What is corporate income tax? What is the minimum corporate tax rate?
A corporate tax is a tax on the profits of a company, but not on all money made. Basically, only taxable income after various things are subtracted.
Taxable corporate profits are the tax taken from a company's profits. The current rate in the US is 21 percent, down from 35 percent before 2017, and makes up 6.6 percent of total federal revenue. However, due to various tax breaks and incentives, many companies pay very little, if any corporate tax. After a new global agreement, with 136 other countries, the global benchmark for corporation tax is to be set at 15 percent, but Democrats want to go further.
Combining with President Biden's pledge that the wealthy and big business will start paying their fair share, legislation is being tabled that will mean global corporations will be needing to pay more tax than ever. This is what Democrats are trying to change to fund their social spending plans, the framework for which should be released on Thursday 28 October.
Why is the corporate tax rate being discussed?
Democrat senators unveiled legislation on Tuesday that could have a big effect on how the IRS recoups tax from big businesses. A 15 percent minimum tax on the most profitable corporations is being tabled, and could be included in the Democrat framework for passing legislation very soon.
The corporate minimum tax targets public and privately owned companies that post more than $1 billion in annual profits over a three-year period, meaning changes to it will be largely aimed at big businesses. That also includes foreign-headquartered businesses, who are taxed on their profits made in the US. Small business owners won't be affected by changes.
You might say that 15 percent is far below the 21 percent already in law. But due to many breaks and loopholes, companies can pay far under this 21 percent value. For an example, Amazon paid no federal corporation tax between 2016 and 2018. The next time they paid tax, in 2019, they paid just 1.2 percent of their profits. This is what the new tabled legislation seeks to eliminate.
"What we have put together is built around the proposition that corporations ought to pay their fair share and profitable corporations should never pay zero tax," Senate Finance Committee Chairman Ron Wyden told reporters.
What developments have there been on negotiations in the last few days?
Alongside extra taxes for businesses, billionaires have been singled out as a target. House of Representatives Speaker Nancy Pelosi says Democrats hope the plan to tax the super rich would raise as much as $250 billion to help pay for expanding the social safety net and tackling climate change.
In total, 700 billionaires would be affected by the change.