AILSA CHANG, HOST:
The Biden administration says it is time for countries to stop fighting over who can offer businesses the smallest tax bill. Treasury Secretary Janet Yellen proposed today a global minimum tax rate for corporations. It's designed to reverse a decades-long pattern in which countries undercut one another by steadily decreasing their corporate tax rates.
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JANET YELLEN: It's important to work with other countries to end the pressures of tax competition and corporate tax base erosion. We're working with G-20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom.
CHANG: Well, this proposal comes as the administration is counting on higher corporate taxes to bankroll its $2.3 trillion infrastructure plan. For more, we're joined now by NPR's Scott Horsley.
SCOTT HORSLEY, BYLINE: Hi.
CHANG: All right, so what is the basic idea behind a global minimum tax? And why is the administration pushing this now?
HORSLEY: Well, as we've been saying for the last week, the Biden administration has big ambitions for its infrastructure plan. It wants to invest trillions of dollars in better highways and faster Internet and cleaner water pipes and a smarter electric grid, and it's planning to send the bill for all those investments to corporations in the form of higher taxes on corporate profits. Some U.S. businesses are saying, wait a minute - we like the idea of all that infrastructure spending, but if corporations have to pay for it, then U.S. companies are going to be less competitive than their rival elsewhere that aren't saddled with those costs. They say it could even drive companies out of the U.S. into lower tax havens overseas.
So the administration hopes to fight that by negotiating a minimum corporate tax that every country would assess. Here's how Secretary Yellen described it in a speech to the Chicago Council on Global Affairs.
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YELLEN: It's about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises and that all citizens fairly share the burden of financing government.
HORSLEY: This is an interesting argument about what makes businesses competitive. For years, Republicans have argued that low taxes put more money in the hands of businesses, which they can invest to become more productive. But the administration is saying, you know, government investment in things like the interstate highway system or R&D that gave rise to the Internet is also an important part of creating a competitive landscape. And they argue the government needs resources to make those kinds of investments, and if tax rates are too low, it can be counterproductive.
CHANG: Well, are other countries even likely to go along with a minimum tax rate, do you think?
HORSLEY: It's far from certain that every country would go along. You know, in the aggregate, a deal like this might be good for government coffers, but countries like Ireland have had a lot of success using low taxes as a magnet to lure big companies to their shores. And so even though it might be a race to the bottom, some countries are likely to keep running.
CHANG: Well, how do corporate taxes in the U.S. compare to other countries right now?
HORSLEY: They're actually pretty low compared to other industrial democracies, for example. If you look at the total tax bill as a share of their economies, France, Germany, Italy collect about twice as much from corporations as the U.S. does. Japan and Canada collect about four times as much. The official corporate tax rate is 21%, and Biden wants to boost that to 28%. But most companies pay a much lower rate thanks to deductions and other tax breaks. The average multinational corporation paid about 8% the year after the big GOP tax cut was passed, and last year, Ailsa, there were dozens of big companies that paid no federal taxes at all.
CHANG: That is NPR's Scott Horsley.
Thank you, Scott.
HORSLEY: You're welcome.
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