Joe Biden and the American Democrats are focusing on a new minimum tax explicitly aimed at companies with large profits. And, amid strong resistance, they also try to introduce an unprecedented wealth tax for billionaires. The goal is to rake in the hundreds of billions of dollars needed to fund the White House’s social and environmental spending priorities, which they intend to pass in Congress as soon as possible. Biden is leaving today for Europe, with delicate appointments at the G20 in Rome and at COP26, the UN climate summit, which he would like to reach strengthened by a budget agreement in his pocket.
Minimum tax of 15% for the most prosperous large companies
The corporate project, which replaces generalized increases in tax rates from 21% to 25%, provides for a minimum tax of 15% for companies that report profits exceeding one billion dollars to shareholders for three consecutive years. The maneuver, in line with the recent agreement in the OECD on a global minimum tax, would affect 200 companies and rake in 300-400 billion in ten years. The most controversial personal wealth tax, on the other hand, would primarily concern those who own liquid assets, including shares or bonds, exceeding a billion, or receive annual income of at least one hundred million for three years.
The Democrats, progressive and moderate, appear ready to unite around an expenditure plan filed down to 1,500-2,000 billion. Although smaller than the 3,500 billion assumed in the past, it is one of the most aggressive public interventions unrelated to immediate responses to crises in recent US history. And finding the resources has perhaps become the last, complex political puzzle.
The formula for the new corporate tax now appears ready. “The most profitable corporations in the country are often the worst in paying their fair share,” said Senator Ron Wyden, one of the promoters of the measure. Year after year they report profits and pay little or nothing in taxes. ”The explicit reference is to Amazon, accused of having registered 45 billion in profits in three years, benefiting from an effective tax rate of 4.3 percent. To ease the impact of the reform, Democrats intend to preserve a number of corporate tax credits, with the Treasury in charge of the details. The most reluctant moderate Democratic senator, Kyrsten Sinema of Arizona, who had rejected general rate increases, endorsed the new idea.
There is discussion about the tax on personal fortunes
The crackdown on the vast personal fortunes of perhaps 700 individuals is still at the center of tense debate. It is currently hinging on an expanded use of the capital gains rate, up to 23.8 percent overall. The proposal is unprecedented because it affects unrealized – and to date untaxed – gains in tradable assets. They would be subject to a one-time income tax from their initial value from 2022, with particular repercussions for entrepreneur-billionaires such as Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos and Tesla’s Elon Musk (who immediately tweeted his protest. ) since the original value of their security vault in their respective giants was virtually zero.