Joe Biden is ready to drop his demands for a US corporate tax rate increase if enough Republicans agree to support increased infrastructure spending, according to people familiar with the negotiations.
The US president’s concession aims to spur a bipartisan agreement on his attempt to fund more than $1 trillion in additional spending over the next decade to modernize roads, bridges and broadband networks across the country.
The US president wanted to fund the plan primarily by increasing the corporate income tax rate from 21 percent to 28 percent, but Republicans vehemently oppose it on the grounds that it would hurt the economy and partially remove Donald Trump’s signature tax. cuts.
In a meeting with Shelley Moore Capito, the West Virginia senator and Republican chief negotiator at the talks on Wednesday, Biden said he was ready to drop his insistence on a corporate income tax increase in favor of a bipartisan agreement.
But he suggested that spending on new infrastructure could be funded by the application of stricter tax law by the Internal Revenue Service to wealthy families. And he wants to put a minimum tax of 15 percent on companies so they can’t take advantage of loopholes that mean they end up paying very little or nothing at all.
“This does not mean that he is giving up his public positions about [Trump tax cuts] and wealthy taxpayers and corporations or his blanket plans,” said one person familiar with the conversations. . . In order to get through the corridor and find a workable agreement, precisely in the context of these negotiations, that was the solution he put forward.”
Biden’s move came before his own deadline next week to move forward with negotiations with Republicans on infrastructure, or to abandon them and try to pass the package using a weak Democratic majority in Congress.
The US president is expected to “reconnect” with Capito on Friday to discuss the status of the talks, according to the White House.
Biden’s decision to abandon his bid to raise corporate income tax may be temporary and limited to Republican negotiations. If the US president ends up negotiating an additional spending package with Democrats alone, a corporate income tax increase will likely be back on the table.
However, the president’s move, first reported by The Washington Post, highlights the political difficulty of pushing any revenue increase in the face of full Republican opposition. The US president also aims to increase individual taxes on the wealthy – including on capital gains and profits – to fund his economic agenda.
The concessions the US president made in the Republican negotiations relate to domestic taxation, and are separate from his international proposals for corporate tax reform.
Globally, Biden is seeking a compromise with other nations to set a minimum tax of 15 percent in order to remove incentives toward tax evasion and shift profits to low-tax nations.
A breakthrough in global tax policy could occur in the coming days as G7 finance ministers meet in London to discuss the US plan, potentially paving the way for a broader agreement at the level of the Organization for Economic Co-operation and Development and the Group of Twenty.
Biden’s infrastructure plan, laid out in late March, is worth $2.3 trillion, but over the course of talks with Capito, he has gradually lowered his target as the Republican side moved upward in terms of how much he is willing to spend.
A potential compromise could be found at a price of just over $1 trillion, but it remains unclear whether either side will find it palatable.