US corporate tax rate would be among highest of developed nations under Dems' plan, study shows
Reconciliation bill means higher taxes for Americans: Rep. Hill
Rep. French Hill, R-Ark., argues the $3.5 trillion infrastructure packages has unseen consequences.
The U.S. would have one of the highest corporate tax rates in the world under a Democratic proposal that would overhaul the nation's tax code in order to fund President Biden's ambitious $3.5 trillion economic agenda.
The plan, unveiled in September by the House Ways and Means Committee, seeks to generate about $2 trillion over the next decade to pay for programs that would expand Medicare, establish free community college, provide paid family leave and combat climate change.
The measure calls for a bevy of tax hikes, including raising the corporate rate to 26.5% for businesses earning more than $5 million in income. The corporate rate would be lowered to 18% for small businesses earning less than $400,000; all other businesses would continue to pay the current rate of 21%.
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The Democrats' proposal – while slightly lower than the 28% rate that Biden campaigned on – would ultimately push the average combined state and federal corporate tax rate to 30.9%, according to a new analysis published by the Tax Foundation.
That would be the third-highest corporate tax rate in the 38-member Organization of Economic Cooperation and Development; only Portugal (31.5%) and Colombia (31%) would have higher rates.
Under current law, the U.S. is "right in line" with its OECD peers, according to the Tax Foundation.
"Returning to near the top of the OECD in corporate tax rates would be costly for a few reasons: it would disincentivize investment and encourage firms to shift profits and locate elsewhere, resulting in fewer job opportunities for Americans and less tax revenue for the U.S. government," the analysis said.
Hungary (9%), Chile (10%) and Ireland (12.5%) are among the OECD countries with the lowest corporate tax rates. Both Hungary and Ireland are resisting a separate push among G-7 leaders to impose a global minimum tax of at least 15% on companies' foreign profits.
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Democrats' tax proposal still faces a difficult path to passage: Moderate and progressive lawmakers are jockeying for control in a narrowly divided Congress, feuding over the size and scope of the partisan spending bill. Left-wing Democrats insist they'll sink a bipartisan $1 trillion infrastructure bill unless it's explicitly tethered to the more expansive spending proposal.
Centrists, however, have voiced skepticism about another multitrillion-dollar bill – funded by a slew of new taxes on wealthy Americans and corporations, no less – after the coronavirus pandemic pushed the U.S. deficit to a record high.
Party members remain fiercely at odds over both the price and the specific policy inclusions of the sweeping spending package.
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