikes to pay for infrastructure, Republican lawmakers, and even some Democrats, are opposed to doing so.

For example, Senate Minority Leader Mitch McConnell said Biden’s plan will get no Republican support in the Senate because “the last thing the economy needs right now is a big, whopping tax increase,” and Democratic Sen. Joe Manchin of West Virginia said on a West Virginia radio show that he would not support a corporate tax increase to 28%. Manchin does want an increase, though, and seems more comfortable with 25%.

The 28% rate seemed reasonable last year to Gary Cohn, the former head of Trump’s National Economic Council. He said at the time he was “actually OK at 28%.”

In a speech on Wednesday, Biden said he would be willing to negotiate with Republicans on the size of the corporate tax increase.

“I’m wide open, but we got to pay for this,” Biden said. “I am willing to negotiate that.”

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Nike, FedEx, and 24 other companies with $77 billion of combined income have avoided paying taxes for years, a new report found

Nike Beijing
Customers lined up outside the Nike flagship store on the opening day at Wangfujing Street on January 20, 2021 in Beijing, China.

  • 55 publicly traded companies paid $0 in federal taxes last year, a study by ITEP found.
  • Nike and FedEx are among 26 companies that have not paid federal taxes in three years.
  • In 2020, the 55 companies avoided paying about $12 billion in federal taxes.
  • See more stories on Insider’s business page.

55 of America’s biggest companies paid $0 in federal taxes last year, a new study from the Institute on Taxation and Economic Policy (ITEP) found.

The 55 publicly traded companies would have paid an estimated $12 billion in federal taxes if not for corporate tax breaks in 2020, including $8.5 billion in tax avoidance and $3.5 billion in tax rebates, the report found using regulatory filings and other information.

Nearly half of the companies have avoided paying federal taxes for the last three years, according to the report. Nike, FedEx, and DTE Energy were among 26 companies that recorded $77 billion in combined pre-tax income in the past three years, but did not pay any federal income taxes.

The news comes at the same time President Joe Biden looks to raise taxes on corporations. The White House announced this week that it plans to limit the number of companies that do not pay federal taxes, as well as increase the corporate tax rate to 28% – raising an estimated $2 trillion over the course of 15 years.

How do multi-billion dollar companies avoid federal taxes?

ITEP’s data found some of the nation’s biggest companies have been avoiding federal taxes for decades, dating back to the Reagan administration. The companies, which encompass a wide variety of industries, use a range of tactics, including tax exemptions and deductions.

While company tax returns are private, publicly traded companies must file financial reports that include information on federal income taxes. Using the financial reports as well as data on each companies’ pre-tax income, ITEP was able to analyze some of the major resources the companies used to avoid paying federal taxes.

In 2017, the Trump administration’s Tax Cuts and Jobs Act of 2017 amended the Internal Revenue Code of 1986, the Washington-based research group said the act failed to address major loopholes in the tax code.

“When President Trump signaled his intention to cut corporate taxes in 2017, he and Congress had an opportunity to pare back the many loopholes that have allowed companies to avoid tax on much of their income since the 1980s,” the report said. “Now, with three years of data published on the effective tax rates paid by publicly traded companies, it is clear that the Trump law has not meaningfully curtailed corporate tax avoidance and may even be encouraging it.”

Read more: When businesses should file taxes this year and how to get an extension if you need more time

The 2017 tax bill dropped the top corporate income tax rate from 35% to 21% – a corporate tax rate that is below average for most countries represented in the Organisation for Economic Co-operation and Development, a group that represents 37 developed countries. The act also allows companies to immediately write off the cost of new equipment and machinery.

Some of the loopholes ITEP found many companies used include tax breaks for executive stock options which allowed the companies to write off stock-option expenses.

Multiple companies, including Nike and Hewlett Packard, used federal research and experimentation tax credits to reduce their incomes, while companies like DTE Energy and Duke Energy used tax breaks for renewable energy to avoid paying federal taxes.

The CARES Act made it even easier for companies to avoid taxes

The $2.2 trillion CARES Act which was passed last year to help alleviate the economic distress of the pandemic and help businesses survive, provided the 55 companies with over $500 million in tax breaks, according to ITEP.

Dozens of publicly traded companies used provision from the CARES Act that temporarily allowed businesses to use losses in 2020 to offset profits earned in previous years, according to the research group.

