US firms would pay less than foreign competitors under Biden tax plan: Reuters

U.S. companies would likely pay less in income taxes than their foreign competitors if President Biden’s corporate tax increases were enacted, according to a Reuters analysis published Tuesday.

The analysis comes amid a debate over how to pay for infrastructure spending. Republicans and business groups frequently push back against Biden’s proposals to pay for infrastructure investments through corporate tax increases by arguing that doing so would make U.S. companies less competitive. 

Reuters’s analysis looked at 52 of the largest U.S. companies and compared those companies’ effective tax rates to the rates of 200 foreign competitors the U.S. firms named in filings. 

The news outlet then applied two of Biden’s corporate tax proposals to the U.S companies’ 2020 earnings. Those proposals would increase the U.S. corporate rate from 21 percent to 28 percent and raise a minimum tax on U.S. companies’ foreign earnings to 21 percent 

Reuters found that the U.S. companies already pay a lower effective tax rate than their foreign competitors. The U.S. firms had an average effective tax rate of 16 percent in 2020, while the foreign companies had an average effective tax rate of 24 percent.

If Biden’s corporate tax proposals had applied to the U.S. companies’ 2020 earnings, the businesses would have paid an average effective tax rate of 21 percent, which is still lower than what the foreign competitors paid, Reuters reported.

Reuters said that the U.S. businesses benefit from tax breaks that are more generous than preferences in other countries and that U.S. companies can benefit more from shifting profits into tax havens than companies based in certain other countries can.

Reuters also said that the gap under Biden’s plan between U.S. companies’ effective tax rates and foreign competitors’ effective tax rates would likely be even higher than its analysis showed because the analysis didn’t account for Biden’s proposals for tax breaks to encourage domestic manufacturing and his proposals for foreign companies to pay higher taxes on their U.S. income.

The White House said in a statement to Reuters that “this reporting highlights that the corporate tax code is broken.” 

The White House highlighted the article in a statement on Tuesday, saying that “the analysis bolsters the President’s argument that his Made in America tax plan will reward work, wealth, ensure large corporations pay their fair share in taxes, and are common sense reforms that will finance critical investments in our economic growth and competitiveness.”

Business Roundtable, a group that represents the CEOs of major U.S. companies, told Reuters that while comparisons of effective tax rates are “informative,” comparing the statutory tax rates of countries is also a valid way to look at how taxes impact the competitiveness of U.S. companies.

Tags Joe Biden

Copyright 2024 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed..

 

Main Area Top ↴

Testing Homepage Widget

 

Main Area Middle ↴
Main Area Bottom ↴

Most Popular

Load more

Video

See all Video