US dollars. AP material photo
Joe Biden’s U.S. administration is starting to push forward in all directions. It is intended to reduce the financial burden associated with the implementation of the new coronavirus infection (Corona 19) economic stimulus plan and the construction of infrastructure to be promoted in the near future. The massive federal tax rate increase has been around 30 years since 1993. However, opposition from both the Republicans and the Democratic Party has been raised due to deteriorating corporate competitiveness, and the red light is on for the passage of parliament. It is expected to be a test bench for President Biden’s leadership, who has revealed his tax increase policy since the presidential election.
Corporate tax, income tax, etc.
According to Bloomberg News on the 15th (local time), the Biden administration is pushing for a comprehensive increase in federal tax rates, including corporate and income taxes. “The George W. Bush administration tried to reduce tax cuts, but it was the first time since the Bill Clinton administration (1993) that a comprehensive tax increase has been promoted,” the news agency said.
A typical example is corporate tax. The Biden administration put cards on the table, rising from 21% to 28%. Former President Donald Trump lowered the corporate tax rate in 2017 from 35% to 21%, an attempt to reverse this. There is also a plan to reduce the tax exemption for’pass-through companies’, which pay income tax instead of corporate tax by catching corporate profits as the owner’s personal income, and expand the scope of real estate tax.
As for the income tax, a plan to increase the tax rate on high income earners with annual income of 400,000 dollars or more and capital gains of 1 million dollars or more is considered. Some Democratic Party members are also moving to promote the so-called “wealth tax” that adds 1% VAT to the $1 billion asset price.
Dissenting voices announced difficulties in passing the bill
The reason the Biden administration pulled out the tax increase card was because fiscal expenditure increased and income decreased in the aftermath of the Corona 19 recession. In addition, concerns over fiscal soundness are growing with the recent release of astronomical funds amounting to $1.9 trillion (2,100 trillion won). From October to December last year, the US government’s fiscal deficit was $572.9 billion, the largest ever. Compared to the same period a year ago, it increased by 60.7%. Considering that President Biden made a pledge to invest in eco-friendly and infrastructure, it is highly likely to increase in the future. It is to raise this financial resource as a tax increase. Last year, the US economic magazine Forbes cited an analysis of the US Tax Policy Center (TPC) and analyzed that if the tax increase plan is implemented, it is expected to increase tax revenue of 2.4 trillion dollars over the next 10 years.
US President Joe Biden is announcing the’US rescue plan’ at the White House on the 15th. AFP Yonhap News
However, until the bill is passed, considerable difficulties have been foreshadowed. Right now, the Republican Party opposes the tax increase on the grounds of weakening corporate competitiveness. Instead, it focuses on strengthening the tax collection enforcement of the IRS. The Democratic Party also failed to form a single squad. “The Democratic Party lawmakers also expressed a somewhat hesitant position to support the tax increase,” said The Hill, a media outlet specializing in the congress.
If the midterm elections exceed the scheduled November next year, it will be more difficult to push forward. For this reason, there are also observations that the promotion of this increase will be a test bench for President Biden’s leadership. As if conscious of this atmosphere, White House spokesman Jen Saki drew a line in a press briefing held that day, saying, “As promised, President Biden will not raise taxes on people with an annual income of less than $400,000.”
Review also setting the lower limit of corporate tax rate
It is known that the Biden administration is also pushing ahead with a plan to set a lower limit on corporate tax rates imposed on multinational corporations. Daily The Washington Post (WP) reported that “Treasurer Janet Yellen is pushing ahead with a plan to put restrictions on the global bleeding competition with a commission.” Even if it is not binding, the newspaper explained that it set the goal of reaching a principle agreement on the lower limit of corporate tax rates for multinational corporations through the Organization for Economic Cooperation and Development (OECD). It is interpreted with the intention of putting a brake, considering that the competition to cut corporate tax rates in each country for decades aggravates the global financial crisis and is beneficial only to companies.
According to an analysis by the Tax Foundation, the average global corporate tax rate in 1980 was 40%, but in 2020 it fell to 23%, which is half the level. The OECD also revealed that 55 countries with corporate tax rates exceeding 30% in 2000 were less than 20 countries.
Earlier, during the Senate approval hearing, Minister Yellen said, “A global corporate tax lower limit can stop the’going to the bottom’ destructive competition. . WP predicted that there is a possibility to propose a 12% lower limit for the corporate tax rate. However, the newspaper explained that if this measure is implemented, funds will move to countries that are not affected by the OECD tax treaty, and there are concerns that the United States may make concessions that would undermine its competitiveness in the negotiation process.
Heo Gyeongju reporter [email protected]
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