FedEx was one of the companies that used the CARES Act to reduce tax bills from prior years when the tax rate was higher.

The company told Insider the CARES Act “helped companies like FedEx navigate a rapidly changing economy and marketplace while continuing to invest in capital, hire team members, and fund employee pension plans.”

Nike, HP, Salesforce, Duke Energy, and DTE Energy did not respond to a request from Insider for a comment.

In its report, the left-leaning research group pointed to several tax code amendments that could cut down on the number of companies that do not pay federal taxes, including a “minimum tax” for profitable companies, as well as cutting back on tax breaks for public companies.

Biden has repeatedly expressed interest in increasing taxes for major corporations as a way to fund his $2 trillion infrastructure plan.

On Wednesday, Biden called out Amazon for avoiding federal taxes. After paying $0 in federal taxes for two years, Amazon started paying federal income taxes in 2019.

Biden said he was aware the company was one of many Fortune 500 companies that use loopholes to avoid taxes, while middle class families are not afforded the same opportunities and pay over 20% tax rates.

“I don’t want to punish them, but that’s just wrong,” Biden said.

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Trump-era stimulus let corporations claim $14 billion in tax refunds, watchdog says

IRS office
  • Tax breaks included in the CARES Act let corporations receive $14 billion in refunds, the GAO said.
  • Roughly 1,200 firms received refunds worth more than $1 million, according to the Wednesday report.
  • The CARES Act won bipartisan support, but Democrats have since slammed the breaks as poorly targeted.
  • See more stories on Insider’s business page.

The Internal Revenue Service (IRS) will dole out $14 billion in tax refunds to corporations thanks to controversial provisions included in last year’s CARES Act, the Government Accountability Office (GAO) said Wednesday.

The $2.2 trillion stimulus package signed by President Donald Trump in the early stages of the pandemic included a swath of measures aimed at reducing tax burdens for struggling businesses. Tenets included carrybacks for business losses and refunds linked to the Alternative Minimum Tax.

The IRS has already received more than 41,000 cases from businesses looking to access refunds through either, or both, of the two tax breaks, according to a GAO report. Roughly $14 billion in related refunds were approved by the end of last year. Of that, about $11 billion has already been distributed.

Yet while the tax breaks included in the CARES Act were touted as ways to keep small businesses afloat, many of the companies filing for relief are winning massive refunds. Nearly 3,000 companies filing for refunds received between $100,000 and $999,000, according to the report. And roughly 1,200 firms got refunds worth more than $1 million.

Bloomberg first reported on the tax break.

US tax law allows businesses to use net operating losses from unprofitable years to cancel out future tax bills in a carryover process. The CARES Act widened this provision to allow operating losses to be carried back as far as five years, effectively letting companies hit by the pandemic dodge some tax burdens.

The CARES Act passed in March 2020 on a nearly unanimous basis, but Democrats have since criticized some of its tax breaks for issuing relief to wealthy companies and Americans. Some lawmakers have even called for the measures to be repealed.

Republicans, however, have pointed out that Democrats backed the bill’s passage and that similar policies have been used in past downturns.

The GAO’s report suggests the $14 billion in approved refunds are the tip of the iceberg for CARES-related tax breaks. IRS officials said in late January they received more than 12,000 more applications for carrybacks and credit refunds, but that they aren’t yet sure how many are related to the CARES Act. A backlog of revised tax returns could also add to the total amount refunded to corporations, the GAO said.

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Biden is reportedly getting even more serious about taxing the wealthy

joe biden
President Joe Biden participates in a conference phone call with governors affected by a snowstorm in the Midwest and southwest Tuesday, Feb. 16, 2021, in the Oval Office of the White House.

  • Bloomberg reports that Biden is getting more serious about some taxes targeting the rich.
  • The increases come amidst growing economic disparity throughout the pandemic.
  • Capital gains, larger corporations, and high-earners could feel the impact of the hikes under talks.
  • See more stories on Insider’s business page.

President Joe Biden is getting even more serious about raising taxes on the wealthy, according to a new Bloomberg report. It likely won’t look like a “wealth tax,” though.

Biden hasn’t said he’d enact a wealth tax like the one proposed by Sen. Elizabeth Warren, and instead he’s reportedly considering alterations to the tax code that would increase taxes on high earners without creating a brand-new tax that targets wealth.

