Three moderate Democrats asked Congressional leaders to pause the adoption of tax hikes aligned with President Biden’s “global minimum tax” plan.
As the White House negotiates with other leading economies to jointly increase their corporate taxes above 15%, federal lawmakers suggest raising the tax on global intangible low-taxed income — otherwise known as GILTI, in reference to income earned overseas by American-owned multinational firms.
President Biden suggests doubling the GILTI tax rate from 10.5% to 21%, while a proposal in the House Ways and Means Committee suggests raising it to 16.5%.
However, three Democratic lawmakers — Tom O’Halleran (D-AZ), Henry Cuellar (D-TX), and Lou Correa (D-CA) — noted to House Speaker Nancy Pelosi (D-CA) in a letter that American firms may be disadvantaged by such tax increases:
As the Build Back Better Act continues to be debated, it is important to ensure that American companies remain competitive on the international stage, particularly as we emerge from the COVID-19 pandemic. I am concerned that, while well-intentioned, the GILTI changes as proposed would potentially reduce American competitiveness with their foreign counterparts and result in American job losses. We must ensure that American businesses remain competitive with China and that technological innovation remains centered in the United States.
These new rules in the Ways and Means draft would allow other countries to take advantage of our rules, and harm U.S. companies. If we wait, it will allow Congress the opportunity to adjust the implementation of the policy based on how G-20 countries write their own GILTI regimes.
All three signatories of the letter, which was also addressed to Ways and Means Committee Chairman Rep. Richard Neal (D-MA), are members of the New Democrat Coalition — a caucus of ninety-five Democratic lawmakers committed to pro-growth fiscal policies.
Politico — which originally obtained the letter — further explains:
Democrats, who can only afford to lose three votes in the House, are banking on hundreds of billions of dollars in tax increases on companies’ cross-border operations to help pay for their reconciliation plan. Delaying those changes in order to accommodate the moderates’ demands would cost Democrats’ money.
At the same time, they may have room to make changes because, as lawmakers pare back their spending plans, they will likely need fewer tax increases to make their budget numbers work.
In a recent interview with The Daily Wire, House Ways and Means Committee Ranking Member Rep. Kevin Brady (R-TX) expressed concern that the Democrats’ pending tax hikes could drive American companies — and up to three million jobs — overseas.
“Raising these corporate business rates so high, and then making other international tax changes that favor foreign companies over America — without question, we are going to take a big step backward to those days where Americans regularly went online or opened the paper and saw another company pulling up roots and moving their plants overseas,” he explained. “I’m really worried about how economically crippling those high tax rates will be.”
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Source: Dailywire
