9/13/20
FORMER VICE PRESIDENT Joe Biden has been pretty clear about where taxes on upper-income Americans and corporations are headed if he’s elected: up. Highlights of his plan include an increase in the top marginal rate, and a limit on deductions for those earning more than $400,000 per year; an end to the favorable “step-up” treatment of inherited financial assets; an increase in the top corporate tax rate from 21 to 28 percent, with a minimum of 15 percent for large companies; and imposing Social Security taxes on wage income above $400,000. Taken together, Mr. Biden’s plans would raise about $3.8 trillion over 10 years, with 72 percent of that coming from the top 1 percent of earners, according to an analysis by the Tax Foundation. Contrary to much Republican rhetoric, Mr. Biden’s proposals represent not confiscatory socialism but an effort to undo the least defensible giveaways in the 2017 tax cuts passed by a GOP Congress and signed by President Trump, while preserving parts of that law that broadened the tax base. Last Wednesday, Mr. Biden added additional teeth — and complexity — to his corporate tax plans, targeting the perennial issue of “offshoring” of U.S. jobs by multinationals.
During a campaign stop in Michigan, he specified that his proposed minimum tax on the foreign profits of U.S.-based companies would eliminate an automatic exclusion worth 10 percent of assets, and apply on a country-by-country basis, in effect making firms pay more to the United States on what they earn in low-tax countries such as Ireland. In addition, he would apply a top corporate rate of 30.8 percent on earnings from products U.S. companies make abroad and sell in the United States — coupled with a 10 percent tax credit for investments that reopen closed plants or “reshore” jobs from abroad. Mr. Biden is right to present alternatives to Mr. Trump’s economic bromides. He is also right to advocate maximum job creation in the United States. The best way to achieve the latter goal, though, is to ensure the United States is a desirable place to invest — generally. Higher business taxes can be compatible with that goal, as long as the rules are clear and consistent.