Biden has already said that Americans making over $400,000 will see a “small to significant” tax increase. High-earning Americans could see their income taxes increase to 39%.

Now, the deputy director of the National Economic Council, David Kamin has told Bloomberg what other tax changes are currently under discussion. One is eliminating the stepped-up basis, something that Treasury Secretary Janet Yellen has already been eyeing.

That measure has to do with inheritance, and how inherited assets are valued for tax purposes. Current law lets assets that have gained value since they were originally acquired be valued at their market price and only taxed on increase from the value at the time of inheritance – not any of the prior gains.

Also under consideration, according to Bloomberg, is increasing the tax rate on capital gains, taxing them at the same rate as the income tax.

Capital gains – profits made from selling assets like stocks – are taxed differently from income once the owner has had the asset for over a year. The rates for those gains are generally lower than the income tax. Throughout his presidency, Donald Trump mostly weighed even more cuts to capital-gains tax rates. Biden’s proposal could bring the rates up to 39% for those making the most money, a far cry from rates that currently come to around 20%. Also, wealthier Americans are exactly the type of people likelier to own assets that can be sold for a capital gain.

Finally, Biden wants to raise taxes on business.

Yellen is working toward creating a global minimum corporate tax rate, under the idea that if the US can convince most other countries to set the corporate tax rate at a certain level, Biden can raise corporate taxes without fear of multinationals leaving the country.

Growing disparity has underscored the push for a tax increase

According to Bloomberg, the “administration’s intentions” have been reinforced by the K-shaped recovery taking place throughout the pandemic in which high-income Americans have seen their jobs and wages grow, while low-income Americans experience the opposite. Biden himself used the term during a 2020 presidential debate.

Throughout the pandemic, low-wage and minority workers have been hit the hardest; those low-wage jobs may also not return post-pandemic, requiring workers to learn new skills and move into different fields. On the whole, workers globally have lost $3.7 trillion in wages during the pandemic, while the world’s billionaires have added $3.9 trillion to their cumulative net worths. In the US alone, billionaires added $1.3 trillion to their net worths during the pandemic.

Biden’s $1.9 trillion stimulus did offer some relief – and increased consumer confidence – for low-income Americans. That package was passed through reconciliation, which seems to be the most likely route forward for any Democratic tax hikes.

Tax increases – and what the wealthy are (or aren’t) paying – have been a hot topic

A new report found that the top 1% of Americans are avoiding taxes more than anticipated; they’ve been failing to report about 21% of their income.

There’s also been a more targeted push by progressives to introduce a new tax on wealth. Warren introduced a new bill that would increase taxes on the top 0.05% of households. If the measure had been in place in 2020, it would have raised $114 billion from billionaires alone.

White House Press Secretary Jen Psaki has said Warren and Biden share similar objectives for addressing that “those at the top are not doing their part,” but the two ultimately have different plans.

In an interview with Bloomberg, Warren praised the American Rescue Plan and Biden’s continual advocacy for it. “There is momentum now for real change, and tax policy is a critical part of that change,” she told Bloomberg.

Warren also recently Sen. Bernie Sanders and other progressive Democrats in introducing a bill that would target corporations where CEOs are at least 50 times more than the median worker. That bill could raise up to $150 billion in 10 years.

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Janet Yellen wants to overhaul corporate taxes for the whole world – she’s talking to other countries about a minimum rate

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Treasury Secretary Janet Yellen.

  • The Washington Post reports Treasury Secretary Yellen is working on a global minimum tax rate.
  • The nonbinding rate would apply to multinationals, as she seeks to keep them from shopping for the lowest territory.
  • Yellen and Biden want to raise the corporate tax rate but need the rest of the world onboard.
  • See more stories on Insider’s business page.

Treasury Secretary Janet Yellen has been clear since her confirmation hearing and subsequent press appearances that the Biden administration needs to raise new tax revenues. At the same time, she’s warned of the difficulties of implementing a wealth tax, which is favored by the progressive wing of the Democratic Party.

Part of the solution is reforming the corporate tax rate – not just in the US but far beyond its borders.

To that end, Yellen is in active talks with other countries about setting a global minimum rate for corporate taxes, The Washington Post’s Jeff Stein first reported.

