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

Two professors discuss the tax proposal as a means to pay for social spending in Build Back Better, and its likelihood of passage.

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.

All in all, I think this proposal actually has a chance of passing and could go a long way toward raising the revenue we need to fund important social projects.

Byrnes: If businesses can’t compete in the global economy, that’s bad for everyone — at a time when U.S. companies are already struggling to bring people back to work in the wake of the pandemic.

Now is not the time for tax increases on the businesses that are carrying this economy. I can’t imagine that this proposal would be included in the final reconciliation bill.

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Bloink: Centrist Democratic Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona both appear to support this framework proposal. That makes it very likely that we’ll see some version of this corporate profits minimum tax in the final package.

The most profitable U.S. corporations are going to have to get used to the idea of paying their fair share.

Byrnes: Raising taxes on big business never has the impact that Democrats think it will. To foster a strong economy, we have to allow our businesses to compete in a global marketplace — and competitive tax rates are a big part of that.

Corporate tax increases will do more harm than good at a time when many businesses are already having trouble hiring and retaining the robust workforce they need. Yes, we need to find a way to fund the programs we pass — but corporate tax hikes aren’t the way to do it.

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