Having unveiled a string of ambitious spending proposals, the Biden administration needs to come up with a way to generate an additional $4 trillion in revenue over the next 10 years. But while it has no shortage of ideas, it will almost certainly come up short.

Now that U.S. President Joe Biden’s administration has proposed an American Jobs Plan and an American Families Plan, it is looking for at least $4 trillion in additional tax revenue. Unlike the six pandemic-related fiscal programs enacted between March 6, 2020, and March 11, 2021, these new spending packages are not meant to provide immediate economic stimulus. Because they are social and redistributive programs that focus more on the supply side, they will need to be funded either through higher taxes or spending cuts. And with no such offsetting cuts under consideration, tax increases seem inevitable.

Of course, the revenue gap could end up being considerably larger than $4 trillion if the $1.9 trillion American Rescue Plan enacted this past March turns out not to be fully covered by increased deficits alone. In that case, the Biden administration may need to add another trillion dollars to its tax revenue target. But for present purposes, we will consider what it will take to raise $4 trillion.

The American Jobs Plan is an eight-year spending and tax-credit program requiring $2.25 trillion of new tax funding, and the (still-inchoate) American Families Plan is expected to be nearly the size of the American Rescue Plan. In both cases, the additional expenditures will occur over 10 years, thus requiring an additional $400 billion per year for the next decade. This target is achievable, but the burden will most likely fall not just on the wealthy but also on the middle class.

The Biden administration’s solution is the Made in America Tax Plan, which it unveiled alongside the American Jobs Plan. But the MATP does not quite add up. Biden and his advisers have proposed a bewildering array of corporate tax reforms intended to raise $2.5 trillion over the next 15 years, with the headline feature being an increase in the corporate tax rate from 21% to 28%. There would also be a 21% minimum levy on U.S. corporations’ global earnings, a 15% minimum tax on “book income” (the profits reported to investors, which are often very different from those used to calculate tax liability), and various measures to discourage U.S. companies from moving abroad to avoid taxes.

But notwithstanding these provisions, the fact is that multinational corporations have proved highly adept at relocating their activity to countries with low taxes, fueling decades of tax competition. As a result, global corporate tax rates (weighted by GDP) declined from 46.5% in 1980 to 25.9% in 2020, with the highest rates mainly in Sub-Saharan Africa. Hence, Biden’s plan depends on significant international cooperation, and U.S. Secretary of the Treasury Janet Yellen has duly proposed an international corporate tax that would apply to multinational companies regardless of where they locate their headquarters.

But this kind of coordinated policy is unlikely to succeed. After all, not even the European Union has managed to coordinate its member states’ taxes. While Germany and France impose corporate tax rates of 29.9% and 32%, respectively, the Republic of Ireland taxes corporate income at a rate of just 12.5%.

The Biden administration maintains that its proposed corporate tax increases would raise an additional $2 trillion over 15 years—or $1.33 trillion over 10 years—from firms’ overseas profits. But this estimate seems optimistic. In 2017, the U.S. corporate tax rate was 35%, and corporate-tax revenue was $297 billion. In 2019—after the Trump administration’s tax reform had reduced the rate to 21%—that revenue figure fell to $230 billion. For Biden’s math to work, the revenue from corporate taxes would need to be $133 billion higher—around $363 billion per year.

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