- 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.