Senator Ron Wyden (D-OR) asks questions to a panel of pharmaceutical company CEOs during a Senate Finance Committee hearing on Drug Pricing in America: A Prescription for Change, Part II on February 26, 2019 in Washington, DC . The committee heard testimony from a panel of pharmaceutical company CEOs about the reasons for the rising cost of prescription drugs.
Photo by Win McNamee / Getty Images
- A democratic plan would revise the way companies pay taxes on foreign profits.
- It could raise $ 800 billion, or enough to fund two $ 1,400 stimulus checks.
- Democrats could clash over taxes when putting together a bipartisan spending package.
- Check out Insider’s business page for more stories.
After a House vote on a $ 3.5 trillion draft budget, the Democrats must now work out a massive social spending package. A major point of contention? Steer.
Before passing the package, with likely unanimous opposition from the GOP, the Democrats face some internal disagreement over funding – likely a series of tax hikes for the richest Americans, investors, and big corporations. President Biden proposed a corporate tax rate of 28%, higher than the current level of 21%. But moderate Democrats like Joe Manchin are already insecure and say they’d rather see a 25% rate instead.
In doing so, they would partially withdraw President Donald Trump’s tax law from 2017.
Part of this 2017 law includes how the government taxes US-based multinational corporations based on where they are headquartered and where they make profits. The Democrats want to revise this element to raise enough money to pay for things like President Joe Biden’s child support, universal Pre-K, and the toll-free community college, among others.
Kyle Pomerleau, tax expert for the conservative American Enterprise Institute, told NBC News that the tax changes could raise $ 800 billion. That’s enough money for the federal government to fund two $ 1,400 stimulus checks, similar to what most Americans received during the pandemic under the $ 1.9 trillion Biden stimulus bill.
Sens. Ron Wyden from Oregon, Mark Warner from Virginia and Sherrod Brown from Ohio take the lead. On Wednesday, that trio released a draft framework aimed at ending incentives for companies to relocate operations out of the US and encourage more to expand domestically. Many companies have used it to reduce their tax burden well below the official 21 percent rate.
“To get the ship back in order, we are ending incentives to move jobs abroad and closing loopholes that allow companies to hide their profits in tax havens,” Wyden said in a statement.
The Trump administration’s tax law enacted a system that included exemptions where companies must pay taxes on foreign profits. This was a change from the previous agreement that allowed companies to hide it overseas and avoid paying full corporate tax entirely.
The Democrats support the current line-up, but want to levy higher tax rates on a broader profit margin, tailor tax obligations to individual countries and not enforce them uniformly. Conservatives argue that this will affect the competitiveness of companies abroad and give them incentives to keep their headquarters abroad.