Congressional Democrats Seek Alternatives to Raising Corporate Tax Rate

By:
Ruth Singleton
Published Date:
Oct 21, 2021

Congress


Democrats in Congress are working on alternatives to raising the 21 percent corporate tax rate in order to fund their reconciliation budget bill, which has vast new investments in education, health, child care, paid leave and climate programs, Bloomberg reported. The bill, also known as Build Back Better, originally envisioned raising the corporate income tax rate from 21 percent to 28 percent. The reason for the workarounds is that Sen. Kyrsten Sinema (D-Ariz.) has signaled opposition to the corporate tax increase. Nearly all the alternatives are more complicated and politically risky than just increasing the top-line rate. 

Some proposals that Democrats are considering include setting minimum taxes, taxing foreign profits, implementing a stock buyback tax and limiting how much corporations can write off for executive compensation.  

Minimum taxes would entail setting a minimum that companies would have to pay—regardless of tax credits and other deductions that now allow them to pay less. 

Taxing foreign profits would mean that U.S. companies operating abroad would have to pay more tax on profits they make overseas. 

A stock buyback tax would be a new levy that would equalize the tax treatment for companies when the buy back their own shares and when they issue dividends to stockholders. 

Democrats are also considering reversing a long list of tax preferences already embedded in the tax code, These included write-offs for buildings and equipment, deductions for employee stock compensation and tax credits for research and development.

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