President Biden has released a summary of the American Jobs Plan that focuses on, among other things, infrastructure improvements. He also released a summary of the Made in America Tax Plan (MATP) to help pay for the American Jobs Plan. MATP focuses on fixing “the corporate tax code so that it incentivizes job creation and investment… in the United States, stops unfair and wasteful profit shifting to tax havens, and ensures that large corporations are paying their fair share.”
According to the White House Briefing, MATP would raise over $2 trillion over the next 15 years and more than pay for the mostly one-time investments in the American Jobs Plan and then reduce deficits on a permanent basis.
Highlights of MATP include:
Setting the corporate tax rate at 28%
MATP would increase the corporate tax rate from 21% to 28%.
Discouraging offshoring by strengthening the global minimum tax for U.S. multinational corporations.
MATP would increase the minimum tax on U.S. corporations to 21% and calculate it on a country-by-country basis. It would also eliminate the rule that allows U.S. companies to pay zero taxes on the first 10% return on foreign investments.
Encouraging other countries to adopt strong minimum taxes on corporations.
MATP proposes to encourage other countries to adopt strong minimum taxes on corporations, just like the United States, so that foreign corporations aren’t advantaged and foreign countries can’t try to get a competitive edge by serving as tax havens. MATP would also deny deductions to foreign corporations on payments that could allow them to strip profits out of the United States if they are based in a country that does not adopt a strong minimum tax.
Preventing U.S. corporations from inverting or claiming tax havens as their residence.
Under current law, U.S. corporations can acquire or merge with a foreign company (“inversion”) to avoid U.S. taxes by claiming to be a foreign company, even though their place of management and operations are in the United States. MATP would make it harder for U.S. corporations to invert.
Denying companies expense deductions for offshoring jobs and credit expenses for onshoring.
MATP would eliminate deductions for expenses that come from offshoring jobs. Instead, MATP proposes to provide a tax credit to support onshoring jobs.
Eliminate FDII deduction.
MATP would eliminate the Foreign Derived Intangible Income (FDII) deduction. Revenue from repealing the FDII deduction would be used to expand more effective research and development investment incentives.
Enact a minimum tax on large corporations’ book income.
MATP would impose a 15% minimum tax on the income corporations use to report their profits to investors (“book income”).
Eliminate tax preferences for fossil fuels.
The current tax code includes subsidies, loopholes, and special foreign tax credits for the fossil fuel industry. MATP would eliminate these.
Ramping up enforcement against corporations.
MATP would ensure that the IRS has the resources it needs to effectively enforce the tax laws against corporations. This will be paired with a broader enforcement initiative to be announced in the coming weeks that will address tax evasion among corporations and high-income Americans.