The Washington Post reported that the Biden administration is now pushing for this levy and is willing to temporarily set aside its broader proposal to hike the corporate tax rate to 28%, in an effort to win Republican support for the infrastructure package.
Strategists said the proposed 15% minimum tax is not a new idea and was already sought by the administration. Republicans have opposed the Biden plan to increase the corporate tax rate from its current level of 21%, which was approved by the GOP in 2017. The report said that President Joe Biden still wants to raise the corporate tax rate, but that may be now discussed outside of the infrastructure negotiations.
The minimum levy is viewed as a so-called “Amazon tax,” aimed at ensnaring profitable companies that pay low corporate tax rates.
“So much of this debate is fluid,” said Ed Mills, Washington policy analyst with Raymond James. “This year there’s a dramatic swing toward focus on a minimum tax for those that pay less than the statutory rate.”
“Where this fits into the larger model of what Democrats are pushing for is it’s part of an idea that Democrats aren’t raising taxes; they’re making more individuals and corporations pay the taxes they already owe,” he added.
Peter Boockvar, chief investment officer at Bleakley Advisory Group said it appeared Amazon and the chip stocks fell soon after the report was released. “Netflix is another one. It’s also down,” he said. “A lot of it is tech.”
Boockvar said Micron paid a 7.5 % tax rate last quarter. Qualcomm paid a tax rate of 17% but it paid at a 5.7% rate in the prior quarter, he noted. NVIDIA paid a tax rate of 6.5% in the last quarter and less in prior quarters, Boockvar said, but the stock rose after Evercore called it a top pick Thursday.
The U.S. has also been calling for a 15% tax rate on an international basis. The Treasury yesterday said that finance ministers from the Group of Seven or G-7 nations are expected to endorse the U.S. push for a 15% minimum tax rate when it meets later this week.
The U.S. is seeking the minimum corporate tax to try to end a downward spiral of corporate tax rates and stop multinational companies from shifting profits to tax-haven countries.
“This is a proposal that Joe Biden has repeatedly pushed,” said Dan Clifton, head of policy research at Strategas. “What he’s saying to the Republicans is ‘if you do a bi-partisan deal, I’ll only raise one tax.’ It does not mean Biden is not going to raise the corporate tax rate down the road.”
Clifton and Mills expect Republicans to reject the proposal. “What it’s doing now is setting up the final action from Biden for walking away from a bipartisan agreement,” Clifton said.
The minimum tax proposal would provide the Treasury about $140 billion over 10 years, while the broader 28% tax rate would provide $700 billion, Clifton said.