Debate: Should Congress Impose a 15% Minimum Tax on Firms With at Least $1B in Profits?

In late October, Democrats in Congress introduced a corporate profits minimum tax proposal as part of the Build Back Better Act. The bill seeks to ensure that corporations with at least $1 billion in profits (as reported to shareholders) pay at least a 15% minimum tax on those profits. If enacted, the tax would be effective in tax years beginning after 2022.

The tax would apply to corporate taxpayers (but not to S corporations, RICs or REITs) that satisfy certain annual minimum income requirements over a three-year period. Income of controlled foreign corporations and nonconsolidated entities would also be included — and any deductions for U.S. or foreign income taxes would be removed in calculating income.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about this tax proposal and its likelihood of passage.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Bloink

Byrnes

Their Reasons:

Bloink: The bottom line is that we have to find some way to pay for these social spending bills in order to make even the pared-down versions of the next piece of legislation acceptable to moderate Democrats who oppose massive spending increases without funding.

This tax would apply only to corporations that report over $1 billion in profits to shareholders — and those who meet certain average minimum income thresholds for a three-year period. Requiring big corporations to pay at least a minimum tax of 15% on those profits is only fair. 

Byrnes: Raising taxes for American businesses is only going to do more harm than good. Another massive tax increase on these businesses will make them less competitive globally. That means those corporations are going to take steps to remove themselves from the U.S. tax system and, frankly, take their jobs with them. 

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Bloink: In reality, this minimum tax rate would apply to only about 200 of the largest corporations in the U.S. This proposal is detailed and contains rules for determining adjusted financial net income — and it also addresses issues specific to multinational corporations.