Axios learned that Janet Yellen will use her first major speech by the Secretary of the Treasury to advocate the lowest corporate tax rate in the world, and that she will raise US corporate tax for President Biden for its infrastructure of more than $2 trillion. The plan to fund the plan provides justification.
Why it matters: Persuading other countries/regions to impose the lowest global tax rate will reduce the possibility of companies moving overseas, because Biden is trying to increase the corporate tax rate from 21% to 28%.
- Yellen said in a speech to the Chicago Council of Global Affairs today: “Competitiveness is much more than that US-headquartered companies compete with other companies in global mergers and acquisitions bids.”
- “Ensure that the government has a stable tax system, can raise enough income to invest in basic public goods and respond to crises, and make all citizens fairly bear the burden of raising funds for the government. ”
- “We are working with the Group of 20 (G20) countries to agree on the lowest global corporate tax rate that can prevent competition from getting out of the trough.”
Big picture: President Trump reduced the U.S. tax rate from 35% to 21% on the grounds that U.S. companies are at a global disadvantage and are incentivized to move them overseas.
- The conservative taxation organization Tax Foundation stated that the average corporate tax rate of the Group of Seven (G7) countries is 24%, and nine countries have recently reduced their corporate tax rates.
- Biden’s plan will also increase the international minimum tax rate on foreign profits of US companies from 10.5% to 21%, but it is still lower than the 28% domestic corporate tax rate.
Push news: Biden invited five cabinet secretaries to explain and sell his plan to the American public, including Secretary of Transportation Pete Buttigieg, Secretary of Energy Jennifer Granholm, Housing and Minister of Urban Development Marcia Fudge, Minister of Labor Marty Walsh (Marty Walsh) and Secretary of Commerce Gina Raimondo (Gina Raimondo).
- Yellen’s task is to present international cases. Her speech also aimed to set the tone for the spring meeting of the International Monetary Fund and the World Bank in Washington, which will actually start this week.
Between lines: Biden has always relied on Yellen to persuade the business community and assured Wall Street that, in addition to his $1.9 trillion stimulus plan, his $2 trillion-plus infrastructure proposal will not cause inflation.
- Now he is deploying her to persuade international finance ministers and central bank governors that the world’s largest economy needs to take consistent corporate interest rate actions to avoid falling into a trough.
deeperYellen will also challenge the world’s economic powers, focusing on climate change and improving access to vaccines in the world’s poorest countries.
- She will call for a new “special drawing right” of US$650 billion, which is essentially a credit line of the International Monetary Fund, which can help developing countries get more US dollars.
- The Trump administration has expressed doubts about the new special drawing rights allocation, and many Republicans in Congress still oppose it.
Bottom line: Yellen tried to persuade other countries to impose the lowest tax rate in the world, thus realizing that if the United States took action alone to increase the corporate tax rate, it would bring risks to the US economy.
- She said: “We can use the global minimum tax together to ensure that the global economy thrives on a more level playing field where multinational corporations are taxed, and to stimulate innovation, growth and prosperity.”