President Biden’s proposed increase in corporate taxes will promote competition and improve the profitability of American corporations, said U.S. Treasury Secretary Janet Yellen in her speech to the U.S. Chamber of Commerce on Tuesday.
Higher taxes that the government intends to levy on business leaders and top earners, Yellen added, will help bolster government stimulus spending. The corporate tax rate was slashed from 35% to 21% by the Trump administration. Biden now intends to raise it again to 28%.
The U.S. government is seeking a global minimum corporate tax
The current U.S. government is also in talks with major economies to set a global minimum corporate tax, which will remove the incentive for American companies to move their bases elsewhere in a bid to pay lower taxes.
“With corporate taxes at a historical low of one per cent of GDP, we believe the corporate sector can contribute to this effort by bearing its fair share: we propose simply to return the corporate tax toward historical norms.”
The Treasury Secretary reiterated on Tuesday that the government is committed to intercepting tax evasion that has, for decades, put responsible and compliant taxpayers at a disadvantage. She expressed support for stronger labour unions to address inequality, highlighting that a little over 10% of the U.S. workforce currently belonged to unions.
“Workers, particularly lower-wage earners, have seen wage growth stagnate over several decades, despite overall rising productivity and national income. There are several contributors to this troubling trend, but one important factor is an erosion in labour’s bargaining power.”
Yellen talks about the benefits of foreign competition
During Trump’s tenure, the U.S. announced policies like tariffs and withdrew from several global trade pacts. In her speech on Tuesday, Yellen, on the contrary, welcomed foreign competition as she accentuated its benefits. The Treasury Secretary said:
“Let others innovate and advance. Let us seek to advance faster and further. We ultimately benefit from the positive spillovers of innovation wherever it occurs. As in any competition, if you lose on content, you work harder to win the next. The better the competition, the stronger you will get. That has been the American way.”
CEO Suzanne Clark of the U.S. Chamber of Commerce, however, wasn’t convinced of Yellen’s remarks. Clark said:
“The data and the evidence are clear; the proposed tax increases would greatly disadvantage U.S. businesses and harm American workers. The administration is right to champion infrastructure, and we want to be there with them to do that, but there are other ways to finance it.”
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Wajeeh Khan
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