W.While President Joe Biden and his administration claim that Trump’s 2017 tax cuts need to be partially overhauled because the law provides incentives for offshoring, proponents of the GOP tax cuts say there is no concrete evidence to support this claim.
In Biden’s newly proposed “Made in America” tax plan, which aims to change the corporate tax structure to pay for its $ 2 trillion infrastructure package, administration claims that the Tax Cuts and Jobs Act “adds new incentives to offshoring.” created “. The president has also hinted that tax legislation shifted jobs overseas during the election campaign.
“”[Former President Donald Trump’s] The 2017 tax legislation lowered taxes on companies that sent manufacturing and jobs overseas, “Biden said during a speech in September.” These companies then make huge profits by shipping these overseas-made products back to the US for sale to American consumers. ”
Proponents of the GOP tax cuts say the legislation has actually encouraged companies not to go abroad – that is, moving production and jobs overseas – and, overall, ended corporate “inversions”. Business reversals occur when a US multinational company merges with a smaller corporation in a low-tax country to take up residence and take advantage of lower tax rates without significantly changing its US business operations
BIDEN INFRASTRUCTURE PLAN FINANCED BY CORPORATE TAXES, BUSINESS SUPPORT SUPPORT
William McBride, vice president of federal tax and economic policy at the Tax Foundation, a bipartisan think tank that generally supports lower tax rates, said his organization had spent time finding evidence that the Trump tax bill contributed to offshoring , but turned out to be empty. to hand over.
Business reversals were common in the years before Trump’s tax cuts. Dozens of companies merged with overseas employees to pay lower taxes. For example, Burger King merged with Tim Hortons in 2014 and became a subsidiary of Restaurant Brands International based in Canada. Fear of further inversions was a major factor in why Republicans sought a tax overhaul first.
McBride pointed out that the 2017 tax cuts effectively ended the inversions as the US corporate tax rate, which had been 35% since the early 1990s, was lowered to 21% by the tax burden.
“As far as we can tell, the inversions have ended,” the tax expert told the Washington Examiner. “It wasn’t a small effect, it completely stopped inversions. There have been no inversions that we know of since the law was changed.”
McBride said that at the heart of the TCJA, lowering the corporate tax rate, “was really the main factor driving tax costs on manufacturing in the US compared to anywhere else”.
“So at the heart of the tax law was reducing production costs in the US, so it would be very strange to find that the effect was the opposite,” said McBride. “In fact, there is no evidence for it.”
Senator Pat Toomey, the senior member of the Senate Banking Committee and a major proponent of Trump’s tax cuts, also pointed to the corporate tax rate of 21% to highlight the TCJA’s impact on inversions. He also attacked the notion that the bill would encourage job offshoring by stating that the unemployment rate was at its lowest level in decades prior to the COVID-19 pandemic.
“Apparently, President Biden is unaware that US corporate inversions stopped immediately after the tax reform was passed, and there hasn’t been any since,” the Pennsylvania Republican told the Washington Examiner.
“Contrary to his claims that our tax reform has led to a dramatic increase in offshoring, pre-pandemic unemployment rates were at all-time lows,” Toomey said. “We should try to get back to that economy. Tragically, the massive tax hikes President Biden is proposing will make it a lot harder to do.”
Biden’s newly proposed “Made in America” tax plan aims to increase the corporate tax rate from 21% to 28%. Pam Olson, a tax expert with the accounting and advisory group PwC, told the Washington Examiner she was concerned that the Biden tax plan could have an adverse effect than intended.
“I believe the 2017 tax bill did a lot to bring back investment and jobs to the United States … and that what the president put on the table will have the opposite effect, making us less attractive Place for investment and for jobs, “said Olson, who also served as assistant secretary of taxation for the Treasury Department from 2001 to 2004.
The government has alleged that one of the provisions in Trump tax legislation, the Global Low Intangible Tax Income known as GILTI, states that foreign profits from US multinational corporations could be funded by foreign investment with a tax rate of as little as 10.5% would rather pay this rate than the domestic rate of 21%. The Biden tax plan envisages increasing this rate to 21%.
However, the Tax Foundation noted in a recent report that the US tax on GILTI is “in addition to the foreign taxes US corporations pay on their overseas profits,” and that the provision “provides a lower effective tax rate for a to avoid full doubling of foreign income taxation, but US corporations that pay both foreign tax and tax on GILTI are subject to two tiers of taxation. ”
Experts say that while they haven’t found any evidence to suggest that the 2017 tax burden increased offshoring, there is generally little concrete evidence of the impact one way or another because so little data is available. McBride said it will take a long time to see the effects.
Olson said the Biden administration’s claims are based on “nothing but academic theories.” She said that while there was suspicion that the 2017 tax cuts provided incentives for offshoring, some of which were quoted by the White House as saying, “It’s all academic literature, and some literature gets the facts completely wrong.”
She said the reality was that the 2017 regulations designed to impact offshore income “were very effective, so effective in fact that many companies spent time figuring out how to get their income entirely within the US tax system.” can bring an electricity full tax base, because the introduced regulations are not in the least cheap, but in many cases have a rather draconian effect. ”
McBride also raised concerns about the impact of a corporate tax rate hike on US jobs. He said that increasing the corporate tax rate will have a very significant impact on the cost of doing business in the US, and increasing the cost of doing business in the US will make it less attractive.
Biden’s tax proposal is met with opposition from Republicans and some in the business community. The US Chamber of Commerce and the Business Roundtable have both issued statements saying they support infrastructure investments but oppose the government’s plans to increase the corporate tax rate.
CLICK HERE TO READ MORE FROM WASHINGTON EXAMINER
The government is also having trouble at home with a bipartisan group of lawmakers who have called for the reinstatement of the full deduction for state and local taxes paid, known as the “SALT” deduction, a tax break for the rich that has been rejected by many Democrats and Democrats most will be Republicans. Some of the Democrats in the group have vowed not to vote for tax legislation unless the $ 10,000 cap imposed by the GOP as part of the 2017 tax cuts is reinstated.