Treasury Secretary Janet Yellen, speaking Tuesday at a U.S. Chamber of Commerce event, called for reform of the corporate tax system to help pay for infrastructure upgrades and other goals advanced by President Biden.
“We believe the corporate sector can contribute to this effort by bearing its fair share,” she said. “At the same time, we want to eliminate incentives that reward corporations for moving their operations overseas and shifting profits to low-tax countries.”
Ms. Yellen, speaking at the chamber’s online Global Forum on Economic Recovery, labeled corporate taxes as being at a “historical low” of 1% of gross domestic product as she argued the administration is seeking to return them to historic norms.
Mr. Biden’s proposal calls for raising the corporate tax rate to 28% from 21%, a move that would push the U.S. from the middle of the pack among major economies to near the top.
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“We are confident that the investments and tax proposals in the jobs plan, taken as a package, will enhance the net profitability of our corporations and improve their global competitiveness,” she said. “We hope that business leaders will see it this way and support the jobs plan.”
Ms. Yellen also said that the nation needs to reorient its fiscal policy.
“We haven’t maintained our infrastructure let alone modernized it,” she said. “We haven’t sufficiently supported public research and development to ensure that America will maintain its technological edge. We haven’t embraced the investments in education and training that we need to keep up with technological change and to compete in the international marketplace as we once did.”
Ms. Yellen repeated her call for a global minimum corporate tax to “stop the race to the bottom.”
If the U.S. raises its tax rates and imposes higher burdens on foreign profits of U.S. companies, a global minimum tax would help prevent companies based in other countries from having a potential advantage.
Suzanne Clark, the chamber’s chief executive, provided an immediate rebuttal after Ms. Yellen spoke.
“It’s always an honor to hear from the Treasury secretary, including, and maybe even especially, when we disagree, as we do on taxes,” she said. “The data and the evidence are clear: The proposed tax increases would greatly disadvantage U.S. businesses and harm American workers and now is certainly not the time to erect new barriers to economic recovery.”
Ms. Clark said the administration is correct to champion infrastructure but the chamber disagrees with the need to raise corporate taxes to finance the spending. “We want to be there with them to do that, but there are other ways to finance it,” she said.
Write to John McCormick at [email protected]
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