Janet Yellen will use her first major speech as Treasury Secretary to advocate for a global minimum corporate tax rate, Axios has learned, while defending President Biden’s plan to raise US corporate taxes. more than 2 trillion dollars.
Why does it matter: Convincing other countries to impose a global minimum tax would reduce the likelihood of companies relocating abroad, as Biden seeks to increase the corporate rate from 21% to 28%.
- “Competitiveness is more than how US-based companies compare themselves to other companies in global M&A bids,” Yellen will say today in a speech to the Chicago Global Affairs Council, according to an excerpt from his Prepared comments obtained by Axios.
- “It is about ensuring that governments have stable tax systems that generate enough revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing the government. ”
- “We are working with the G20 nations to agree on a global minimum corporate tax rate that can stop the race to the bottom.”
The panorama: President Trump lowered the US rate from 35% to 21%, arguing that American companies were at a global disadvantage and were being incentivized to relocate abroad.
- The average corporate rate in the G7 is 24%, and about nine countries recently lowered their corporate rate, according to the Tax Foundation, a conservative tax group.
- Biden’s plan would also raise the international minimum rate for foreign profits for US companies from 10.5% to 21%, which would still be lower than the domestic corporate rate of 28%.
Driving the news: Biden has hired five cabinet secretaries to explain – and sell – his plan to the American public, including Secretary of Transportation Pete Buttigieg, Secretary of Energy Jennifer Granholm, Secretary of Housing and Urban Development Marcia Fudge, Secretary of Work Marty Walsh and Secretary of Commerce Gina Raimondo.
- Yellen’s task is to make an international case. His speech is also designed to set the tone for the annual spring meetings of the International Monetary Fund and the World Bank in Washington, which begin practically this week.
Between lines: Biden has relied on Yellen to convince the business community and assure Wall Street that his over $ 2 trillion infrastructure proposal, in addition to his $ 1.9 trillion stimulus package, will not lead to inflation.
- Now he is deploying it to convince international finance ministers and central bankers that the world’s largest economies must act in concert on corporate rates to avoid a race to the bottom.
Go deeper: Yellen will also challenge the world’s economic powers to focus on climate change and ways to improve access to vaccines for the world’s poorest countries.
- It will request $ 650 billion in new “Special Drawing Rights,” essentially lines of credit at the IMF that can help developing countries access more US dollars.
- The Trump administration was skeptical of the new SDR assignments, and many Republicans in Congress still oppose it.
The bottom line: In trying to convince other countries to impose a global minimum tax, Yellen is recognizing the risks to the American economy if it acts alone by raising corporate rates.
- “Together we can use a global minimum tax to ensure that the global economy thrives on a more level playing field in the taxation of multinational corporations and spurs innovation, growth and prosperity,” he said.