The US was long an outlier, with a corporate tax rate of 35% versus the international average of 24%, until former President Donald Trump’s 2017 tax cut slashed the corporate rate to 21%. But even that hasn’t stopped other countries from lowering their rates to attract multinationals. The Post noted that nine countries lowered their corporate tax rate just last year.

Nobel Prize-winning economist Joseph Stiglitz, a mentor of Yellen’s, told the Post that if she is successful in these talks, it would be “a little like the Paris climate accord of taxes.” Yellen is holding talks with more than 140 international counterparts via the Organization for Economic Cooperation and Development (OECD), where countries are looking at global tax issues, with a particular focus on tech.

The goal for now is a nonbinding consensus on a minimum tax rate within the OECD, with the thinking that the US could move off the Trump-era 21% without fear of multinationals leaving to pay taxes at a lower rate somewhere else.

In the background of Yellen’s push for a global minimum is the Biden administration’s current push to find more tax revenue. President Joe Biden is reportedly planning the first major federal tax increase in nearly three decades, according to Bloomberg. One of the proposals on the table is a raise to the corporate tax, something that Biden campaigned on. He’s proposed raising the corporate tax rate to 28%.

The right-leaning Tax Foundation found that, since 1980, the “worldwide average statutory corporate tax rate has consistently decreased,” with the biggest drops coming in the early 2000s. According to the Tax Foundation, “the worldwide average statutory corporate income tax rate” is 23.85%.

Biden also just said this week that Americans earning over $400,000 could see an increase in their taxes, a measure he acknowledged may not win any Republican support.

There could be a complicated path forward for Yellen’s corporate minimum, per the Post. Congress may need to be involved in approving new tax rules, and it could take the countries involved years to enact the tax, if they even choose to adopt it.

As the Post reports, if the complex measure is successful, it would be a huge accomplishment for both Yellen and Biden’s presidency – and maybe the world. It could also help pay for a $2 trillion infrastructure package.

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Biden is considering a major federal tax increase for the first time in nearly 30 years, report says

biden vaccine
President Joe Biden

  • President Joe Biden is reportedly planning a tax increase in his next spending package.
  • Bloomberg reported that Biden is considering raising the corporate tax rate from 21% to 28%.
  • Biden’s also thinking about increasing income taxes for individuals who earn over $400,000 a year.
  • See more stories on Insider’s business page.

President Joe Biden is preparing to include a federal tax increase in his next big economic package, according to a Bloomberg report on Monday.

People familiar with the matter told the outlet that the Biden administration is working on a follow-up spending bill to the recently-enacted $1.9 trillion coronavirus stimulus. The initiative is expected to have a bigger price-tag, and may raise the corporate tax rate and the income tax rate for high-earning individuals to offset the spending, Bloomberg reported.

The move would represent the first major federal tax hike in nearly 30 years, per Bloomberg. The last significant tax increases were implemented in 1993 under the Clinton administration.

Sources with knowledge of the private discussions told Bloomberg that current ideas involve raising the corporate tax rate from 21% to 28%, bumping up the income tax rate for individuals who earn more than $400,000 per year, increasing the capital-gains tax rate for individuals who earn at least $1 million per year, expanding the estate tax, and “paring back” tax preferences for pass-through businesses, which are not subject to corporate taxes, such as limited liability companies.

White House press secretary Jen Psaki on Monday told reporters that “there isn’t a package yet” but that Biden’s next proposal aims to fulfill components of his “Build Back Better” agenda touted on the 2020 presidential campaign trail.

“The president remains committed to his pledge from the campaign that nobody making under $400,000 a year will have their taxes increased,” Psaki said. “His priority and focus has always been on people paying their fair share and also focusing on corporations that may not be paying their fair share either.”

The Tax Policy Center, a nonpartisan think tank, reported that Biden’s campaign tax plan would generate roughly $2.1 trillion over a decade, Bloomberg noted, but added that the administration’s plan will probably not be that large.

Republicans are widely expected to push back on any tax-increase initiatives, according to Bloomberg. The party, under the Trump administration, passed sweeping tax cuts in 2017 – the biggest overhaul to the federal tax code in three decades – without any Democratic votes. The law reduced the corporate tax rate from 35% to 21%. Democrats assailed the bill as a “heist” that would “exacerbate inequality” in the country. Biden’s proposal would likely repeal elements of the 2017 Tax Cuts and Jobs Act, Bloomberg reported.

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