Sep 21, 2022
President Joe Biden recently signed the Inflation Reduction Act (IRA) into law, making it the Democrats' signature healthcare, climate, and tax reform package. This historic achievement will likely be remembered as one of Biden's most significant legislative victories. Many aspects of the IRA make it a big win for tax fairness, but by far the most notable is the 15% minimum tax that the bill levies on America's biggest and most profitable corporations.
Most Americans desperately want to see taxes raised on the wealthy and corporations.
Unfortunately, not everyone in America is celebrating the IRA's 15% corporate minimum tax as a "win." Conservative politicians and high-profile media pundits have wasted no time in bemoaning its passage. Republican Senator Mike Crapo, a ranking member of the Senate Finance Committee, promised that a corporate minimum tax would burden American manufacturing and fall as an "increased tax" on low-income Americans.
Since the 2017 Tax Cuts and Jobs Act lowered the corporate tax rate and created new tax loopholes, billion-dollar corporations have been getting away with murder when it comes to paying taxes. In 2020, no fewer than 55 companies--including household names like Nike, FedEx, and Salesforce--paid nothing in corporate income taxes. The 15% corporate minimum tax ends this egregious behavior and finally forces corporations to start paying the taxes they rightfully owe.
Nothing could be further from the truth. The only Americans that will "suffer" under such a tax will be ultra-wealthy C-suite executives and corporate investors--ordinary Americans and American manufacturing will be just fine.
According to an analysis by the Joint Committee on Taxation (JCT), roughly half of the revenue raised from the corporate minimum tax over the next decade will come from companies in the manufacturing industry. Senator Crapo claims this is unfair, as these companies are "already struggling with inflation, supply-chain disruptions, and an impending recession." But in reality, the new corporate minimum tax will only affect companies that make at least $1 billion in profits and that currently pay significantly less than the current corporate tax rate. These sorts of companies can hardly be considered "struggling."
Senator Crapo would also have Americans believe that the corporate minimum tax would spell the end to domestic manufacturing. But the facts suggest otherwise. According to a separate analysis from the JCT, about half of the manufacturing companies subject to the tax will be textile, apparel, leather, pharmaceutical, and electronic companies that produce most of their products abroad. Rather than pushing manufacturing abroad, the new corporate minimum tax could actually incentivize more domestic manufacturing as it cracks down on companies that choose to shift profits and operations overseas.
Democrats shouldn't be scared by Republican pushback; they should sell this new tax to the American people as a serious win. Call me crazy, but I believe that most Americans agree that corporations should be paying taxes in the country where they're based and sell most of their products. They don't deserve free rides any more than anyone else in America.
Corporations rely on our publicly funded infrastructure--our streets, highways, roads, and bridges--to move their products around just like the rest of us. They rely on our public schools to educate their workers just like the rest of us. They rely on our publicly funded courts to sue foes just like the rest of us. And for these reasons, it's time that they finally start paying for it all, just like the rest of us.
The corporate minimum tax, as written in the IRA, is not perfect. It differs in some critical ways from the 15% global minimum tax that over 130 Organization for Economic Cooperation and Development (OECD) countries agreed upon last year. And it certainly doesn't go far enough to reverse the trend that is the corporate consolidation of wealth and power in America. But it nonetheless is an important first step in stopping the worst of corporate tax dodging and putting an end to stories of mega-corporations like Nike and FedEx paying nothing in taxes.
Even though the corporate minimum tax is now the law of the land, Republicans like Senator Crapo will not stop their attacks. Democrats should ignore their specious arguments and, instead, use this tax initiative as a rallying cry for the upcoming midterm elections. Most Americans desperately want to see taxes raised on the wealthy and corporations. The corporate minimum tax won't completely undo the immense inequality in our tax code, but forcing some of the country's most profitable corporations to pay more taxes is certainly a great start in giving voters what they want.
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