Janet Yellen will use her first major address as Secretary of the Treasury to advocate for a global minimum corporate tax rate, Axios has learned, as she advocates President Biden’s plan to increase U.S. corporate taxes to fund his $ 2 trillion + infrastructure plan.
Why it matters: Convincing other countries to impose a global minimum tax would reduce the likelihood of businesses moving abroad, as Biden aims to increase the corporate rate from 21% to 28%.
- “Competitiveness is about more than how US-headquartered companies stack up against other companies in global mergers and takeover bids,” Yellen said today in a speech to the Chicago Council on Global Affairs, according to an excerpt from her prepared remarks obtained by Axios.
- It is about ensuring that governments have stable tax systems that generate sufficient revenue to invest in essential public goods and respond to crises, and that all citizens share the burden of government funding fairly. ”
- “We are working with G20 countries to agree on a global minimum corporate tax rate that can stop the race to the bottom.”
The big picturePresident Trump lowered the U.S. tariff from 35% to 21%, arguing that U.S. companies worldwide were at a disadvantage and incentivized to move offshore.
- According to the Tax Foundation, a conservative tax group, the average corporate rate in the G7 is 24%, and some nine countries have recently lowered their corporate rates.
- Biden’s plan would also increase the international minimum rate for US companies’ foreign profits from 10.5% to 21%, which would still be lower than the 28% domestic rate.
Driving the newsBiden has engaged with five cabinet secretaries to explain – and sell – his plan to the American public, including Secretary of Transportation Pete Buttigieg, Secretary of Energy Jennifer Granholm, Secretary of Housing and Urban Development Marcia Fudge, Secretary of Labor Marty Walsh and Minister of Commerce Gina Raimondo.
- It is Yellen’s job to advocate the international cause. Her speech also aims to set the tone for the annual meetings of the International Monetary Fund and the World Bank in Washington, which will begin almost this week.
Between the linesBiden relies on Yellen to convince the corporate sector and reassure Wall Street that his $ 2 trillion + infrastructure proposal, on top of his $ 1.9 trillion stimulus package, will not lead to inflation.
- Now he’s using her to convince international finance ministers and central bankers that the world’s largest economies must work together on corporate rates to avoid a race to the bottom.
Go deeperYellen will also challenge the world’s economic forces to focus on climate change and ways to improve access to vaccines for the world’s poorest countries.
- She will be calling for $ 650 billion in new “Special Drawing Rights” – essentially lines of credit with the IMF that can help developing countries access more US dollars.
- The Trump administration has been skeptical of new SDR allocations, and many Congressional Republicans are still against it.
it comes down toBy trying to convince other countries to implement a global minimum tax, Yellen recognizes the risks to the US economy if it only trades in raising corporate rates.
- “Together we can use a global minimum tax to ensure that the global economy thrives on a more level playing field in the taxation of multinational corporations and drive innovation, growth and prosperity,” she said.